Transcript Visa Commercial Payments Overview

Commercial Payments
Overview
Oct 2014
Orson Morgan
Sr. Account Executive
Public Sector
Visa Confidential
Agenda
• Commercial Payments
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Visa at a glance
Commercial Payments Trends
Fraud/Risk Mitigation
Tokenization
Regulatory update
RPMG study
Visa Confidential
Visa at-a-glance
Visa is the world’s largest electronic payments network and provider of tailored payment solutions;
driving business growth by streamlining procure-to-pay processes, while delivering enhanced control,
transparency, and insight
14,600
2.2 billion
$6.9 trillion
Financial institution clients1
Visa cards1 (as of June 30, 2013)
Total volume2
175
88 billion
36 million
Currencies Processed
Total
transactions2
Visa settles the majority of volume from
public sector credit card programs, and
has relationships with most issuers
competing for public sector business.3
Acceptance locations
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83% of GSA is Visa-branded4
41 of 49 states are Visa-branded
76 prepaid programs in 40 states
Note: Figures are rounded, exclude Visa Europe and are as of September 30, 2013 unless otherwise noted; figures from 4Q13 operational performance data except number of
financial institutions and ATMs.
Source: 1Based on payments volume, total volume, number of transactions and number of cards in circulation; 2Includes payments and cash transactions; 32013 U.S. Commercial Card
Market Update, Mercator Advisory Group; 4GSA website, 2013
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| U.S. Local Government Stats & Facts | March 2014
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Current Economic and Fiscal
Situation
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U.S. Commercial Opportunity
Commercial Consumption Expenditure (CCE) spend capture
opportunities exist across business segments
2012 U.S. CCE Distribution
100% = $22.8T
Segmentation By Revenue
5 Year
CAGR = 4.8%
Small:
Medium:
Large:
$ Trillions
<$25M
$25M-500M
>$500M
Government
$1.6
6.8%
Asia Pacific
36%
$20.6
2007
$21.3
2008
$18.6
2009
$20.1
2010
$21.7
2011
$22.8
$23.8
$25.0
$26.2
$27.5
49.9%
$28.8
Large
Market
$11.4
2012
2013
2014
2015
2016
2017
$ Trillions
USA
20%
23.9%
Small
Business
$5.5
LAC
7%
CEMEA
Europe19.4% 8%
27%
Middle
Market
$4.4
Source: Visa Commercial Consumption Expenditure Index; Economist Intelligence Unit (EIU) modeling and analysis, September 2013. Global CCE index data sources include Bureau of
Economic Analysis (BEA), U.S. Census Bureau, Organization for Economic Cooperation and Development (OECD), STructural ANalysis (STAN) Database, EuroStat Database, General
Government Accounts from the National Accounts of OECD Countries, United Nations Statistics Division National Accounts Main Aggregates Database, EIU proprietary databases,
government data and EIU model estimates where government data was unavailable. Large contracted defense spending not included in CCE index. Note: Figures updated
September 2013
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Large/Middle Market Trends
U.S. Commercial Payment Card
Purchase Volume by Type 2007 2016
$Billion USD
$300
$206
$200
$100
$94
$0
Large and Middle Market Trends
• Anti-fraud and security measures continue to be topof-mind for companies, even with fraud rates on the
decline
• Purchasing and Prepaid are primary drivers of U.S.
product growth
• Traditional Corporate Card volumes will benefit from
strong business travel levels
• Mobile innovation and reporting/auditing tools will
be two key options for growth outside of classic card
benefits
• Green and Eco-business Initiatives are at the
forefront of successful product strategies
• U.S. Markets show greatest opportunity, but
Emerging Markets will play a key role in growth
• U.S. Commercial Card Growth is Greater than Small
Business and volume growth will be led by Visa
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Corporate
Purchasing and Fleet
Source: Packaged Facts, December 2012
Visa Commercial Payments Overview 2014
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“State and local government fiscal conditions
have improved dramatically, but not as much as
the overall economy. Subnational government
contributions to GDP growth were essentially
flat in 2013… The recovery has continued into
2014, particularly in state hiring.”
-Dan White, Moodys
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GF Spending Expected to Grow for 4th Straight
Year, Although Below Average
36-year historical average rate of growth is 5.6 percent
Source: NASBO Fall 2013 Fiscal Survey of States
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*Fiscal 2014 numbers are enacted
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GF Spending Exceeding Pre-Recession Level
Source: NASBO Fall 2013 Fiscal Survey of States
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*Fiscal 2014 numbers are enacted
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State and Local Employment Cuts
State and local employment has declined 735,000 from the start of the
recession through January
• State employment declined 161,000 from Aug. 2008 – Jan.
2014
– State government employment declined by 6,000 positions in January
• Local employment declined 574,000 from July 2008 – Jan. 2014
– Locals reduced positions by 11,000 in January
Source: Bureau of Labor Statistics
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Improvements to the State Fiscal
Environment
• Revenues improving, surpluses expected
• Enacted net tax cuts in 2 of the last 3 fiscal
years
• State and local sector is contributing (some) to
GDP growth rather than detracting
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Challenges: Long Term
• Tighter Resources Debt and Pension Liability
• State Revenue
• Infrastructure
• Federal Cuts
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State Debt/Ratings Outlook
• Stable rating outlook for states currently
• Fitch (Dec. 2013): The financial position of most states has
noticeably improved since the recession.
• Standard & Poor’s (Dec. 2013): State governments come into 2014
with revenue and spending better aligned
• Moody’s (Dec. 2013): US states sector is supported by broad and
diverse economies, low debt burdens…
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Fraud Awareness, Prevention and
Mitigation
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Fraud, Abuse, & Misuse: Definitions
 Fraud – The theft card information by fraudsters
 Account takeover (information
change)
 Mail thefts
 Counterfeit cards
 Lost/Stolen cards
 Mail order/telephone order
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Skimming
Database Hacking
Franchise Software Hacking
Sniffing
Phishing
Abuse – Intentionally or unintentionally violating policies and
procedures for personal gain
Misuse – Intentionally or unintentionally violating policies
and procedures for work related gain
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Our Strategy
A layered approach
Build and enhance stakeholder trust in Visa as
the most secure way to pay and be paid
PROTECT
PREVENT
Protect
vulnerable
account data
Minimize fraud
in the payment
system
ADVANCE
Execute risk strategies
for emerging products
and channels
Trust and
Partnership
RESPOND
Monitor and
manage events
that occur
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Our Strategy: We have the Tools
A layered approach
A layered approach
PREVENT
Minimize fraud
in the payment
system
Dynamic Authentication
Intelligent Authorization
• EMV chip
• Verified by Visa
• Visa Advanced Authorization
• Visa Consumer Authentication Service
!
PROTECT
Protect
vulnerable
account data
RESPOND
Monitor and
manage events
that occur
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Data Security
Data Elimination
Breach Response
Cardholder Empowerment
Shrink Zone of Impunity
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Non-storage
Encryption, tokenization
PCI standards
Payment gateways
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Proactive Alerts (CAMS)
Transaction Alerts
Law enforcement support
Chargeback & Fraud programs
Global Brand Protection programs
Visa U.S. EMV roadmap
October 2012
April 2013
October 2015
October 2017
Technology
Innovation
Program (TIP)
Acquirer
Chip POS
Processing
Mandate
POS
Liability Shift
AFD
Liability Shift
U.S. domestic and
cross-border
Acquirer Chip
ATM Processing1
Mandate
Note: POS = point of sale; AFD = automated fuel dispenser
1Requirement for third-party processors only
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ATM
Liability Shift
U.S. domestic and
cross border
EMV deployment status
Visa – U.S.1
• 7.4 million EMV cards issued
• 520,000 merchant outlets
EMV enabled
• 8% of U.S.-issued cross-border
transactions are chip-on-chip
Visa – Global1
• 1 billion chip cards issued
• 43% of all POS transactions
originate from chip terminals
• 54% of all ATM transactions
originate from chip
ATM terminals
Industry Status
Based on EMVCo Q4 2013 data combined from American Express, Discover,
JCB, MasterCard, UnionPay and Visa (does not include U.S.)
• 2.3 billion EMV cards have been issued globally
• 36.9 million EMV terminals have been deployed globally
1Visa
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data as of end December 2013
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Losses from Misrepresentation and
Internal and External Frauds
Source: RPMG Purchasing Card Benchmark Survey 2012
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Tokenization
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Payment Token Standard
Payment Token Standard at a glance…
A Payment Token is a “non-financial identifier” that can be used in place of
an original payment credential to initiate a payment transaction. Tokens
replace sensitive data with a surrogate value that is not mathematically
reversible while encryption scrambles information into an unreadable format
which is reversible only with the right key.
 Global & Multi-Channel
 Able to be passed through or routed by existing
and new payment ecosystem players
 Distinct and identifiable in system
Global
Enables New
Channels
Network Tokens
Industry Standard & Service
 Deployable as static or dynamic (limited use, time
limits)
 Compatible with existing payment technologies
(Web, NFC, POS standards)
 Supports all regulatory obligations (e.g. routing
decisions)
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Secure
Interoperable
Supports New
Participation
Minimizes
Ecosystem
Impact
Regulatory update
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Surcharging Frequently Asked
Questions
• What will it take for a merchant to be able to surcharge?
• How will the process be regulated?
• What can a client do if they feel a merchant should not be
surcharging?
• How does surcharging notification work?
• Are Purchasing Cards considered Credit Cards?
• Does this impact Debit Cards?
• How many merchants have already signed up to surcharge?
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Settlement Update – “Check-Out Fees”
• The card networks (Visa and MC) and several bank issuers have
reached a preliminary agreement on the interchange lawsuit filed by
merchants. The lawsuit was brought in 2005 by merchant plaintiffs
alleging that banks and card payment networks restricted competition
on interchange rates.
• With the preliminary agreement, Beginning Jan 27, 2013, merchants
will be able to add “checkout fees” (surcharge fees) for Visa &
MasterCard credit card transactions per the terms of the settlement
agreement. The terms apply to all Visa and MasterCard credit cards.
• Debit and Prepaid cards cannot be assessed “checkout fees”.
• 10 U.S. states have surcharging restrictions including California,
Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New
York, Oklahoma and Texas.
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Settlement Update – “Check-Out Fees”
• Check-Out fees are being imposed solely at the merchant/supplier
discretion.
• A merchant/supplier must disclose the check-out fee at the point of
sale (or online check out screen). Also, merchants/suppliers are
required to provide a separate line item on the receipt that shows the
dollar amount of the fee. (example provided on next slide)
• Each merchant will determine how much the “checkout fee” will be if
they decide to charge one, however, no merchant may charge more
than 4% of the transaction amount. Merchants are required to disclose
the amount of the surcharge before you make a purchase; look for
signs at the store entrance and at the cash register or point of sale.
• U.S. Merchants that intend to surcharge must complete a notification
form with Visa or MC 30 days in advance of charging the fee
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Settlement Update – “Check-Out Fees”
Client Questions and Disputes
Clients can access information from Visa
directly:
Follow the links below for additional
information:
• Visa:
http://usa.visa.com/download/merchants/su
rcharging-faq-by-merchants.pdf
If a cardholder believes that a charge is
questionable (they were charged more than 4%
or the fee was not disclosed upfront), they
should contact Visa. Follow the link below in
order to report a merchant violation:
Visa
Customer Assistance Center: 1-800-847-2911
Report a Merchant Violation Online Form:
https://usa.visa.com/checkoutfees/contact.js
p
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RPMG
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Purchasing Card Spending in North
America (in $ billions)
Actual
Expected
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Source: 2014 Purchasing Card Benchmark Survey, RPMG Research
Purchasing Card Volume Growth
Across all respondents, the percentage growth in 2011-2013 (27%) was
higher than the previous six years.
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Source: 2014 Purchasing Card Benchmark Survey, RPMG Research
Key Benchmarks
Spending per
Transaction, 2005-2013
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Monthly Transactions per
Card, 2005-2013
Spending per Card, 20052013
Source: 2014 Purchasing Card Benchmark Survey, RPMG Research
Current P-Card Spending by Category
(in $ billions)
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Source: 2014 Purchasing Card Benchmark Survey, RPMG Research
Purchasing Card Wallet Share
Transactions under $2,500
Percent of Transactions Under $2,500 Paid with Card
The percentage of
under $2,500
transactions have
been increasingly
shifting to
purchasing cards,
largely shifting from
paper checks.
* In 2003, the capture category was under $2,000
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Source: 2014 Purchasing Card Benchmark Survey, RPMG Research
Purchasing Card Wallet Share
Transactions $2,500- $10,000
Percent of Transactions $2,500-$10,000 Paid with Card
The percentage of
$2,500 to $10,000
transactions have
been increasingly
shifting to
purchasing cards
from paper checks.
* In 2003, the capture category was $2,000-$10,000
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Source: 2014 Purchasing Card Benchmark Survey, RPMG Research
Key Purchasing Card Benefits
Cost per
transaction
Cycle Time
Process
Simplification
Traditional paperbased PO format
$90.20
PER TRANSACTION
Plastic purchasing
card
$20.38
PER TRANSACTION
Savings of $69.82
PER TRANSACTION
Traditional paperbased PO format
11.4
DAYS
Plastic purchasing
card
3.4
DAYS
Savings of 8.0
DAYS
Traditional paperbased PO format
2.3
MANAGER APPROVALS
Plastic purchasing
card
1.4
MANAGER APPROVALS
Source: 2014 Purchasing Card Benchmark Survey, RPMG Research
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Achieving High Performance
Organizational policy, internal processes, and
program controls are fundamental components of
the architecture of a Best Practice program.
Policy
Control
Process
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Source: 2014 Purchasing Card Benchmark Survey, RPMG Research
Policy Best Practice Areas
Leading organizations adopt best practices in five key card
policy areas.
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Source: 2014 Purchasing Card Benchmark Survey, RPMG Research
Policy: Client Checklist of Best Practices
 Ensure optimal card distribution
 Regularly evaluate policies related to allowable spend categories
and update as needed
 Mandate card use for all eligible categories of purchases
 Foster ongoing senior management support of the purchasing card
program
 Implement rewards related to purchasing card program
performance
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Source: 2014 Purchasing Card Benchmark Survey, RPMG Research
Control Best Practice Areas
Leading organizations adopt best practices in three control
related areas.
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Source: 2014 Purchasing Card Benchmark Survey, RPMG Research
Control: Client Checklist of Best Practices
 Revisit transaction and monthly spend limits to ensure maximum
utility from the card program
 Conduct regular data mining to ensure effective control and
compliance
 Evaluate and optimize card issuance criteria
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Source: 2014 Purchasing Card Benchmark Survey, RPMG Research
Process Best Practice Areas
Leading organizations implement best practice processes to
optimize purchasing card use and use p-cards as an
innovative tool to improve business processes
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Source: 2014 Purchasing Card Benchmark Survey, RPMG Research
Process: Client Checklist of Best Practices
 Quantify and track purchasing card program cost savings.
 Implement an electronic accounts payable (EAP) solution to
augment the purchasing card program
 Implement a virtual card solution to augment the purchasing card
program
 Conduct regular spend analyses and policy and procedure reviews
to ensure program optimization
 Integrate and automate card program data in the ERP system
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Source: 2014 Purchasing Card Benchmark Survey, RPMG Research
Unanswered Questions?