26 october 2006 european prepaid: whats the business? chris reddish, group head european prepaid...

26 October 2006

European PrePaid: What’s the business?

Chris Reddish, Group Head European PrepaidMasterCard International

26 October 2006 MasterCard PrePaid - Innovation Delivered 2

Prepaid applications are used in a variety of models and distributed through different channels

•Promotions•Subscription

•Internet•Teenager•Incentive•Benefits

Financial institutions

Non-FIs

Closed loop (1) Restricted acceptance (2)

Open loop (3)

•Luncheon

Distribution channel to

end-user

•Payroll•Travel•Money share•Travel / Per diem•Insurance

•Gift

(1) Closed loop = acceptance restricted to a single merchant.(2) Restricted acceptance by geography, type of goods, group of merchants, type of terminals (e.g. POS

only, internet only)(3) Open loop = international acceptance and inter-operability

Acceptance model


Agenda

• Introduction

• Opportunity Model

• Case Studies

• Key Programme design Parameters

• Business Case vs Programme Design

• Main Corporate PrePaid Applications

• Conclusions


Benefits of Prepaid for companies and issuers

TO COMPANIES & ORGANISATIONS

• Cost reduction

– Replacement of costly cheques and cash

– Allows the organization to focus on core business not distribution of funds

• Improve information, control and fraud prevention

• Streamlined processes (electronic card activation loading, reporting)

• Provide better services to employees

TO ISSUERS

• Generate new revenue stream by moving traditional check and cash purchases to payment cards

• Build new relationships with companies looking for innovative ways to streamline costly and time consuming paper based transactions

• Enhance customer relationships and encourage greater loyalty by adding value to existing corporate partnerships

• New opportunity with minimal changes to existing processes


Agenda

• Introduction


• Case Studies




• Conclusions


Recent Key European programsUK:

• “Cash2Go” travel card

• APS “CashPlus” card

• PPT/NAG “Splash Plastic”, Western Union travel card

• “Bullring” shopping mall card

Italy:

• BNL prepaid card

• Intesa “Flash”

• BPU “Libra Cash”

• ICCRI “Kalibra”

Norway:

• DnB NOR “Gavekort”

Poland:

• Municipal card

Switzerland:

• “EasyCash” card

Austria:

• EP Austria travel card

• World Cup Gift Card

NL:

• ABN-Amro programs with city councils

• ING: pilot with Tempo Team (Randstad)

Spain:

• BBVA corporate prepaid cards


Luncheon Card

Product Description / Attributes• First Prepaid Bank Card in the world as a true and

efficient solution for member participants to deliver a

luncheon voucher replacement card

• MasterCard® Commercial branded card limited by merchant category code to domestic restaurants and amounts. This product is

designed in-line with internal regulatory laws

• Advantages for all the participants in the process:

– For employee: more than 200k restaurants accept the card.

– More secure than vouchers or cash

– For company: easy to load and reduce cost of delivering (only one time every 2 years)

– For restaurant: less discount than vouchers, less risk than cash, faster than any other method


Results

• More than 3,000 companies and over 15,000 employees are eating with a BBVA Luncheon MasterCard® card. It expects to get 25,000 cards by the end of 2006

• Type of customers:– Small company 50%– Large and Multinational 25% (i.e. Telefónica)– Government (central and local): 25% (i.e Generalitat

Catalunya)

2002 2003 2004 2005 2006(*)

Number of Cards0

5000

10000

15000

20000

25000

Number of BBVA Restaurant Cards


Per Diem Card

Participant Advantages:– For attendees: cash replaced but a

simple reload with correct amounts on regular basis. More secure than vouchers or cash. Card can be replaced with residual value if lost/stolen. Can be taken home after meetings/conferences without need to convert currency

– For international institutions: easy to load and reduced cost of delivering, a secure way of providing service

– For SwissBankers: introduction into Swiss domestic market, allowing quick expansion because of modular set-up.

Maestro® branded EMV-chip card to allow wide- spread usage inside and outside Switzerland at POS and ATM. Cardholder’s balance and transactions can be verified through IVR and web


Results

• Introduced during 1 Q 2006

• 30,000 cards to be issued in 3 years

• Acceptance in Switzerland and elsewhere 100% PIN on-line, fully secured at ATMs and POS

• EMV-chip providing additional security


Social Benefits Card

Product Description

• Product setup

– Cirrus® or Maestro ® prefunded magstripe card to allow wide spread usage inside and outside the Netherlands at ATM or POS.

– Cards are reloaded on a weekly basis replacing cash disbursements and increasing convenience for clients. Also reducing infra-structural costs for the local governments.

• Advantages for participants:

– For cardholders: cash replacement so no longer needed to report to the local office for cash. Card can be replaced with residual value if lost/stolen.

– For local government: full control, easy to load and reduced cost of delivering, a secure way of providing service.

– For ABN AMRO Bank: introduction into new markets (USP), allowing quick expansion with modular set-up.


ABN AMRO Prepaid Card

Results

• Introduced during 2004 in the city of Enschede in the east of the Netherlands. Successfully rolled out in other large cities in the Netherlands, such as Groningen, Apeldoorn, Den Haag and Breda

• The solution enabled the municipality to end historic practice of handing out cheques or cash through payment windows

• High usage and satisfaction rates (about 4-5 trxns per month)

• Acceptance in the Netherlands and elsewhere; 100% PIN on-line, fully secured at ATMs and Maestro POS

• More than 10,000 cards issued


Many opportunities….

All data: Source PSEL Draft Report April 2006

Remittances 5,771 5%

Gifting 22,792 22%

Travel 15,095 14%Insurance

6,623 6%

On-line 7,087 7%

Unbanked 8,579 8%

Benefits 14,353 13%

Payroll 9,708 9%

Gaming 13,350 13%

Youth 3,103 3%


Introduction

• Introduction


• Case Studies

•Key Programme design Parameters



• Conclusions


Key program design parameters

• Delivery channels

– By company to employees

– By company to clients

• Issuing process (batch, instant issuing,…)

• Value-risk positioning & supporting technology (ex: chip vs mag stripe)

• Card features (design, expiration date,…)

CARD DELIVERY LOADING SPENDING SERVICES

• Re-loadable (salary, travel) vs. Disposable (incentive)

• Top-up options

– Usually bank transfer

• Restricted acceptance (E.g. incentive) or open loop (E.g. salary, travel)

• POS, ATM, CAT, internet or Mo/To

• Domestic use only or international use

• Balance inquiry, transaction history, card blocking, emergency card replacement, ATM locator, PIN change,…

• Channels: IVRU, web, customer help desk, physical branches

• Pricing?


Introduction

• Introduction


• European Market Report


•Business Case vs Programme Design


• Conclusions


The business case varies greatly according to the program design

• Card fees, activation & maintenance fees

• Cardholder service fees

• Interchange fees (POS)

• Forex mark-up

• Breakage (money never claimed)

• Float

• Substitution economics

• Investments

– Technical set-up

– Marketing

• Card production & management

– Plastic, chip, PIN management, personalization, distribution,…

• Operations

– Service provider charges

– ATM service fees & Network fees

• Implementation

CARD & DELIVERY LOADING SPENDING SERVICES

TARGETED SEGMENT + VALUE PROPOSITION


Introduction

• Introduction





•Main Corporate PrePaid Applications

• Conclusions


Main Corporate PrePaid applications

• Travel / Per Diem cards

– Typically replaces cash disbursements or employee self-funding

– More perceived control that traditional T&E card

– Ideal for specific employee/industry segments

• Incentive, gift and compensation cards

– Employee incentives and gifts

– Consumer incentives and b2b incentives

– Miscellaneous customer disbursements (insurance, compensation)

• Salary cards & remittance

– Low-skilled, migrant and un-banked

• Government applications

– Welfare benefits


Introduction

• Introduction






•Conclusion


Prepaid and New Technology….


Conclusive remarks

• Business Users are onboard for:

• Greater access to electronic payment tools

• Make business easier;

• Business travel

• Payment for supplies/services needed in the everyday running of a business.

• BUT the business target market calls for particularly impactful marketing and communication action :

• Increasing awareness and knowledge

• Promoting the Prepaid business case

Thank you.

26 october 2006 european prepaid: whats the business? chris reddish, group head european prepaid...

Documents

prepaid bank card

bbva luncheon mastercard

municipal card switzerland

easycash card austria

bbva corporate prepaid

web slide

maestro branded emv

cash purchases