Welcome

Welcome – New Members

      Murray Scott – Buropak Steve Hattersley & John Bottreill – Cognitronics Stephanie Wilson – SK Chase Rob Frome & Fatima Wessom – New Look Nicky Tollafield – Shoe Vouchers Carly Wickenton & Nick Warren – Starbucks  Cassandra Cavanah - SpaFinder

Welcome – Guests

     John Gaukroger – Joe Browns Debbie Hughes – Ten Pin Dominic Peachey – Financial Services Authority Diane Jackson - BAUGUR Group Susi Pink - Lavish

Membership

  Issuers - 40 Service – 38  78 total New Members  Murray Scott – Buropak    Steve Hattersley & John Bottreill – Cognitronics Stephanie Wilson – SK Chase Rob Frome & Fatima Wessom – New Look     Nicky Tollafield – Shoe Vouchers Nick Warren – Starbucks Ken Pearceson – Royal Mail Kevin Turnbull & Cassandra Cavanah – Spa Finder

New Executive

        Natasha Toothill – payzone (S) -

Chair

Arun Glendinning – B&Q (I) -

Vice Chair

Philip Shelley – Voucher Central (S) Yvonne West – Sainsbury’s (I) Caroline Watson – Voucherline (S) Rachelle Smith – PPT (S) Denise Porter – Treatme.net (I) John Davis – Argos & Homebase Business Solutions (I) Bill Alexander – Red Letter Days (I)

Cabinet Roles

       Regulation & Legal – John Davis PR & Research – Yvonne West & Denise Porter Liaison with other Associations & Membership Development & Recruitment – Rachelle Smith & Bill Alexander Finance & Constitution – Philip Shelley Social Events & Marketing (web, exhibitions) – Caroline Watson Conference – Arun Glendinning (Vice Chair) Secretariat Liaison – Natasha Toothill (Chair)

Achievements membership year 2007/08 Natasha Toothill

Highlights

  Increased membership Refreshed Aims & Objectives

Aims & Objectives

 Promoting the use of vouchers and gift cards to business and consumers  Enhancing the standing and raise the profile of our industry, internally and externally through leadership and advocacy  Provide a forum for networking, training, events, best practices, information and education  Addressing consumer and regulatory issues relating to the industry

Highlights

           Increased membership – Should be 100 in 2009 Refreshed Aims & Objectives Networking & Communication – meetings, social events, Voom!, BRC dinner, members website Research – YouGov, Giftex Prepay PR – day-to-day, Christmas activity, Negative press at Christmas Speaking opportunities – NIS, PME, Retail Industry Forum, Prepaid Expo, Gift Cards Europe Marketing – consumer website Legal – VAT, Fraud, Royal Mail, FSA Industry data – change in IRI data Conference – increase in delegates Liaison with other associations – PIF, BRC, MAA

New Fee Structure

 Social membership phase out  All members (Issuers & Service) pay same membership fee £2200 + VAT   Complementary place at conference for all paid up members Fee of £800 for Issuer members to collate IRI data (reduction of £50 on last year)  Only paid up members will be eligible to attend meetings, social events and vote

The Future of The VA five year plan The Executive

Five Years Ago

 31 members (Full members £2600, Associate £1000)  Exec included: Sainsbury’s, M&S, High Street Gift Vouchers, Arcadia Group, Virgin, Capital Incentives.

 Debenhams had launched gift card

What do you want from the VA?

Budget of £180k pa to manage VA activities gets you:       Research Networking  PR  Marketing Website Special offers Conferences Exhibitions  Tax updates  Legal advice  Market news  Newsletter  Market stats  Education  Training  Lobbying

Doubled membership again in 5 years



What would budget of £300 000 buy you?

Do we?

            Increase the membership?

Stay where we are?

More social events?

Increase our lobbying power?

Offer market specific training?

Try to change consumer buying habits?

Self regulation?

Network new markets?

Create member forums to share issues?

To be the market spokesman for prepaid?

Grow awareness in the B2B market?

Pack it all in……?

What do YOU want from the VA over the next 5 years?

 Ask yourself:  What are your 3 main requirements this year from the VA?

 In 2013 – what should the VA be offering members?

 Which areas of membership need to be developed?

 How do we categorise our members?

Brainstorm these areas in 3 groups

Brain Storming results – What VA members would like to see in 08/09

          It was agreed that increasing the membership is key, encouraging the missing large retailers to join, but that we do not grow too big that we dilute the message of the VA, we should enrich rather than simply enlarge membership Up to date Legal Issues and a snapshot of how it applies to our market Lobbying – Concerns on Non-redemption Sub groups and Forums to share issues People from outside the sphere to learn about the market Accreditation / self regulation Research – Consumer (YouGov) & Supplier led Get the VA into the consumer eyes – use the Logo as a ‘Seal of Approval’ Like to see the website used as a resource Like to see Conference 09 address member issues –   back to the ‘dynamics in paper’ maintain a balance gift card / V New technologies and better understanding – more education   More on prepaid Keynote Speaker – new blood

Plans for 08-09 continued

     Members would welcome Industry related training programmes so they could send teams of people Voom! too big a file. Send email with link to website?

Would like to see more PR on the website Need more instructions and procedure for negative PR to be sent to members Good mix of priced social events, like to see more, maybe include outside of London.

Brain Storming 5year Plan

      We should understand more of the Market, understand how the market has changed from 2007 – 2013 Consumer Research Education Lobbying Voice of the Industry VA logo to represent ‘Seal of Approval’

Q&A FSA Dominic Peachey

LEGAL & REGULATORY ISSUES IN PREPAID The Financial Services Authority Prepaid - Q&A Dominic Peachey, FSA

The Regulatory Minefield

 Why is the FSA addressing a retail conference?

 Innovative Electronic Payments Products have attracted the EU  E-Money Directive (2000)  Payment Services Directive (2007)  Need to rationalise these two (2009)  Watch this space

Those EU Directives:

 E-money directive currently in force  Regulates third party pre paid  Due for revision by Q2/2009  Payment Services Directive  Became European law on Xmas Day  Must be implemented in UK by 11/09  Will eventually absorb the revised e-money directive

E-money Directive

 If you issue a prepaid card that is not closed loop you are forced to become a financial institution (or hire a bank)  The consequent regulation is prescriptive and onerous  But the EU is taking a long hard look at the future of EMD and is looking to ease the burdens

Payment Services Directive

 Will apply to all payment services, not just prepaid  Is more principles based and less prescriptive than EMD  Contains a lot of Conduct of Business regulation  Likely to be a complaints led regime  Mediated by Financial Ombudsman

A Word On Principles Based Regulation

 Instead of issuing detailed rules (could encourage a box-ticking mentality)  You issue a set of high level principles  And switch the focus of regulation to desired outcomes  Leaving Senior Management in firms with the freedom to choose how best to achieve those outcomes

PBR – The Example of Hong Kong

 The HK Monetary Authority has adopted a Principles Based regime for e-money  Octopus is the ticketing system adopted by the HK Mass Transit Railway  Includes Pre Pay purse which can be used outside the basic transport system

OCTOPUS

 Regulated by HKMA  Code of Practice drawn up by OCL and endorsed by HKMA  www.info.gov.hk/hkma/eng/bank/value_cards/code_of_practice_OCL_.pdf

 “manage float prudently”  “back with sufficient, liquid, low risk assets”  “ensure sufficient cash flow to handle daily operations”

By Contrast with Hong Kong…

 ….and its 3 golden principles…  The European liquidity regime…  ….as enacted by the FSA’s Handbook  Runs to 17 pages of rules and guidance  This is the difference between rules based and principles based regulation

Prepaid and E-money

 Most (but not all) prepaid is e-money  Open, closed and restricted loops  Definition of e-money  Who can issue e-money?

 Oyster  Storecards  Gift cards  Group Schemes and Cross Border

Exploring Those Loops

 An open loop scheme is a network branded product (VISA, Maestro &c) that may be used virtually anywhere  A restricted loop implies the issuer has negotiated contracts of acceptance with a limited group of merchants  A closed loop scheme is one where issue and acceptance is limited to the same person

Definition of E-money

E-money is monetary value (as represented by a claim on the issuer) which is:    Stored on an electronic device Issued on receipt of funds Accepted as a means of payment by persons other than the issuer Surrogate for coins and banknotes Not deposit taking

Who Can Issue Electronic Money?

 Banks  Building Societies  Specialist e-money issuers (ELMIs)  Waivered firms  EEA firms who passport into the UK

Products Which Are Not Prepaid

 Debit and credit cards  Mobile based proximity payments  Account based mobile payment schemes  These products are not currently regulated  But will become so from 1 November 2009

Oyster

 2 elements – travel card and pre pay  Pre pay may only be used to buy travel rights from Transport for London  So it is a ticketing system and not a stored value product for paying third parties  Has escaped financial regulation to date  Despite extension to TOCs

Oyster Involves:

 No straight revenue pass through  Discontinuity between transport services consumed by cardholder and payments received by operators  Use of parallel operators to complete same journey  Use of sequential operators to complete same journey  Effect of daily price capping

Storecards

 Accounts mutated into charge cards and credit cards  If they only operate within the one store chain, they are not regulated  Intra-group and cross-border edge towards regulation  Commission says storecards exempt unless co branded with VISA or MasterCard

Gift Cards

 What exactly is a gift card?

 Is it a token or voucher of nominal value or  Is it an electronic purse with a running balance  With whom can it be redeemed?

 If in doubt, seek advice

Group Schemes and Cross Border

 Whether a scheme is regulated or not often hinges upon third party acceptance as payment  That means legal third parties  Including acceptance by subsidiaries and by other group companies  This may cause problems cross border – even the Anglo-Scottish border

Limited Network Exclusions

 Article 3 (k) of PSD  Excludes:  limited networks of service providers  limited range of goods or services  Commission guidance intends the exemption of storecards, canteen cards, petrol cards, transport cards  BUT

The Exemption Does Not Run To…

 Cards which can be used in a long list of big chains of merchants  Because they are typically designed for a growing network of service providers  Which could take them out of scope of “limited network”  But shopping mall cards should be clear

Websites

 These can be virtual marketplaces  So apply the same principles  Can the payment instrument only be used for purchases through a specific website?

 Or can it be used for a certain range of goods and services offered over the Internet?

Questions

 B&Q asked Dominic to confim the regulation of B&Q gift crads in different sceniros:    Only in B&Q stores is OK B&Q on a Mall in another store – regulated B&Q merged with another company on a card – regulated  PPT would like shopping centre cards regulation confirmed.

 If it can only be used in the one centre it falls outside regulation.

 payzone asked if the new directive will be down to legal interpretation?

 Yes! FSA will give support and advice, and essentially the European Court makes the decision on how its run.

IRI Figures Andrew Johnson

Figures

 VA collate sales data from all members  Recently reformatted data collected  First draft of 2007 full year data including gift voucher, gift card and e-voucher sales

Paper v Plastic v E

 Paper  Gift Cards (closed, open, restricted)  E-vouchers 65% 32% 3%

 Closed  Restricted  Open

Plastic Only

97% 0.5% 2.5%

Consumer

 Paper  Gift Cards (closed, open, restricted)  E-vouchers 50.63% 45.05% 4.32%

B2B

 Paper  Gift Cards (closed, open, restricted)  E-vouchers 90.4% 9.22% 0.38%

Total Sales by Channel

includes paper, plastic & e  Direct  On-Line  Gift Card Centre  Third Party 93.21% 3.58% 0.59% 2.62%

Gift Card Only Sales by Channel

 Direct  On-Line  Gift Card Centre  Third Party 98% 0.78% 0.97% 0.31%

 Retail  Agent  Leisure

Category Breakdown

76% 21% 3%

Conference 2008 Conference 2009 Arun Glendinning

Conference 2008 Feedback

 244 delegates  16 exhibitors  Excellent feedback  Less panel sessions  Free drinks in the evening!

Conference 2009

 Wednesday 29 th April 2009  QEII Conference Centre, London  All members one complementary delegate (subject to Terms & Conditions)  Member rates for colleagues & guests  Exhibition area  Sponsorship opportunities  Free evening drinks!

 More information in Voom!, and members website

Housekeeping Andrew Johnson

Calendar of Events

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Pizza Fest – this evening

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Next members meeting – Wednesday 8

th

October

VA Endorsed Events

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Prepaid 08 – this week – feedback

Facts from conference

VA Endorsed Events

            

Prepaid 08 – this week – feedback

Facts from conference Eastern Europe has the biggest market for prepaid as most government benefits are paid on prepaid cards Prepaid is forecast 23% annual growth rate globally 2008-2012, particularly unbanked and youth Gift cards are the entry point into prepaid, particularly youth 19.6% growth in prepaid card numbers and 40’5 growth in tranx value in Europe Turkey, Greece then UK are top three opportunities Transport cards will have big impact on UK market In rest of Europe prepaid is heavily bank orientated In Germany 75% of debit cards have prepaid function Consumers 8% growth in non-store vending and 0.8% growth in in-store vending Retailers through their distribution and brand strength hold the key to the success of prepaid in UK By 2015 the market will be dominated by open loop

British Retail Consortium Dinner Wednesday 24

th

September

 VA booked a table  Members can book places at £210 + VAT  Over 1000 key retail figures meet for annual dinner  Grosvenor Park Lane, London

Prepaid Cards Summit 22

nd

& 23

rd

October

 Prepaid Conference  The Brewery  More details in Voom!

 Organised by VRL Knowledge Bank

Prepaid Awards Inaugural Gala & Gallery

 Prelude to Prepaid Awards 2009  Wednesday 22 nd October 2008  Sheraton Park Lane, London  Member discounts to attend  Awards voted on the night  Event joint endorsement from VA & PIF  More at www.prepaidawards.com

The Motivation Awards

 Awarding motivation & incentive programs  In association with the ISP  20 awards  Discounts for members to attend and sponsor  Wednesday 5 th November, Royal Garden Hotel, London  More at www.motivationawards.org

 Umbrella Association covering whole Prepaid Market    Working Groups:     Business models – Rachelle Smith Legal & Regulatory – John Davis Consumer & Education – Andrew Johnson Transportation – available  Two places available to VA members should any other member wish to attend Updates in Voom!

PIF newsletter from VA office – includes profiles of the Prepaid market in other European Countries  More info on PIF website

 PIF is looking at self regulation and accreditation for all PIF members  The VA needs a definitive guide on negative balances  PIF Code of Conduct has been incorporated into VA Code of Conduct

Research Executive

Research membership year 2008/09

 2007 – YouGov & Giftex Prepay  YouGov - PR lead, gifting trends  Giftex Prepay – research focus, gift cards and voucher trends  2008?

Research Brain Storm results Consumer Questions

            Repeat questions from 2007 so results are measurable and get Trend Data Consumer: Reasoning behind purchase?

Why do you choose gift card / Voucher over product?

Awareness of Gift card? E-voucher / Mobile?

Perceived value of all these?

Are they buying by Brand?

Do they repeat purchase?

Do you find it difficult to understand value of gift card?

How many Voucher or gift cards not used?

Do they ever club together?

What is normal purchase value?

Age of the purchaser?

    How important is packaging?

Have you recived gift card voucher? Would you have preferred cash?

What does the value tell you perception of the giver?

Appetite for Open Loop

Research Brain Storm results B2B Questions

     Why do they not like cards?

What do they want from plastic? – top up / reload / denominated Can they be used to increase brand loyalty Offer additional benefits for plastic Is presentation / packaging important?

Any Other Business?

 The BBC’s the one show has been approaching Large Retailers for figures regarding non-redemption. The VA & Clareville are happy to field these questions, so that we deliver the same answer. Please call Andrew if you would like advice