Prepaid Comes of Age: Prepaid as Everyday Money

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1 Matt Lanford, Head of Prepaid Europe Prepaid Comes of Age: Prepaid as Everyday Money Prepaid 2010 Conference and Expo

2 New players and innovation are dramatically increasing the pace of change in the payments industry The industry has historically moved at a steady, predictable pace with very few disruptive changes over the last 50 years 1950 Diners Club Established American Express issues its first charge card 1970 Establishment of standards for the magnetic stripe 1974 NACHA formed. Nationwide ACH rules approved 1985 Discover Established 2002 Bill Me Later Established 1994 First version of the EMV system was released First mobile-based payments introduced in US 2003 First proximity payment device introduced 2007 Revolution Money Launched 2008 Google Checkout Trends launched /8 MA launches repower networks Bank AmeriCard Launched 1966 Master Charge program introduced 1973 The first online transaction auth system is introduced 1976 The first prepaid telephone card launched 1985 First rewards card launched 1989 Budapest Independence 1996/2001 MA introduces first prepaid card 1998 PayPal Founded 2003 Plastics overtake cash as preferred method of payment 2005 First real-time auth risk scoring system developed 2006 Google Checkout Launched 2006 MasterCard IPO /9 MA launches scale social benefits, payroll programs 2 Page 2

3 Rapid changes are also being driven by several potentially disruptive trends Trend Pace Probability Impact 1 Increasing government regulation or involvement in payment card pricing High High High 2 Introduction of new transaction origination form factors or processes (mobile, biometric, near field etc.) Low Med Med 3 Strong interest by governments & corporates to electronify all payments to reduce costs Med High High 4 Increasing consumer demand for simplified electronic payments available anytime & anywhere Low High Med 5 Growing interest by merchants in driving loyalty and consumer understanding through electronic payments Med Med Med 6 Growing integration of the value chain and accelerating scale resulting in availability of prepaid through new channels Med High Med Page 3

4 Prepaid Global Market Sizing Report-2010 This is a global prepaid study and it is in no way a reflection of how MasterCard performs in the prepaid arena An in-depth, comprehensive study of the bulk of world-wide prepaid spend: 45 countries comprising approximately 90% of global GDV Includes open and closed loop volume A research-based projection of GDV to 2017: Adoption rate analyses based on customized inputs for each category and country Assessment of all major prepaid card functionalities: Includes a breakdown of 18 categories of prepaid spend (e.g., government, payroll, general purpose consumer reloadable, etc.) Study conducted by Boston Consulting Group leveraging BCG s local market experts, proprietary research, triangulation of multiple external resources. Page 3

5 Prepaid is Growing Globally 2017 Open Loop GDV estimated at $840B U.S./Canada $457B Europe $156B LAC $81B APMEA $146B Source: BCG Prepaid Market Sizing Report, May 2010, Research commissioned by MasterCard Page 5

6 The Prepaid Opportunity Can Be Categorized into Three Broad Macro- Verticals Consumer Consumer reloadable Travel Online Campus Remittances Gift $273B $243B $324B Public Sector Public Benefit & Welfare programs Emergency assistance & disaster relief Pension & Social Security Travel & cash management Payroll & incentives Corporate Programs Business travel & entertainment Meal vouchers Corporate purchasing Payroll Corporate Incentives & Promotions Source: BCG Prepaid Market Sizing Report, May 2010, Research commissioned by MasterCard Page 6

7 $Billions Top Three Markets Account for Over 50% of Open Loop Opportunity 2017 European Open Loop GDV by Market Next 5 Markets 37% $10.1 $10.0 $9.3 RoE 8% $12.3 $155.7 Top 3 Markets 56% $16.1 $11.3 $16.7 $ % $ % 25% UK Italy Russia Germany Iberia CEE France Nordic Rest of Europe Total Europe Source: BCG Prepaid Market Sizing Report, May 2010, Research commissioned by MasterCard Page 7

8 Future of Prepaid: Realizing its Full Potential Prepaid Open-Loop Turnover in 2017: $156B Payroll Cons. Other 4.64 Gifts 9.48 Corp. travel 1.17 Insur Corp. Other 1.18 Transit 1.8 Gov t Online Gen. use Consumer Verticals Corporate Verticals Cons. Travel Source: BCG Prepaid Market Sizing Report, May 2010, Research commissioned by MasterCard Page 8

9 Significant Growth Expected this New Decade $45.0 $40.0 $35.0 $30.0 $25.0 $ Top Open Loop Markets 26% Open Loop CAGR for all of Europe $30.6 $20.0 $16.7 $16.1 $15.0 $10.0 $11.5 $11.3 $10.1 $5.0 $- $2.4 $2.2 $1.7 $0.3 $0.7 UK Italy Russia Germany Iberia CEE Source: BCG Prepaid Market Sizing Report, May 2010, Research commissioned by MasterCard Page 9

10 Over $184B GDV in 2017 Closed Loop Prepaid Presents a Sizable Opportunity $90 $80 $70 $60 $50 $40 $30 $20 $10 $- $79 $20 $16 $69 UK & Ireland France Italy Rest of Europe Top Verticals Government and Gift greatest opportunity (over 90% of opportunity) UK is 43% of 2017 European closed loop opportunity $184B total closed loop GDV Campus $7 Cons. Incent $1 Lunch Vouch. $8 Transit $52 Gov t $47 Gifts $68 Source: BCG Prepaid Market Sizing Report, May 2010, Research commissioned by MasterCard Page 10

11 $Billions Three Dominant Vertical Markets $6 $16 $ Top Open Loop Verticals by Market Consumer verticals including travel, online and general purpose reloadable contribute to the majority volume in Europe $18 $20 $10 $5 $6 $1 $13 $6 $9 $3 $3 UK Italy Russia Germany France CEE Public Sector Consumer Corporate Source: BCG Prepaid Market Sizing Report, May 2010, Research commissioned by MasterCard Page 11

12 Prepaid is at the Core of Channel & Product Innovation Transit Retailers Mobile Post Offices MasterCard Labs MasterCard repower Mobile MasterCard MoneySend MasterCard incontrol Page 12

13 Simplicity Seizes Market Opportunity Prepaid has just a few fundamental building blocks At their root all prepaid products are closed loop, restricted loop or open loop Then simply a case of customising card programmes to meet specific user needs, whether for consumers, corporates or public sector organisations Prepaid applications are limited only by our collective imaginations Page 13

14 Selling Prepaid as a Consumer Product Knowing your consumer and seeing the world from their perspective is crucial Success hinges on understanding what end users want from prepaid and simplifying the concept for them to see the immediate benefits Prepaid needs to: Meet consumers needs, desires and aspirations Serve specific purposes for all the consumers who use it Create excitement among the people who sell it, in particular the retail community Page 14

15 The Prepaid opportunity is driven through multiple channels Corporate Customer & End Consumer Post Offices

16 MasterCard Partners in Prepaid High Engagement approach to drive prepaid innovation and Partner growth Enhanced customer dialogue & support Increased investment in customer growth & success Simplified customer interaction model Page 16

17 MasterCard s Partners in Prepaid is a high engagement approach focused on customer success Enhanced customer dialogue & support Periodic MasterCard surveys to value chain participants to assess market needs Reaching out to co-develop research and innovation agendas Sharing global best practices through periodic webinars Major program launch support Increased investment in customer growth & success Prepaid specific promotions On going collateral and messaging support Annual marketing forum to share and seek feedback on proposed activities Simplified customer interaction model Enhance prepaid on-boarding and flexibility Accelerate response time Page 17

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