PKI Issues: The Payment Perspective March 6, 2000 Ann Terwilliger eCommerce Authentication Visa International

Visa ConfidentialGF609DC. 2 2 EC Market Reality  Internet sales volume continues to grow at a rapid rate  Fraud will become a greater concern with rising volume  Consumers still worry about using payment card on the Internet  Non-acceptance of Visa card on ‘Net is a problem  New threats to Visa and Member Banks

Visa ConfidentialGF609DC. 3 3 Authenticated Payment Strategy Objective:  Grow Visa volume over Internet  Providing assurance to cardholders to shop online  Ensure Visa brand prominence on the Internet  Provide tools to make shopping easier  Establish a globally consistent Authenticated Payment Platform  Reduce fraudulent use of Visa cards/accounts  Reduce charge backs  Result in increased profitability  Preserve Visa relevance in eWorld  Provide added value to Members  Leverage existing infrastructure

Visa ConfidentialGF609DC. 4 4 Major Opportunity In Non-Shoppers % of On-line Users Who Shop A majority of on-line users are still not shopping 0% 20% 40% 60% 80% 100% Non-shoppersShoppers source: Jupiter Communications, Forrester Research

Visa ConfidentialGF609DC. 5 5 Security Concerns Are Still Important! Censorship; Special Interest Government ratings system Not familiar with merchant Why Haven't You Shopped Online? Security concerns Can not touch goods Too time consuming 0.0% 71.6% 65.7% 49.3% 59.7% 39.2% 42.8% 23.9% 28.8% 10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0% Source:MarketFacts October’98 Credit card security Personal privacy Censorship by government Depiction of violence Pornography 0.00%10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%90.00% Top Concerns Of Internet Users Source: CyberDialogue 1998

Visa ConfidentialGF609DC. 6 6 Consumer EC Shopping Trends On-line shoppers tend to shop infrequently at only a few merchants The average shopper purchases at only five sites on a regular basis. source: Ernst & Young LLP Internet Shopping Report Internet Shopping Patterns Frequency Over Past YearOnce 2 to 4 times 5 to 10 time s >10 times 4% 33% 50% 13% Goal: increase the frequency of on-line shopping

Visa ConfidentialGF609DC Potential Profitability Opportunity The key to driving market growth is adoption of secure electronic commerce Source: Jupiter Communications, SIMBA, Forrrester & Visa Estimate $0 $50 $100 $150 $200 $250 Global On-line Sales US$ billions Previous Projections Potential New Sales Projection $300 $400 $350 Increase # of merchants cardholders shop with xxx = Increase # of on-line shoppers Increase purchasing frequency Increase # of on-line merchants

Visa ConfidentialGF609DC. 8 8 TRUST= Internet Sales Growth

Visa ConfidentialGF609DC. 9 9 Authenticated Payments Payment Service Internet MERCHANT ISSUER Transaction Encryption Merchant Authentication Cardholder Authentication Non-repudiation CARDHOLDER

Visa ConfidentialGF609DC Authenticated Payment Platform Requirements :  Must reduce fraud through some form of enhanced cardholder authentication  Convenient and simple for consumer and merchants  Quick time to market  Must work internationally  Interoperability - both business and technology The requirements are also the hurdles that need to be overcome to achieve success