Executive Briefing Issue 2 August 2009
Welcome News Welcome to another issue of Executive Briefing, First Data’s online ATM collaboration in India newsletter, keeping you up to date with recent company events, new customer wins and service offerings. In this issue, we focus on the continuing success of FirstVisionTM, our global issuing and consumer finance processing solution, offer information on decision management solutions and insight into the challenges for electronic payments in emerging markets. We hope you find something of interest and, as always, welcome your comments and feedback.
Rana Kapoor of YES BANK with First Data’s Nigel Lee Newsflash First Data and YES BANK are joining forces M & A award for Trionis to create an expanded network of ATMs across India. The initiative will significantly First Data has won a Cards International award enhance the availability of ATMs to India’s for Best Merger and Acquisition, in recognition of cardholders and introduce the concept Trionis, the interbank processing business jointly of ‘convenience ATMs’ to the market. owned by First Data and 15 former EUFISERV shareholders. First Data’s Paul Stanley (pictured) Print Centre opens in Turkey collected the award at the Cards and Payments First Data has opened a new printing facility Europe 2009 event in June. Trionis was launched in Istanbul. The 24/7 operation provides in September 2008 to provide interbank payment specialised print and electronic mail switching services throughout the Single Euro solutions for bank, credit card and other Payments Area (SEPA) and beyond. financial statements for customers in south-eastern Europe and the Middle East.
Expanding card acceptance in Asia with Merchant Solutions INDUSTRY COMMENT Merchant Solutions, the acquiring joint Seizing the opportunities in emerging payments markets venture between First Data and Standard Chartered Bank, has signed new card Emerging markets are becoming the growth engine for the global acceptance agreements with JCB payments industry. However, these countries face a range of International and China Union Pay (CUP). challenges from limited infrastructure to large unbanked populations. These agreements enable JCB and CUP First Data discusses how these challenges can be overcome. cardholders to use their cards at thousands > more of purchase points across China, Hong Kong, Macau, Singapore, Malaysia, Brunei, Bangladesh and Sri Lanka.
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FIRST DATA INSIGHTS UK customers choose FirstVision Prepaid mobile solutions Co-operative Financial Services and Vanquis Bank, both headquartered in the UK, have Banks and retailers have long used prepaid products to enter new renewed major processing contracts with markets, build their brands, drive customer loyalty and boost revenue. First Data, ensuring they will benefit from Expanding customer needs and advances in mobile commerce the company’s continuing investment in the and e-commerce have given prepaid products a competitive edge. FirstVision processing solution. First Data will provide card issuing and processing In a new paper, First Data’s Paul Stanley explores how organisations services to both banks until 2017. can leverage this trend to grow prepaid revenues.
Outsourcing to boost liquidity Supporting all card schemes in Canada Outsourcing provides a cost-effective and flexible solution for banks looking to improve their liquidity. First Data’s Nadeem Shaikh Following a new agreement with Visa in examines how outsourcing payments processing can present Canada, First Data has become the first a viable alternative for banks faced with increased demands on merchant acquirer in the country to directly participate in all three major schemes: their investment capital and restricted technology budgets. Visa®, MasterCard® and Interac®. ATM management Next generation payment Despite the emergence of internet banking and, increasingly, mobile solutions company formed banking, the global installed base of ATMs is expected to grow significantly over the next three years. First Data’s Andrew Morss Bank of America N.A. and First Data have discusses how outsourcing can help banks to get more from their formed a new company that will deliver next-generation payments solutions to ATM networks. merchants ranging from small business to Canadian gift card consumer study commercial and corporate clients. Banc of America Merchant Services, LLC will provide A presentation featuring key findings from First Data’s annual clients with the most comprehensive suite market survey of gift card purchasers and receivers in Canada is of innovative payments solutions including now available. The presentation outlines 2008 trends and consumer credit, debit and prepaid cards to merchant needs for both closed and open loop gift cards in Canada and their loyalty, cheque and eCommerce payments. implications for gift card issuers. Six Australian credit unions Automating the invoicing presentment sign agreements with Cashcard and payment process Following Australia’s introduction of Direct Electronic Invoice Presentment and Payment (EIPP) software Charging in March, six of the country’s helps businesses to automate procurement and accounts payable credit unions – Maritime Mining & Power, transactions and provides an excellent alternative for companies Nova, Gateway, Intech, IMCU and Select – have signed one-way card acceptance unable or unwilling to invest in an enterprise electronic data agreements with Cashcard. The agreement interchange solution. First Data’s Jim Lister outlines how EIPP allows the credit unions’ cardholders to use software can deliver significant benefits with minimal capital outlay. Cashcard branded ATMs without incurring a direct charge. Cashcard, the First Data Please contact Gerard Lysaght, telephone +44 1268 297 032 owned network, is Australia’s largest or email [email protected] to request a copy of these independent ATM network with close white papers or click here to view the reports on our website. to 5,500 ATMs.
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SERVICES UPDATE Card processing for Poland’s Euro Bank FirstVisionTM - Processing Power and Performance Worldwide First Data has extended its card processing FirstVision is the new name for First Data’s strategic services agreement with Euro Bank S.A. consumer finance and issuing processing solution until 2012 and will support the upcoming which brings together years of payment expertise from launch of the bank’s new chip-based across the globe. In this interview, Nadeem Shaikh, Visa-branded payment cards. SVP of Financial Institutions, First Data, provides an insight into First Data’s development of a single Growing merchant relationships solution to deliver consistent functionality and in Korea technology in support of banks and retailers First Data has been selected by restaurant around the world. > more chain Bennigan’s Grill & Tavern and retailer Nike to provide point-of-sale and switching Analytics and decision management solutions services for their Korean operations.
If you are a bank or retailer looking to maximise revenues, reduce risk or improve the customer experience, customer analytics and decision management tools can help you to make powerful, data-driven decisions across the entire customer lifecycle. > more
EVENTS Middle East Client Conference
Representatives of First Data’s banking customers in the Middle East enjoy a spectacular camel polo match, which preceded two days of presentations and discussions at the Middle East Client Conference held in Dubai at the end of April.
For more information and news, please visit the press release section on our website www.firstdata.com.
Contact us For further information on First Data or any of the items covered in this newsletter, please contact: Asia Judy Cooper on +65 6511 8725 or email [email protected] Australia & New Zealand Lisa Brodie on +612 9959 2054 or email [email protected] Germany Claudia Klein on +49 69 7933 1686 or email [email protected] Greece Sofia Roumeliotou on +30 210 624 4543 or email [email protected] Latin America & Canada Julie Holan on +1 321 263 3838 or email [email protected] Middle East Sunayana Kripalani on +971 50 4514263 or email [email protected] South Africa Lee-Anne Porter on +27 11 510 0294 or email [email protected] Turkey Aysu Balik on +90 212 290 34 34 or email [email protected] UK & Ireland Helen Owen on +44 1268 297278 or email [email protected] Other European Countries Silvio Piskernigg on +43 1 717 73 3393 or email [email protected] All General Enquiries Fabienne Knecht on +44 1268 296882 or email [email protected]
> unsubscribe printer friendly format Executive Briefing Issue 2 August 2009
Seizing the opportunities in emerging payments markets
Rapid economic growth in many emerging markets has led to an increasing demand for electronic payments. This can be seen in the strong rise in the number of general purpose payment cards across the globe. Cards in force rose 21.4 percent across the Middle East and Africa in 2007, while the increase in Asia-Pacific was 14.9 percent (*).
In spite of the economic downturn, electronic payment growth rates are expected to continue in several of the main emerging markets, such as Brazil, Russia, India and China, albeit at a slower rate than previously predicted.
There are several significant challenges to developing electronic payments in emerging payments markets. This article highlights the major ones and outlines how they can be overcome.
1) Less mature markets often have underdeveloped payment infrastructures and lack a widespread network of ATMs and point-of-sale terminals
In many developing payments markets ATM and merchant card acceptance networks are initially limited to large cities, with point-of-sale (POS) deployment focused on high-end retailers. Lack of a card acceptance network hinders growth in card usage.
According to Standard Chartered Bank, a successful payments industry requires three elements: 1) a strong technical infrastructure, 2) an industry-wide risk management framework, and 3) an appropriate legal and regulatory structure (**).
As well as a lack of payment infrastructure, many emerging markets do not have credit bureaux. This could be a potential problem as card issuers may not have enough information on their customers to be able to issue credit cards or offer other consumer lending products to them.
Any credit risks can be overcome by issuing prepaid and debit cards as entry-level products. By building up a transaction history, cardholders can later qualify for credit products or, if they wish, full bank account services.
Countries that progress fastest in developing their payment infrastructure are those where the regulatory authorities either encourage investment in and development of the electronic payment infrastructure or manage it themselves.
2) Many emerging markets often have large unbanked or financially underserved populations
The main characteristics of emerging payment markets are that cash makes up by far the largest proportion of payment transactions and that a large section of the community has no access to mainstream financial services.
Partnerships between financial institutions, employers and government agencies are an effective way to reach large numbers of underserved and unbanked people. However, in order to succeed, any initiative must have a clear understanding of behaviours, attitudes and preferences.
Product design, marketing and distribution will be crucial to the success of any product targeted at the unbanked. So too will be explicit communication of the product benefits. Unfortunately, several prepaid programmes targeted at the unbanked have failed because one or more of these elements was missing.
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Seizing the opportunities in emerging payments markets (continued)
One of the most effective ways of increasing card usage is for employers to pay salaries directly into accounts linked to payment cards. Debit cards have usually been favoured for this purpose as they carry no credit risk. However, payments made directly to prepaid card accounts are becoming more popular. Both options are highly effective ways of reducing the cost of processing cash payments. At the same time, they provide much greater security, both to the companies making salary payments and also to employees.
Salary payments on prepaid cards are becoming more common in the Middle East, especially for migrant workers. Cards can also be used to send remittances securely, as the recipient can also withdraw the funds with the card provided by the issuing bank.
In countries like South Africa and Kenya, which have a high level of mobile phone usage, delivering payment services through the mobile channel can complement other types of electronic payments, such as cards.
Entry level products such as prepaid cards have proven to be a low-risk option for issuers and enabled many unbanked people to gain access to mainstream financial services. In Brazil, however, private label cards often fulfil this role. Issued by retailers, they enable cardholders to use their cards for purchases in the network of stores that issued them. An increasing proportion of these cards are now co-branded with marques of payment systems such as Visa and MasterCard to enable them to be used more widely. Crucially, private label cards also enable cardholders to get access to credit. Retailers often offer credit for purchases after cardholders have built up a transaction history.
First Data’s correspondent banking services business in Brazil enables cardholders to pay utility bills and make other payments at a wide range of retail outlets. This improves convenience for cardholders and also increases transaction volumes at the host retail outlet.
3) Cash payments dominate - with all the extra costs, security risks and lack of transparency that this involves
The costs of cash are often hidden and difficult to quantify. That said, cash is not a cheap and efficient means of payment. A study by the Dutch central bank showed that the cost of cash represented 0.8 percent of GDP – this in a country with a highly developed and mature payments infrastructure. The cost of cash to the economies of less developed countries is likely to be much higher.
Payment cards are the most important instrument to replace cash. Debit cards are well positioned to replace cash for medium-value transactions, while prepaid cards can often be an effective replacement for low value transactions.
The mobile phone is playing a major role in replacing cash in emerging markets. The proportion of mobile phones held by people in emerging markets is far higher than those who have access to full banking services or even payment cards.
At the same time, government benefits can be delivered on prepaid cards, removing the need to make these payments in cash.
One of the most often overlooked – but important – trends in driving electronic payments is the young population in many emerging markets, including the Middle East, Turkey and several African countries. Young people are often comfortable using payment cards, mobile phones and the internet.
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Seizing the opportunities in emerging payments markets (continued)
4) Banking facilities are limited outside the most economically active cities and towns
The development of electronic payments is often hampered by poor telecommunications and the lack of payment infrastructure outside large cities. The reliance on cash to make transactions is a contributing factor to the often wide wealth gap between urban and rural centres. For example, cash is used for 83 percent of transactions in China compared to 21 percent in the US – three-quarters of China’s population lives in rural areas (***).
Innovative risk/reward business models where third party organisations partner with banks can be used to deploy ATMs in areas where the electronic payment infrastructure is limited or non-existent. This is a model that First Data is following in its alliance with YES BANK in India.
ATMs located in rural areas can also enable people living there to access remittance payments sent to them from other countries. Many issuers now offer card accounts for remittance payments where cards are issued to both the sender and receiver, making the process more secure and quicker.
Developing mobile-based payments is another way of expanding the reach of electronic payment services where infrastructure is limited.
Summary
Emerging markets offer great opportunities to expand electronic payments. Challenges such as lack of infrastructure, high levels of unbanked people and the dominance of cash payments can all be overcome through commitment to the marketplace, local knowledge and providing electronic payment solutions appropriate to each individual market.
First Data has experience working with financial institutions and retailers in emerging markets across five continents. For more information on how we can help your business in emerging markets, please contact Gerard Lysaght, telephone +44 1268 297 032 or email [email protected].
(*) Nilson Report, issues 907 and 909, July and August 2008
(**) “A Review of Payment Systems in Africa” by Vinod Madhavan, Standard Chartered Bank. Published by gt News on 17 June 2008
(***) McKinsey Quarterly, May 2007 Executive Briefing Issue 2 August 2009
FirstVision™
Nadeem Shaikh, Senior Vice President of Financial Institutions, provides an insight into First Data’s strategic card and consumer finance processing solution…
Tell us about the reasons behind the introduction of FirstVision?
Over several years, we recognised the market’s growing demand for a truly global processing platform that would add value across the payment product lifecycle. This was the impetus for us to build a fully integrated solution for financial institutions, including banks and retailers. Using, as a basis, our VisionPLUS® platform (a platform already widely used by many of the world’s leading card issuers), we focused on developing a single processing solution that would deliver consistent functionality and technology across markets. Branded as FirstVision, this global solution incorporates an extensive range of products and services to fully support the management and processing of credit cards - including bank, co-branded, private label and Sharia-compliant cards - as well as debit, commercial, prepaid, loyalty management, loans and card acquiring.
What new functionality will be delivered through the FirstVision technology programme? We are introducing new functionality and tools that will help clients to increase productivity and efficiency and reduce costs. Clients’ customer service agents will be able to perform tasks more quickly and easily with our new user interface. This features the latest web browser technology and is highly intuitive, to help clients reduce training costs and call handling times and freeing up more time for cross selling activities. This new user interface is currently being piloted in one of our customer services contact centres and we intend to launch it for our first clients early next year.
In the business intelligence and value management space, our new feature-rich analytics suite will offer clients greater flexibility with advanced reporting, predictive analysis and modelling capabilities, to provide enhanced portfolio and customer insight. With our single communication channel management solution that reaches out to all end users, clients can serve multiple products across multiple channels including, web, email, interactive voice response (IVR) and SMS. We have also made it even more efficient for new clients to start processing with First Data by introducing a new portfolio of on-boarding processes and tools.
These new tools are in addition to existing solutions which include fraud management, risk and pricing strategy management, loyalty, collections and others. The FirstVision solution is underpinned by leading edge technology and is the result of First Data’s collaboration with some of the world’s leading suppliers. Our scale and strength have enabled us to continue investing through the current economic downturn and our long-term investment programme ensures future developments in technology, infrastructure and delivery.
Tell us about the structure and global support team behind FirstVision? When you have clients all over the world, you need the global scale and local presence to support them. We are organised to deliver FirstVision through a single global line of business, with a single mission, strategy and delivery focus. We have drawn on expertise from inside and outside First Data to develop a global community of more than 1,400 people who support FirstVision today. By managing services in this way we can deliver the platform stability, quality support and product innovation that our clients are looking for. It’s this global community that drives product innovation and enables us to implement projects quickly - be it platform conversions, new product launches or market expansion - to give our clients a competitive advantage.
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FirstVision™ (continued) Why should card issuers consider FirstVision? Time after time, FirstVision has proven its capability in meeting the needs of financial institutions of all types and sizes, anywhere in the world. The functionality on the platform is, in our opinion, unrivalled, having been developed over several years with experience gained in markets across the world. This functionality is consistent across our data centres in Argentina, China and Germany, so clients can benefit from platform enhancements regardless of where in the world they originate.
What are its key strengths? One of the key strengths of FirstVision is that it allows financial institutions to pursue a standard operating model, accelerating market and product expansion and improving operational cost effectiveness. This means they can focus their attention on business development and customer relationships rather than dealing with the issues associated with legacy or in-house platforms. The global community supporting FirstVision ensures consistent, high quality support across the world. It is the combination of our people, service offering, payments expertise, data centres, networks, processes and geographic presence that make FirstVision an unrivalled global processing solution.
If you would like to learn more about FirstVision and how First Data can support your business, please contact Peter Labrinos, email: [email protected] or Peter Sorenti, email: [email protected] Executive Briefing Issue 2 August 2009
Analytics and decision management solutions from First Data
In the current economic climate, consumer buying behaviours and patterns are changing rapidly. Businesses that are able to make quick, insightful decisions, and understand the expected outcomes of those decisions before they are implemented, have an advantage over their competitors.
PREDIGY™ is First Data’s integrated platform for customer analytics and decision management, available to customers across the international business. With PREDIGY, organisations can build, simulate and deploy analytical applications across their portfolios. Its modular design and ease of use means that it can be quickly deployed to leverage analytics for immediate bottom line impact.
Specifically, PREDIGY helps businesses to:
• Perform advanced market segmentation analysis to identify new customers, minimise costs and mitigate risk
• Provide key insights to customer behaviour and characteristics, to improve profitability and to make and simulate better business decisions
• Capture unstructured customer feedback, such as free-form text, to help refine products and service delivery programmes
• Undertake more productive and effective collections and recovery activities
For years, First Data has supported clients in the financial services and retail sectors, helping them to make data-driven decisions to drive profitability, improve customer loyalty and reduce service costs.
“One of our customers, a large international bank, wanted to understand and reduce attrition across the customer base,” explains Paula Forney, Director of Data Analytics at First Data. “The goal was to develop more accurate predictions for identifying at-risk customers in time to take action. PREDIGY was used to analyse data in the client’s call centre operations and generate predictive models. The results were impressive: the client noted a 20% improvement in customer retention, yielding an estimated €1.75 million in annual revenue.”
In the world of collections, analytics and predictive modelling tools enable organisations to match collections strategies to accounts, improving collections efforts and reducing costs.
Paula Forney adds: “PREDIGY can be used to analyse specific portfolios and identify which groups of customers within a portfolio will be most likely to pay. Our clients find this useful in improving the success rate of their agents and minimising the effort expended on customers less likely to pay.”
For more information on PREDIGY and how First Data can help you maximise your customer offering, please contact Barry Honeycombe, Director of Analytics Sales, telephone +44 (0) 1268 296682 or email [email protected].