“Wave and Pay” Visa Contactless VISA EUROPE Guido Mangiagalli Consumer Market Development Visa Europe

Presentation Identifier.2 Information Classification as Needed Visa Europe Agenda Contactless business opportunity Visa Europe contactless strategy Visa e-money

Presentation Identifier.3 Information Classification as Needed Visa Europe Cash – The Business Opportunity Europe 361 bn cash vs 60 bn non-cash transactions 85% Cost of cash to society 0.5% GDP (Europe €50 bn)

Presentation Identifier.4 Information Classification as Needed Visa Europe Cost of cash to society 0.5% European GDP € 50 Billion Central Banks Retail Banks Retail Cash € 32 Billion€ 13 Billion€ 5 Billion Incoming/ recycling process Outgoing process Means € 5.9 Bil Staff € 9.7 Bil Transport € 1.0 Bil Inventory € 4.4 Bil Means € 4.3 Bil Staff € 2.8 Bil Transport € 1.4 Bil Inventory € 2.5 Bil € 21 Billion € 11 Billion Source: EPC

Presentation Identifier.5 Information Classification as Needed Visa Europe Cash – The Business Opportunity UK cash market 27.2 bn transactions for £268 bn 20.7 bn of these transactions are for less than £10

Presentation Identifier.6 Information Classification as Needed Visa Europe Cash – The Business Opportunity 50% of all low value cash transactions are accounted for by just eight spending categories: Top-up groceries Spending at confectionary, tobacconists and newsagents outlets Payments in pubs and bars Fast food restaurants Taxis Mobile phone top-up Transportation Off-license sales

Visa contactless activities

Presentation Identifier.8 Information Classification as Needed Visa Europe Visa Contactless Payment Programs Launches in Asia Pacific Malaysia – after a successful pilot in 2004, began initial rollout of 500,000 cards and 4,000 merchants in February 2005 Taiwan rollout began in October 2005 Korea and Thailand rollout imminent Launch in United States Chase has issued millions of cards to date Over 20,000 merchant locations Began in Atlanta in May 2005 and expanded to major metro areas of seven other states Visa Contactless Mini Card announcement Opportunities in Europe Key market commitments to pilot in 2006 and deploy in 2007

Presentation Identifier.9 Information Classification as Needed Visa Europe Contactless Benefits for Consumers Convenience and speed No more fumbling for cash Reduced card orientation issues Consumer remains in control of card – further extends use of customer activated payment Appeal of new technology Consumer Feedback from pilot in Malaysia Cardholder Protection: “With Visa Wave, it does not leave your hand. So it is less likely to get cloned” Convenience: “There is no need to swipe the card. It’s convenient.” “No signatures necessary.” Appeal of Technology: “It’s keeping up with the technology. It’s like using Bluetooth…” International Acceptance: “Visa. This is what we use when we are out of Malaysia” Consumer Feedback from pilot in Malaysia Cardholder Protection: “With Visa Wave, it does not leave your hand. So it is less likely to get cloned” Convenience: “There is no need to swipe the card. It’s convenient.” “No signatures necessary.” Appeal of Technology: “It’s keeping up with the technology. It’s like using Bluetooth…” International Acceptance: “Visa. This is what we use when we are out of Malaysia” Source: Visa Wave consumer research conducted in Kuala Lumpur in September Focus group interviews with two groups of consumers aged

Presentation Identifier.10 Information Classification as Needed Visa Europe Contactless Benefits for Merchants Increased ticket size of approximately 20-30% compared to cash Reduced transaction time by as much as 25% faster throughput Increased frequency of purchases Reduced cash handling and operating costs Improved terminal reliability–particularly for fast food, gas stations, movie theaters, parking garages, and vending machines Merchants directly relate revenue to transaction speed Former McDonald's CEO Jack Greenberg: “Unit sales jumped 1% for every six seconds saved in drive-through lanes.” Card Technology – January Eleven CIO Keith Morrow: "We saw lots of positive indications from that pilot." Customers using the cards shopped at the stores more frequently than they had before, and spent more during each trip. "We've been very aggressively pursuing this for more than two years." CIO Insight – June 2005

Visa Europe contactless

Presentation Identifier.12 Information Classification as Needed Visa Europe EMV Migration Europe 125m Visa cards in issuance as at end September % of all Visa products 50% of POS transactions cleared through VisaNet in August came from chip-enabled devices UK situation 120 Mil all brands 98% penetration Approximately 1Mil POS and ATMs 71% Visa transactions are Chip and Pin

Presentation Identifier.13 Information Classification as Needed Visa Europe Europe Contactless Chip & PIN will boost the deployment of offline/unattended acceptance infrastructure Visa Europe is developing a contactless payment card solution to target face-to-face low value payments Transactions below €15 No PIN Always offline Fast (less than a second)

Presentation Identifier.14 Information Classification as Needed How Does it Work? Both card and terminal can do contactless qVSDC below card and terminal transaction limits (€15) offline contactless funds available on card (€50) Offline authorised with no PIN from offline contactless funds automatic revert to contact qVSDC insufficient offline contactless funds offline contactless counters reset at any online authorisation

Presentation Identifier.15 Information Classification as Needed Contactless qVSDC Leverage EMV infrastructure Flexible yet simple Minimal card and terminal changes No Visa system changes No required Acquirer host changes Issuer host changes limited to card personalisation Contactless qVSDC transaction speeds less than 0.5 sec.

E-money

Presentation Identifier.17 Information Classification as Needed Visa Europe Lessons learned Make a completely new solution for low value payment is not an easy task Visa Cash Mondex Moneo… Octopus Hong Kong Third parties payments represent ~10% total spending –Are these payments profitable(?)

Presentation Identifier.18 Information Classification as Needed Visa Europe Visa E-money proposition A prepaid Chip-based platform Leverage EMV technology Off-line and on-line capability e-purse like customer experience but Network based Contactless for for low-value payments –below £10, offline, no PIN No need for proprietary reloading systems –F2F, Internet, Mobile… Compliant with European e-money directive –Re-loadable, Anonymous/ KYC…

Presentation Identifier.19 Information Classification as Needed Visa Europe Pre auth off-line spending Pre auth 50 Stored Value account Prepaid £50 How does it work Counter 30 E-money £30 EMV transaction £30 EMV Clearing Message £30 Offline auth 30

Presentation Identifier.20 Information Classification as Needed Visa Europe Pre auth of-line spending Pre auth 50 Stored Value account Prepaid £50 How does it work E-money Lunch £10

Presentation Identifier.21 Information Classification as Needed Visa Europe Pre auth of-line spending Pre auth 50 Stored Value account Prepaid £50 How does it work E-money Travel card £15 Pre auth fund exceeded -5 On line auth £15 Decline 40

Presentation Identifier.22 Information Classification as Needed Visa Europe Pre auth of-line spending Pre auth 50 Stored Value account Prepaid £50 How does it work E-money Top up £40 On line auth £15 Transaction Authorized EMV Script to synchronize counters 15 £15

Presentation Identifier.23 Information Classification as Needed Visa Europe In closing… EMV infrastructure investment provides the foundation for new Visa value-added services E-money Contactless –Add offline authorisation and no CVM requirement Real opportunity to Displace cash Enable “new” acceptance environments Increase card usage and transaction spend Leverage customer relationships New Visa payments form factors Mobile phones…

Presentation Identifier.24 Information Classification as Needed Visa Europe Questions Thank You