Solving for personal commerce: Interoperability as the key to scale

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Visa Confidential Visa Confidential

Solving for Personal Commerce:

Interoperability as the Key to Scale

Gavin Krugel

Tuesday, November 12, 2013

| Digital Solutions, Emerging Markets | November 14, 2013 2 Visa Confidential

Market leader Market leader Market leader Market leader Market players

Mobile Money is replacing cash in many countries

Percentage of GDP processed by mobile money services is significant:

KENYA BANGLADESH UGANDA PAKISTAN TANZANIA

31%1 of Kenya’s

GDP

3.6%2

of Bangladesh’s

GDP

20%3 of Uganda’s

GDP

44%5 of Tanzania’s

GDP

1.5%4

of Pakistan’s

GDP

4. Based on $0.88bn transactions in Q4 2012 (CGAP, June 2013) cf. $231.2bn GDP (World Bank, 2013)

5. Based on $1.06bn per month (Bank of Tanzania, Dec 2012) cf. $28.2bn GDP (World Bank 2013 stats).

Each company logo represents the mobile money market leader by registered wallet value.

1. GSMA Mobile Money for the Unbanked: The Kenyan Journey to Digital Financial Inclusion (July 2013)

2. Based on $1.03bn transactions in Q1 2013 (CGAP, June 2013) cf. $115.6bn GDP (World Bank, 2013)

3. GSMA Mobile Money for the Unbanked: Global Mobile Money Adoption Survey, 2012 (February 2013)

Amount of value moved over mobile money platforms annually (see references below):

Note: All brand names and logos are the property of their respective owners, are used for identification purposes only, and do not imply product endorsement or affiliation with Visa.

| Digital Solutions, Emerging Markets | November 14, 2013 3 Visa Confidential

82.20%

0.00%

2.70% 8.30%

0.90%

5.30%

0.60%

P2P

Micro Payment

Airtime

Bill Payment

International Remittances

Bulk Payments

Merchant Payments

Transaction types differ significantly from traditional retail payments Mobile Money Transactions (2012)

Source: GSMA Mobile money for the underbanked, 2012

Global Mobile Money Adoption Survey

| Digital Solutions, Emerging Markets | November 14, 2013 4 Visa Confidential

Barriers to adoption

34% lack of

interoperability as

the primary barriers to

adoption

Security concerns do not appear to be a barrier to adoption

Source: Visa Mobile Money Survey 2012

| Digital Solutions, Emerging Markets | November 14, 2013 5 Visa Confidential

Regulators are responding

‘Electronic retail payment service providers shall utilize open systems capable of becoming interoperable with other payment systems in the country and internationally’

‘Electronic retail payment service providers are encouraged to enter into interoperable arrangements’

Kenya proposes National Payment Systems Regulation

Movements toward interoperability begin in Nigeria, Pakistan, Indonesia, Tanzania, Uganda, Rwanda…

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What does a closed loop mobile money service look like?

Mobile network operators and banks who have implemented mobile

money platforms have developed closed-loop systems to serve their

consumers, but do not operate beyond their networks as yet

C = Consumers A = Agents

There are over 325 closed-loop mobile payment systems planned or in market1

Mobile Money Implementation A

Primary Transactions: Cash-in, Cash-out, P2P Transfers, Airtime Top-up and Bill Payment

Mobile Money Implementation B

Wallet Platform

C1

C2

C3

A1

A2

A3

1Source: GSMA November 2013 Deployment Tracker

Wallet Platform

A1

A2

A3

C1

C2

C3

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Mobile Money ecosystem’s are complex

Bank / Financial Institutions

Remittance Partners

Business

Mobile Network Operators

Government

VisaNet / Other

Regional Switches

Other Mobile Money

Platforms

Enterprise Platforms (CRM)

Agent Network Managers

(ANM)

Bill Payment Service Provider

Merchants

Mobile Money

Service

Interoperating them more so….

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Defining interoperability

• Ability for consumers to send money to each other irrespective of Mobile Money service

• Ability for consumers to cash-in or cash-out at competing mobile money agents

• Ability for consumers to use retail payments at all retailers irrespective of who signed the retailer up

• Ability for consumers to use existing payment system infrastructure such as ATM, POS, eCommerce and international remittances

9

Considering interoperability

• Technical interoperability – how will the messages flow or be defined or standardized?

• Consumer awareness – how does the consumer know the retailer/ATM/agent or mobile money service is interoperable?

• Where does the consumer go to query or dispute an interoperable transaction?

• What are the rules governing such disputes?

• What are the mechanisms for compensating mobile money service owners for facilitating your customers transactions?

• What are the entry standards or conditions to be a part of an interoperable service?

• Can you be sure that you will be settled for the transactions you process on behalf of other service providers?

10

U.S. Credit Card Market Programs 1958-1969

Sources: Electronic Value Exchange – Origins of the Visa Electronic Payment System by David L. Stearns; The Power of an Idea by Paul Chutkow

Acceptance Financial Accounts

1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969

BofA and

30

other closed-loop programs launched

Only

10 more

closed-loop programs

added

Visa / Telenor Partnership Overview

11

VisaNet

U.S. Credit Card Market Programs 1958-1969

Sources: Electronic Value Exchange – Origins of the Visa Electronic Payment System by David L. Stearns; The Power of an Idea by Paul Chutkow

1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969

BofA and

30

other closed-loop programs launched

Only

10 more

closed-loop programs

added

481 Programs

added

1,207 Programs

added

Bof A begins licensing banks nationally and internationally

Acceptance Financial Accounts

Visa / Telenor Partnership Overview

Visa’s Solution: Organizing Complexity Visa eliminated the need for individual acceptance agreements. Visa’s open-loop alternative connected merchants, banks, accountholders worldwide through one payments network.

Visa

Acceptance Financial Account

12

13

Déjà Vu? 2003-2012

Sources: GSMA Mobile Money Tracker, 2013

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Over 208 deployments in

over 35 countries

Acceptance Mobile Money Accounts

Visa / Telenor Partnership Overview

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Mobile Money Programs Predictability and Security Expanded Payment Eco-

system

Person to person Agents

Remote Payment

Mobile Money Account

Mobile Money Account

+ =

What Visa brings to Mobile Money

Operators

Merchants ATMs

eCommerce

Person to person

Remote Payment

Agents

Traditional Visa Payment Transactions

Visa Personal Payment Transactions

New Transactions based on Agents

15

Visa Mobile Prepaid enables interoperability between mobile money platforms

Evolving Mobile Money

Emergence of low-cost, ubiquitous mobile technology now allows mobile network operators (MNOs) to provide financial services to subscribers via mobile money platforms

Visa will connect mobile money platforms to the worldwide Visa Network through Visa Mobile Prepaid, expanding payment and purchase offerings to subscribers and increasing revenue for MNOs

+

A Simple Question… “If anything in the world were possible, what would be an ideal organization to create the world’s premier system for the exchange of value?”

- Dee Hock, founder of Visa

In other words,

“what is the best way to pay and be paid?”

16

With a Visionary Answer

An open-loop infrastructure and

network that moves money (value)

Trusted and guaranteed

payment for all parties

Security, reliability, convenience

Global reach, multiple markets

Scalability to handle sudden

and large variations in volume

The answer to the original question became our vision and Visa was born.

Gavin Krugel

[email protected]