2010 investor day - s1.q4cdn.coms1.q4cdn.com/.../events/...2010_investor_day_morning_session.pdf ·...
TRANSCRIPT
2010 Investor DayMarch 11, 2010
Agenda – Morning Session
Joseph Saunders –
Chairman & CEO
Oliver Jenkyn –
Global Head of Strategy & Corporate Development
John Partridge –
President
Elizabeth Buse –
Global Head of Product
Antonio Lucio –
Chief Marketing Officer
Bill Sheedy –
Group President, The Americas
Ruben Osta –
Country Manager, Brazil
Questions & Answers –
O. Jenkyn, J. Partridge, E. Buse, A. Lucio, B. Sheedy and
R. Osta
Byron Pollitt –
Chief Financial Officer
Questions & Answers –
J. Saunders, J. Partridge and B. Pollitt
2
Agenda – Afternoon Session
Brian Triplett –
Head of Global Prepaid Products
Darren Parslow –
Head of Global Commercial Product Strategy
Marc Luet –
Global Head of Processing, Acceptance and Advisory Services
Ellen Richey –
Chief Enterprise Risk Officer
Questions & Answers –
B. Triplett, D. Parslow, M. Luet and E. Richey
3
Safe Harbor Reminder
Certain statements contained in this presentation are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor”
created by those sections. These statements can be identified by the terms “anticipate,”
“believe,”
“continue,”
“could,”
“estimate,”
“expect,”
“intend,”
“may,”
“plan,”
“potential,”
“predict,”
“project,”
“should,”
“will”
and similar expressions which are intended to identify forward-looking statements. In addition, any underlying assumptions are forward-looking statements. Such forward-looking statements include but are not limited to statements regarding certain of Visa’s goals and expectations with respect to earnings per share, revenue, operating margin, free cash flow, and the growth rate in those items, as well as other measures of economic performance.
By their nature, forward-looking statements: (i) speak only as of the date they are made,
(ii) are not guarantees of future performance or results and (iii) are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward-looking statements as a result of a variety of factors, including all the risks discussed under the heading “Risk Factors”
in Part 1, Item 1A –
“Risk Factors”
in our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q or Periodic Reports on Form 8-K, if any. You are cautioned not to place undue reliance on such
statements, which speak only as of the date of this presentation. Unless required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.
4
A View from the TopJoseph Saunders Chairman and Chief Executive Officer
Overview
Growth
Innovation
Opportunities & Challenges
6
Post IPO Track Record
Completed Integration of
Visa Inc.
Instilled Public
Company Focus
Enhanced Relationship
with Visa Europe
Delivered on IPO Financial Commitments
Renewed Key
Customer Contracts
7
Challenging Landscape
Regulatory
Trust/Data Security
Legal
Disintermediation
Economy
8
Future Investment – Innovation
Innovation as a Central Priority
Revenue Diversification•
U.S. versus ROW
•
Core Products versus Newer Initiatives
Prepaid
eCommerceMoney
Transfer
Mobile Technologies
9
Strategy OverviewOliver Jenkyn Global Head of Strategy and Corporate Development
11
Global Industry Revenue
Source: McKinsey
531
354
489
Payments TV
120
Film/MusicHotelAirlines
525
Asset Mgmt
914
Telecom
1,097
Retail
1,113
Total Global Industry Revenues, 2008 (US $Billion, approximate)
Individuals SMEs C
orporations Governm
ent
12
Payments Industry Landscape Complexity
Network
Payment Instruments
Business System
Prepaid Card
Money transfer
Emerging
Credit Card
Debit Card
Cash
Check
ACH
NCR
Brinks
IBM
Fiserv
Bank of America
Chase
VTB24VTB24
VTB24
ICICI
ITAU
RBC
Brinks
Metavante
Pariter
Fiserv
Chase
SVPCoCPA
NACHA
Viewpointe
Symcor
Bank of Japan
Brinks
Metavante
Pariter
Fiserv
Chase
Bank of America
Chase
VTB24
ICICI
ITAU
RBC
US FederalReserve
Harland Clarke
US Fed Reserve
DeLaRue
Fiserv
Wal
-Mar
tLo
blaw
sA
erof
lot
App
le
Agent Network Agent Network
Bank of America
MonerisICICI
First Data
Global
MasterCard
Green dot
TYSYS
Galileo
Green dot
ChaseMetaBank
Blackhawk
Western Union MoneyGram
GoogleSuicaEdyPayPalRevolution Money
MasterCard
In-house In-house
ICICIChase
Bank of America
Moneris
First Data
Global Interac
Star EFTPOS
TSYS
First Data
Bank of America
Itau
RBCChase
ICICI
Cpi card
Fiserv
VeriF
one
Inge
nico
DiscoverJCBAmerican Express
Payee Transaction Acquirer
(Merchant) Acquirer Processor
Issuer Payment Payer
Processor Instrument Issuer (Consumer)
13
Visa Landscape Perspective
NON-EXHAUSTIVE
DPSMDEX
Domestic Processing
Options
Acquiring JVs(emerging markets)
VPS
Network
VIN, Extras
Loyalty Info services
Panel StudiesAdv Auth
Risk Services eComm Mobile Access
Supporting Value Added Services
VISA INTELLILINK
Payee Transaction Acquirer
(Merchant) Acquirer Processor
Issuer Payment Payer
Processor Instrument Issuer (Consumer)
Key Industry Trends and Visa Position
14
Secular electronification of paper payments
Growth in “ready-funds”
preference
Capitalize on market leading position
Play to strength in debit & prepaid
Recovery in volumes Increased travel and cross-border
Invest to shape evolution of marketsFlexibility for local market needs
Ongoing innovation investmentAccelerate corp. development and M&A
Continue leadership role in industry
Continue to work with clients to shape outcome
Key Industry Trend Visa Positioning
US regulatory environment
Global macroeconomic recovery
Emergence of new economic powers
New innovative / emerging technologies
Data security and risk
Visa Corporate Strategy
15
Foundation is solid•
Established strategies are in place across the major pillars of the business
As a growth company, we look beyond today’s strategies to maintain the long-term trajectory
•
Existing strategies will meet near-
and mid-term targets•
Our sights are set on long-term growth strategies
Setting multi-year Strategic Aspirations accelerates momentum•
Focus on 6 specific Strategic Aspirations for 2015•
Priority Projects for 2010 and 2011 moving quickly
Visa Corporate Strategy
16
Achieve superior financial performance to drive shareholder return
Mission: Accelerate the electronification of commerceVision: The world’s best way to pay and be paid
Grow participants of network: Issuers, acceptors, cardholders, new users
Grow usage of network: Drive brand preference, expand channels, increase processing penetration
Enhance value of network: Core products expansion, value-added services, new businesses
Emphasize local market focus and talent to ensure sustainable competitive advantage globally
Support global payment ecosystem by managing stakeholders and ensuring value creation for all
Strategic Aspirations for 2015
17
Aspiration By 2015, Visa will…Accelerate electronification Reach X% payments volume share of global PCE
Diversify geographically Generate 50% of revenue from outside U.S.
Embed processing Ensure X% of all our transactions are processed on VisaNet
Enter new businesses Drive X% of revenue from offerings that Visa does not have commercialized in the market today
Differentiate value proposition
Prioritize its investments in services that drive unique value and can be monetized in negotiations
Maximize shareholder value Be a global top 75 company by market capitalization
Corporate Strategy Pillars
18
“Touch”
and drive revenue from as many
transactions as possible
Focus on core products, and invest in new clients and capabilities that enhance the value of the network
Aspire to “partnership”, with a focus on the best people, team and talent
Build active preference through brand leadership
Grow the network of acceptors and expand across channels
Processing Products & Services
Brand
Acceptance
Clients
Local Market Focus
Local Market FocusLocal knowledge is our strongest asset, and central to our strategy. We must ensure local empowerment, effective decision-making, and competitive advantage via local talent
Organizational changes empowered country managers and drive efficient decision-making
Reduced layers of bureaucracy between decision makers
Organized countries globally into sets of manageable Country Groups
Maintained attention on our Priority Markets
Developed detailed country-specific strategies
19
Processing Strategy
20
We must “touch” as much of every transaction as possible to enable a long-term, differentiated value proposition, and associated revenue streams
Protect and grow VisaNet transaction volume
Expand into acquirer processing in select countries to grow market
Increase issuer processing to grow revenue & deepen relationships
Actively explore acquisitions / JVs as viable solutions in local
markets
Deliver country-specific solutions, with global consistency
Product and Services Strategy
21
Focus on core products, and invest in new clients, capabilities, and acquisitions that enhance the value of the network
Extend
Capability New
Diversify
Protect and
Grow
New Clients / New Capabilities
Customer
Current
New
Capability
Customer
Current
New
CreditDebit
Money Transfer Non-FIs
Supply Chain Mgt
Info Prods
Mobile Payment Remote
Alerts
Mobile Offers & LocatoreComm
Authenti- cation
Product and Services Strategy
22
Focus on core products, and invest in new clients, capabilities, and acquisitions that enhance the value of the network
Money Transfer
FIs
Mobile Payment
POSComm- ercial
Mobile Money
Transfer
Prepaid eComm Gateway
Health- care
Brand Strategy
23
Better Money for Better Living
Become the Universal Currency of Life by consistently delivering a message of “Better Money for Better Living”
Acceptance Strategy
24
Acceptance
Performance
Preference
Partnership Build sustainable partnerships to increase Visa loyalty
Optimize operational performance to increase merchant value proposition
Drive preference to increase share with current merchant clients
Prioritize merchant segment investment at the country-level
Grow our network of merchants through country-specific application of the acceptance lifecycle, targeted segment prioritization, and creative acceptance investments
Right People, Team, Talent•
“Partnership”
aspiration
•
Proactive stance / Client priorities
Deliver Unmatched Insights•
Leverage global best practices
•
Value from “information goldmine”
Client Coverage Strategy
25
Planning / Decision-making•
Structure and discipline
•
Empowered decision-making
Communicate Strategy•
Share Visa’s strategy with clients
•
Drive innovation messages
Deliver a superior value proposition to our clients through our aspiration of “client partnership” focused on the right team, best insights, and efficient decision-making
26
Visa Corporate Strategy
Foundation is solid•
Established strategies are in place across the major pillars of the business
As a growth company, we look beyond today’s strategies to maintain the long-term trajectory
•
Existing strategies will meet near-
and mid-term targets•
Our sights are set on long-term growth strategies
Setting multi-year Strategic Aspirations accelerates momentum•
Focus on 6 specific Strategic Aspirations for 2015•
Priority Projects for 2010 and 2011 moving quickly
27
Expectations and Stakes
Investment Case: Growth, Growth, and more Growth.
As we have stated multiple times, the most important corporate objective V should have is the preservation of top and bottom line growth.
The two main areas we are focused on are emerging markets and newer products -
Morgan Stanley, 2/22/10
Of the 500 companies that appeared on Fortune’s first list, in 1955, only 71 have a place today.
Nearly 2,000 companies have appeared on the list since its inception, and most are long gone from it.
Just because you make the list once guarantees nothing about your ability to endure. - Jim Collins, Author
Visa’s Long-Term Focus
28
Visa understands investor expectations
•
An investment in Visa is an investment in long-term, global growth
Visa must push beyond its current strategies
•
Harnessing secular electronification will drive attractive growth
•
However, we are pushing ourselves to look beyond next horizon
Visa is taking steps to ensure a “gap”
to long-term aspirations never emerges
•
Push for upside
•
Manage downside
29
Visa Corporate Strategy
Foundation is solid•
Established strategies are in place across the major pillars of the business
However, as a growth company, we look beyond today’s strategies to maintain the long-term trajectory
•
Existing strategies will meet near-
and mid-term targets•
Our sights are set on long-term growth strategies
Setting multi-year Strategic Aspirations accelerates momentum•
Focus on 6 specific Strategic Aspirations for 2015•
Priority Projects for 2010 and 2011 moving quickly
30
Driving Growth: Assets and Capabilities
•
Expanded business model opportunities
•
Integrated global view of capabilities and best practices
•
Opportunity for new roles across value chain
•
Holistic pricing, incentives and interchange strategies
•
M&A capabilities
•
Best-in-class employees
•
Strong secular “tailwind”
•
Superb client relationships
•
Unsurpassed acceptance and issuance
•
World-class brand
•
Unmatched network and scale
•
Reliability and security
•
Product leadership
•
Excellent financial position
Established and Proven New Levers
31
Strategic Aspirations for 2015
Maximize shareholder value Be a global top 75 company by market capitalization
Aspiration By 2015, Visa will…Accelerate electronification Reach X% payments volume share of global PCE
Diversify geographically Generate 50% of revenue from outside U.S.
Embed processing Ensure X% of all our transactions are processed on VisaNet
Enter new businesses Drive X% of revenue from offerings that Visa does not have commercialized in the market today
Differentiate value proposition
Prioritize its investments to services that drive unique value and can be monetized in negotiations
Organization and Strategy Built on Client Needs John Partridge President
Client Needs Inform Our Strategy
33
Processing Products & Services
Brand
Acceptance
Clients
Local Market Focus
John Partridge, President
34
, ,,
Client Needs Inform Our Organization
35
Country / Country Groupings
Global Support Functions
AmericasU.S.CanadaBrazilMexicoRest of Latin America
InternationalJapan
Korea
China
Greater China
Southeast Asia
India
South Asia
Australia
N. Zealand/S. Pacific
Russia
CIS/Southeast Europe
GCC
Rest of Middle East
Africa
Under President•
Elizabeth Buse•
Antonio Lucio•
Marc Luet•
Bill Sheedy
Other•
Corporate Relations•
Finance•
HR•
Legal•
Risk•
Strategy, Advisory •
Technology
Local Feedback
Functional Support
Innovation
Defining Success
36
Differentiation
Growth
Driving Growth Through Visa Products and InnovationElizabeth Buse Global Head of Product
37
Product and Services Strategy
38
Drive sustainable growth for all stakeholders in the network•
Continue to penetrate cash and check
•
Enhance network value through differentiated products & services
•
Invest in Innovation Initiatives for future growth
Processing Products & Services
Brand
Acceptance
Clients
Local Market Focus
Goal:
Visa’s Strategic Framework for Growth
Extend
Capability New
Diversify
Protect and Grow
New Clients / New Capabilities
Customer
Current
New
39
Continuous Innovation
40
– Processing Services – Visa IntelliLink Management – Advanced Authorization – Partial Authorization– Visa Incentive Network – Loyalty Platform Services
Products
Services
Debit PrepaidNEW
TECHNOLOGYCredit Commercial
Money Transfer
Unique Services
Differentiated Debit Innovation
41
VISANET VISANET Global NetworkGlobal Network
ATM AccessPurchasing Capability
Full Service Issuer Processing
Call Center Services
Authorization Processing
Card Management
Exception Processing
Network Gateway
Fraud/Risk Management
Data Mining & Analytics
ATM Terminal Driving
Extend Visa’s leadership in debit by providing an integrated product offering and tailor services to local market geographies
Employee BenefitsConsumer Corporate & GovernmentProducts
Rules & Guidelines Regulation Analytics Operations Innovation Processing
Differentiated Prepaid Innovation
Platform ServicesPartial Authorization
Auto-Substantiation
Advanced Authorization
Visa AuthorizeFirst
Visa ReadyLink
Network Services
Infrastructure
Accelerate growth across all aspects of the Prepaid business by providing comprehensive products, services and infrastructure
42
Differentiated Commercial Innovation
43
Grow core usage and penetration
Extend capabilities to new geographies
Target new customers and verticals
Verticals
Visa PerformSource
Visa IntelliLinkVisa Multinational
Visa Payables Automation
Drive penetration and usage across Commercial segments to grow the core, while extending to new customers & capabilities
The eCommerce Opportunity
44
Fast growth: Fastest growing channel for Visa1
Sizeable segment: eCommerce sales expected to reach $880 billion in 20102
High cross-border mix: Significant opportunity to drive cross-border volume for Visa and its clients
Payment options: Currency is electronic payments
Visa’s focus: Strategies are both offensive and defensive
Unique characteristics make eCommerce a critical channel
1 VisaNet Volume2 Source: JP Morgan and company reports, "Nothing But Net," Jan 2009, PhoCusWright
as cited by Expedia, "Company Overview Q2 2009," Sept 2009
Drive continued preference for Visa as the leading payment method for online purchases
Global eCommerce Initiative
CROSS BORDERCROSS BORDER
DynamicChallengeResponse
Hong Kong, China, Taiwan
Visaperks.ca
Mexico, Brazil Hotels.com OfferOnline Authentication
Visa / Borderlinx Canada, Australia, GCC
45
FAST GROWTHFAST GROWTH
FAST GROWTH & CROSS BORDERFAST GROWTH & CROSS BORDER
Rightcliq by Visa
Online shopping tool for consumers, delivered by Visa
Convenience tool to improve shopping experience
•
Browse: Wishspace, get advice, discounts/offers
•
Buy: Auto form fill, digital wallet
•
Delivery: package tracking
46
Note: Features, functionality and schedules may be updated or modified by Visa at its discretion
A new, innovative, managed service from Visa that enhances the end-to-end eCommerce shopping experience
Visa Money Transfer Solution
RecipientSender
Sources: AITE Group, World Bank, IMF, McKinsey Payment Practice, 2007
Globally, domestic and cross-border remittances represent an $11 trillion opportunity
47
Benefits of Visa Money Transfer
48
Consumers:• Send money to
a Visa account
• Initiate transfers via multiple channels
• Benefit from tools and controls to allow for more secure transactions
• Access funds at millions of merchant outlets and 1.4 million ATMs globally
Visa Clients:• Provide new remittance services (and end-to-end support)
• Introduce new revenue streams
Visa: • Increase transactions running through the network
• Introduce new revenue streams
• Add new clients
Visa Money Transfer provides a new value proposition for all stakeholders
As reported by client financial institutions, includes merchant acceptance locations and ATMs in the Visa Europe territory
NOTE: Only select Visa Money Transfer programs are shown. Number of Visa Money Transfer programs is as of February 2010
Visa Money Transfer Momentum
4949
Significant global momentum, with 51 Visa Money Transfer programs across 15 countries
Australia: (Travelex)Singapore:
(Singapore Post)
China: 70m+ accounts (ICBC, EPS Hong Kong Ltd.)
Russia: 16 bank-
managed programs
(Alfa Bank, Severnaya Kazna)
UAE: (UAE Exchange)United States:
(US Bank)
India: 17 bank-managed programs (HDFC, Corporation Bank, ICICI)
Mobile Ecosystem
RetailBanks
Enabling ServicesCards &
Payments
Transit and Mobile Operator Payments
Text and Ticketing
MobileOperators
Handset OEMs
50
NokiaRIM Samsung
Apple
Motorola
Sony Ericsson
Airtel
MTNAT&TBeeline
RogersVodafone
Telefonica
oyster
Zain
ZapSafaricomM-Pesa
American Express
First Data
Starbucks Coffee
ClairMail
China Union Pay
HSBC
JP Morgan Chase
Banco Do Brasil
CitiWells Fargo
The Royal Bank of Scotland
CIBC BarclaysBank of America
RBC
Emirates NBD
ICICI BankBradesco
docomo
PayMatenectar
MasterCard
Diners Club
etisalat
Octupus
Live Nation
ticketmaster
GSMA
Neu
Star
Mobile Money
Android
T Mobile
Mobile Ecosystem
RetailBanks
Enabling ServicesCards &
Payments
Transit and Mobile Operator Payments
Text and Ticketing
MobileOperators
Handset OEMs
51
NokiaRIM Samsung
Apple
Motorola
Sony Ericsson
Airtel
MTNAT&TBeeline
RogersVodafone
Telefonica
Oyster
Zain
ZapSafaricomM-Pesa
American Express
First Data
Starbucks Coffee
ClairMail
China Union Pay
HSBC
JP Morgan Chase
Banco Do Brasil
CitiWells Fargo
The Royal Bank of Scotland
CIBC BarclaysBank of America
RBC
Emirates NRD
ICICI BankBradesco
docomo
PayMatenectar
MasterCard
Diners Club
etisalat
octupus
Live nation
ticketmaster
GSMA
Neu
Star
Mobile Money
Android
T Mobile
•
Establish Standards
•
Support multiple form factors, networks, and platforms
•
Provide global product suite
•
Bring Financial Institutions into the ecosystem
•
Differentiate by market
Reducing Complexity & Enabling the EcosystemReducing Complexity & Enabling the Ecosystem
India
Acc
epta
nce
Malaysia
POS
Paym
ents
Brazil
Rem
ote
paym
entUnited States
Mon
ey
tran
sfer
CanadaVa
lue-
Add
ed
Serv
ices
Visa, in partnership with financial institutions and the wireless industry, has introduced 23 mobile programs in 19 countries
Global Mobile Strategy
NOTE: Only select Visa mobile programs are shown. Number of Visa mobile programs is as of February 2010
52
Airtelbharti
mChek
Maybankmaxis
Nokia
Claro
Banco Do BrasilBradesco
U.S. Bank
Rogers Wireless
VancityRBC
Developed Markets Mobile ApproachEnhance the consumer purchase experience and enable consumers to manage their spending better
53
Transaction Alerts Mobile Offers Mobile Contactless
Existing Visa Accounts
Emerging Markets Mobile ApproachExtend Visa’s financial services network to underbanked populations in emerging markets
54
Prepaid Accounts
Money Transfer Mobile Top Up Remote Payments
Extending Visa’s Value:
Visa IntelliLink
Visa Risk Manager
Visa Advanced Authorization
Industry leading products and services to reduce costs
55
Innovating relentlessly to improve the point-of-sale experience
Visa ReadyLink
Balance Inquiry
Visa Account Updater Auto-substantiation
Partial Authorization
Extending Visa’s Value:
56
Extending Visa’s Value:
57
TAQC PlatformVisa Extras Visa
PassfirstVisa Incentive Network (VIN)
Driving unique benefits to merchants and consumers
58
Experience It Yourself!Experience It Yourself!Innovation from Visa:
The Role of Marketing in Driving ResultsAntonio Lucio Chief Marketing Officer
Role of Marketing
60
Driving transactions and revenue while building equity and differentiation for the Visa brand
Visa Strategy
61
Mission: Accelerate the electronification of commerce
Vision: The world’s best way to pay and be paid
Grow share from cash and check through education
Drive differentiation through brand equity and innovation
Apply analytical framework to prioritize opportunities globally
Leverage analytical tools to optimize impact locally
X% payments volume share of global PCE
Brand Equity gap
MROI
Marketing Objectives:
50% of revenue from outside U.S.
Global Marketing Investment Approach
62
Global Budget
Allocation
MROIOptimize Marketing
Mix by Country
A simultaneous top-down and bottom-up approach is used to ensure budget alignment with global strategic priorities
Decision Factors
ReturnGrowth
1 Market Development
Competition
TOP-DOWN – Key Metrics •
Electronic share of PCE
•
Acceptance locations
•
% of total banked population
•
Share of electronic payments
2
3
4
BOTTOM-UP – Key Metrics•
Revenue and volume growth
•
Share of spend
•
Short-term MROI
Country Credit Affluent Debit Small Business Commercial Prepaid Mobile eComm Money
Transfer
Country 1 ● ● ● ● ● ● ● ● ●Country 2 ● ●Country 3 ● ● ●Country 4 ● ●Country 5 ● ● ● ●Country 5 ● ● ● ● ●
Differentiation
Proven Marketing Activities
63
Dev
elop
edEm
ergi
ngSo
phis
ticat
ed
Emerging Developed SophisticatedCountry Maturity
Prod
uct M
atur
ity
Australia Debit
Specific activities have been proven effective for certain stages of country and product development
Australia Credit
Brazil Debit
BrazilCredit
U.S.Credit
U.S.Debit
India
Proven Marketing Activities: Brazil
64
•
Debit Marketing Objective:–
Educate consumers to drive usage at POS
•
Affluent Marketing Objective:–
Build awareness and differentiation of premium card benefits
•
Cross Border Marketing Objective:–
Promote message of ubiquitous Visa acceptance among travelers
•
Cross Product Marketing Objective:–
Drive usage of total product portfolio through activation of Football (FIFA) asset
Country Maturity
Prod
uct M
atur
ity
E D SED
S
Drive debit usage through education and credit usage through affluent and cross border marketing
E –
Em
ergi
ng, D
–D
evel
oped
, S –
Sop
hist
icat
ed
Brazil Debit
Brazil Credit
Proven Marketing Activities: Australia
65
Country Maturity
Prod
uct M
atur
ity
E D SED
S
Drive debit usage through education of benefits vs. EFTPOS and credit usage through affluent and cross border marketing
•
Debit Marketing Objective:–
Educate consumers of benefits of Visa Debit vs. EFTPOS
•
Affluent Marketing Objective:•
Drive usage by increasing awareness of Visa Platinum’s new, local product benefits
•
Cross Border Marketing Objective:–
Drive usage by educating Australian Travelers on benefits of using Visa vs. cash/forex
for international transactions
•
Cross Product Marketing Objective:–
Drive usage of total product portfolio through activation of Football (FIFA) asset
E –
Em
ergi
ng, D
–D
evel
oped
, S –
Sop
hist
icat
ed
Australia Debit
Australia Credit
Proven Marketing Activities: U.S.
66
E –
Em
ergi
ng, D
–D
evel
oped
, S –
Sop
hist
icat
ed
•
Debit Marketing Objective:–
Drive usage of Visa Debit over cash for purchases under $25
•
Affluent Marketing Objective:–
Drive usage of Visa Signature over AmEx
in key MCCs
(T&E, Retail, Restaurants)
•
eCommerce
Marketing Objective:–
Drive online usage through communication of security and value
•
Cross Product Marketing Objective:–
Drive usage of total product portfolio through activation of Olympics asset
Drive debit usage versus cash and check, credit usage through mass affluent and eCommerce marketing
Country Maturity
Prod
uct M
atur
ity
E D SED
S
U.S. CreditU.S. Debit
Driving the Category
67
Educating consumers on the benefits of our products
These proven marketing activities executed at the local level, continue to help Visa drive category growth by:
Encouraging new usage patterns
Building brand equity
Demonstrating commitment to our Issuing and Merchant Clients
Driving Effectiveness, Efficiency and Accountability
68
Marketing drives both short- and mid-term revenue growth
Momentum
•Increase Cards in Wallet•Increase Acceptance•Increase Usage
Brand Equity
Short Term Marketing Activities
MROIMarketing drives revenue at
multiple levels:•
Short-term lift•
Brand equity•
Brand momentum70%
20%
10%
Source: The Hierarchy of Effects (HOE) model has been conducted in the US as an assessment of mid-term brand impact of marketing, Visa MMA HOE model was commissioned by Visa and conducted by independent research firm, MMA, using 104 weeks of Visa sales data and other explanatory data such as Nielsen GRPs, ending December 31, 2006.
Scientific Tools Provide Key Insights
69ILLUSTRATIVE ONLY
Sophisticated Analytical Tools – Econometric Models and Factor Analyses
Input Data ActionsAnalysis
-1
0
1
2
3
4
5
6
Oct
-03
Dec
-03
Feb-
04
Apr-
04
Jun-
04
Aug-
04
Oct
-04
•
Regression models•
Built at the product, initiative and media channel levels
Marketing Investments
Transaction Data
Partner & Competitive Mktg. Activities
5458626364647273687175777883
0
20
40
60
80
100
Accepted
Most in US
Fastest W
ay to Pay
Most Reliable
Most Convenient
Best for E
veryday
Use
Best for In
ternet Purchases
Makes Y
our Life Easie
r
Gives You Freedo
m
Empowers You to Live Life Your W
ay
Helps You Accomplish
What M
atters
Understands W
hat's Important to
You
Only Brand You Need
Energetic
Most Safe and Secure
Visa MasterCard American Express Discover
Brand Health & Sponsorship Tracker Data
Understanding of key revenue drivers helps quantify returns from marketing investments
Optimize marketing
mix by country and
channel
Analytical Tools Guide Decisions
70
Increased ROI: short term and brand equity
Olympics
NFL•
5 local campaigns─
100% brand
─
90% TV
Rugby World Cup
Insights and analysis inform key decisions
Campaign Optimization
Sponsorship Portfolio Optimization Maximized ROI
Beijing vs. Vancouver
•
Global campaignFIFA
─
60% TV─
40% digital
─
50% brand ─
50% promotion
71
Driving Differentiation: Innovation
Visa Prepaid Debit card RightCliq by Visa
Proximity Payments and other mobile application Money Transfer
Driving innovation with focused targeting in prioritized countries through relevant channels
89
136126
106
139
47
61
79
9888
8479
29
79
51
119
56
80
0
50
100
150
Q4'09
Global Brand Equity Index Scores (Q4 09)
98
79
62
137
0
50
100
150
Q4'09 Brand Popularity
Brand Relevance
Brand Familiarity
Brand Uniqueness
Brand Quality
U.S. Brand EquityGlobal Brand Equity
Global Brand Health Tracker (GBHT) was commissioned by Visa and conducted by independent research firm, Ipsos
ASI. Respondents include: U.S: adults 18+ who own at least one payment card, continuously starting in 2002 through to present Outside of US: banked adults 18+, in waves starting in 2003 through to present.
Brand Strength
Visa Has Unsurpassed Global and U.S. Brand Strength and Equity
72
In Conclusion…
73
Mission: Accelerate the electronification of commerce
Vision: The world’s best way to pay and be paid
X% payments volume share of global PCE
Brand Equity gap
MROI
50% of revenue from outside U.S.
Grow share from cash and check through education
Drive differentiation through brand equity and innovation
Apply analytical framework to prioritize opportunities globally
Leverage analytical tools to optimize impact locally
Marketing Objectives:
Break
The Global Roadmap Bill Sheedy Group President –
The Americas
Client Strategy
76
ProcessingProducts & Services
Brand
Acceptance
Clients
Local Market Focus
Partner with clients to drive their business•
Fully integrate at client business level
•
Customize delivery of global capabilities to align with individual client opportunities and pain points
•
Invest and rebalance client resources based on state of market development and growth potential
Goal:
1
12 months ended September 30, 20092 CY 2008, among Visa, MasterCard, American Express, Discover, Diners, JCB, CUP3
12 months ended June 30, 2009Sources: Visa Inc., Euromonitor, and The Nilson
Report 920, 924, 927, 930, and 932
77
U.S.
Canada
Brazil
Mexico
Australia New Zealand &South Pacific
Russia
Japan
AfricaIndia
Korea
GCC
CIS/ SE Europe
China
SoutheastAsia
SouthAsia
Countries & Territories 48
Financial Institution Clients > 10,000
Payments Volume1
$ 1.97T
Visa Share of GPC2
54.6%
Visa Penetration of PCE3
20.2%
Cards1
1.04B
Countries & Territories 115
Financial Institution Clients > 1,800
Payments Volume1
$ 734B
Visa Share of GPC2
41.3%
Visa Penetration of PCE3
15.0%
Cards1
712M
Visa Inc.
78
Client Value Creation Strategy
Deploy personnel in market and close to clients
Operate as partners to drive portfolio performance and integrate within clients’ enterprise
•
Deliver expertise, experience and trust to be relevant –
not just sales•
Reinforce value through clear quantification of benefits to clients
Deliver product, technology and marketing resources based on capabilities of a global organization
•
Align Visa Inc. organization to support clients within each market•
Differentiate services and support for larger clients•
Apply Visa’s scale and platform benefits to all clients
79
Why Clients Choose VisaProduct Set
•
Comprehensive: credit, debit, prepaid, commercial, etc.•
Product and technology innovation (new products and R&D)
Brand
Business and Portfolio Growth (activation and usage)•
Consistency of execution•
Insights, consulting, etc.
Network•
Scale•
Flexible and robust
Fee Economics and Financial Incentives
Balance Client Customization/Differentiation
Emerging Developed Sophisticated
Number of Countries 140 32 19
Avg. PCE Per Capita $2K $13K $27K
Card Penetration Low High High / Saturated
Acceptance Low Medium High
Payment Infrastructure Basic Developed Mature
PCE Penetration Low Moderate High
Focus Open Accelerate Protect, Grow, Diversify
80
Global Country-Level Segmentation
Sources:
Visa Inc. and World Bank
ThailandThailandNigeriaNigeria
MoroccoMorocco
IndiaIndia
RussiaRussia
BrazilBrazil
AustraliaAustralia CanadaCanada U.S.U.S.
JapanJapan
S. KoreaS. Korea
81
Investment Focus
Emerging Developed Sophisticated
Objective Build shareand scale
Growrevenue
Optimizeprofitability
Products & Services Earlyadopter
All coreproducts
Value-addedservices
Brand Awareness and activation
Usage andproduct attributes Differentiation
Acceptance T&E andInternational
Everyday spend and convert cash to POS payment
Card-not-present, small / large ticket, emerging
Merchant Team By countrygrouping By country By merchant
segment
Client TeamsSmall, country-levelteam in major hubs across many clients
Client service generalist supported by country-level resources
Fully-dedicated client teams and specialized product sales teams
82
Current Client Challenges
Client distraction in current business environment•
Macroeconomic challenges•
Difficulties arising from M&A and systems integrations
Uncertainty from regulatory and legislative environments
Business evolution requires a much broader client set•
By product (e.g., prepaid, information services)•
By service (e.g., processing, acceptance)•
By channel (e.g., eCommerce, mobile)
83
U.S. Is Still a Growth Story, But Not Everything Is Growing Equally
Focus on clients’ business•
Prioritize quality and growth•
Maintain discipline in financial negotiations•
Skew towards longer term relationships
Invest in products•
Expand upon debit secular trend•
Invest in and expand affluent credit•
Build and monetize new value-added services
Take advantage of processing position and capabilities
Drive merchant acceptance and POS usage
Sources of Incremental U.S. Growth
Cash & Check$3.0T
Visa$2.0T
Other Card, Paper &
Electronic$5.1T
Strong Growth Opportunities
PCE data for 12 months through June 2009Source: Visa Business & Economic Insights; Visa Advisory Services
84
Debit still has a long runway•
Large cash and check opportunity•
Favorable demographic trends
Merchant acceptance continues to grow•
Visa provides merchants with value•
New acceptance is supporting debit
Large segments remain underserved•
Unbanked and underbanked
consumers•
Business-to-business spend (Syncada)
Drive growth in new channels by delivering innovative solutions
•
eCommerce•
Mobile
Deliver unparalleled value to clients•
Processing services•
Portfolio optimization
Expand product suite and services with existing and new clients
•
Be prepared to deliver what our clients need as their strategies evolve
•
Develop products that promote cardholder usage and retention
2009 U.S. PCE
Visa Growth Through Differentiation
Emerging Developed Sophisticated
Number of Countries 140 32 19
Avg. PCE Per Capita $2K $13K $27K
Card Penetration Low High High / Saturated
Acceptance Low Medium High
Payment Infrastructure Basic Developed Mature
PCE Penetration Low Moderate High
Focus Open Accelerate Protect, Grow, Diversify
85
Global Country-Level Segmentation
Sources:
Visa Inc. and World Bank
ThailandThailandNigeriaNigeria
MoroccoMorocco
IndiaIndia
RussiaRussia
AustraliaAustralia CanadaCanada U.S.U.S.
JapanJapan
S. KoreaS. Korea
BrazilBrazil
BrazilBrazil
BrazilBrazil
The Global Roadmap - BrazilRuben Osta Country Manager -
Brazil
Goal:
Local Market Focus
8787
Brazil •
Enhance multi-year client relationships with major banks and expand new strategic offerings
•
Expand domestic processing
•
Continue innovating and launching new products
•
Maintain Visa’s leadership position as the “preferred”
brand
87
ProcessingProducts & Services
Brand
Acceptance
Clients
Local Market Focus
Outstanding Compounded Growth
88
Source: Visa Inc.
0.2
1.8
1994 2009
0.4%
11.1%
1994 2009
Card Issuance(millions)
29%
Acceptance Locations(millions)
16%
PCE Penetration
21%CAGR
Calendar Year 2009
4.9
220
1994 2009
Brand Awareness
26 2724
2629
2723
1715 15 14
1215
128
62.5 3.5 5
10
16 1721
2826 26 27 28
30 3133
3739
0 1 2 2 2 2 2 35 6 7 7
1214 14
11
1313
0
5
10
15
20
25
30
35
40
45
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Credicard Visa MasterCard
Source: Datafolha, Oct 2009
Question: What is the first credit card brand that comes to mind?
Perc
enta
ge o
f R
espo
nden
ts
89
Getting the Cards Issued
•
Right Banks – strong brand & branch network
•
Right Sales and Marketing Support – building trust
•
Right Customers – appealing demographics
90
29% CAGR – 220 million cards issued
1
2
3
Building Acceptance
Joint venture with bank clients•
Merchant coverage•
Terminalization•
Growth and innovation•
Infrastructure costs / investments•
Aligned strategic initiatives and efforts (Visa, issuers and acquirers)
Sales force to sign-up merchants
Training branches (today still 85% sign-ups)
Deliver standard and unique infrastructure platform
91
VisaNet do Brasil (Cielo) is born
Marketing
•
Aligning issuers, VisaNet and merchants
•
Merchant co-op programs, POS signage
•
Consumer product promotions, sweepstakes, discounts
•
Educational campaigns
92
1
2
3
Yesterday: Brand Building; Today: Activation and Usage
4
Penetrating PCE
•
Right Products – credit, debit, prepaid, verticals
•
Right Innovation – chip, eCommerce, Visa Passfirst
•
Right Relationships – multi-year contracts, incentives
93
21% CAGR – 11.1% of PCE
1
2
3
Product PenetrationAcceptance/ Innovation
Focus Going Forward
9494
Early days on debit
Prepaid
Commercial
eCommerce•
Debit•
Verified by Visa Mobile•
Top up
Interiorizationprojects (non-metropolitan areas)
Focus on•
Growing economically active population
•
Increasing wages•
Emerging middle class
•
Banked population•
Usage behavior
Questions and Answers SessionOliver JenkynJohn PartridgeElizabeth BuseAntonio LucioBill SheedyRuben Osta
Financial Review Byron Pollitt Chief Financial Officer
Today’s topics
Volume and support incentives
Foreign currency hedging
Capital structure and uses of cash
Update on February metrics
Early thoughts on fiscal 2011
97
Volume and support incentives
Customized price discounts used to•
Secure multi-year contracts•
Promote volume growth
Classified as contra revenue, with various accounting treatments
Expected to grow over time
98
Contractually committed, typically for 5 years
Common U.S. practice, spreading to Rest of World (ROW)
Customized price discounts
Contract Term - 2009 (Years)
18%
32%
US 79%
5%
ROW 80%
VISA 80%
Volume Under Contract
99
3-558%
>5 12%
<3 30%
Customized by client
Incentive Type Illustrative Examples
Basis points (bps) on Payment Volume (PV) •
2 bps on all PV
Pay for growth •
10 bps on year-over-year growth
Conversion •
$2 per card converted; and/or milestone payments
Fixed •
$5m signing bonus
Fixed with hurdle •
$3m when PV exceeds $1b
100
Visa amortizes up front incentive payments only if
Contract terms drive the accounting
Not yet earned
Recoverable if client breaches or early terminates
Visa has intent and
ability to enforce repayment
Future profit exceeds amount deferred
1
2
3
4
101
With client payment volume growth
Incentives expected to grow over time
16.0%15.1%15.6%
FY 2008 FY 2009
Mix of Incentive Types
102
Incentives as a % of Gross Revenues
72%
28%
62%
38%
66%
34%
Growth Fixed
Q1 FY 2010
Incentives expected to grow over time
Incentives as % of Gross Revenue
PortfolioPaymentVolume
Major Bank Consolidations Involving Visa Issuers
1. Chase / Washington Mutual2. Bank of America / Merrill Lynch3. Wells Fargo / Wachovia4. PNC / National City
103
As client portfolios grow larger
2008 Q1 2010
US 512 805
ROW 555 638
Total 1,067 1,443
Number of Contracts
As more clients enter multi-year contracts
Incentives expected to grow over time
104
105
Managing foreign currency (FX) exposure
•
What drives Visa’s FX exposure
•
How significant is the exposure
•
What is Visa’s approach to hedging
•
How hedges impact revenue growth
What drives Visa’s FX exposure
Operate in 190 countries and territories, representing 165 currencies
Maintain offices in 29 countries
Define FX exposure on a “net basis”
106
Net FXExposure = Gross Revenue
Less Incentives and Expenses
82%
18%
How significant is the exposure
107
Currency Distribution
Net Revenue
OtherCurrencies
Expenses
74%
26%
Approx % of Exposure Hedged
70%
30%
HedgedU.S. Dollars Other currencies
What is Visa’s approach to hedging
Solve for reduced risk and volatility
Execute only “economic hedges”
Use Value at Risk model to determine currencies to hedge
Hedge 17 currencies on a rolling 12-month basis
Record gain/loss at maturity primarily in 4 P&L lines•
Revenue: Service and International•
Expense: Personnel and Marketing
108
Q1 FY
0% Flattish
How hedges impact revenue growth
Impact of FX on Visa revenue growth
Q1 Q2 Q3 Q4 FY
(1)% (4)% (5)% (3)% (3)%
FY 2009
FY 2010 Outlook
109
Guiding Principles
Capital structure – uses of cash
110
•
First call on cash is to reinvest in attractive growth: organic, JVs, M&A
•
Preserve strong balance sheet, with sufficient liquidity to backstop settlement risk and fund VE put
•
Return excess cash to shareholders balancing dividends and share repurchase
•
Introduce debt to optimize cost of capital recognizing no compelling near term use of proceeds
Capital structure – uses of cash
111
$ billions
Capital Structure Snapshot
Q1 FY 2010
Available Cash $3.6 After fully funding litigation escrow, cap ex, working capital, JVs, dividends and share repurchase
Credit Line +3.0
___
Total Sources $6.6
Settlement Risk Set Aside
(~5) ___
Excess Cash ~$1.6
Debt Capacity ~ $6-7 @ A rating
M&A, VE Put ?
Capital structure – uses of cash
Dividend Payout RatioVisa @ $0.50/share
Dividend levels are guided by comparisons to S&P 500 dividend-paying companies with EPS growth above 20%
Dividend YieldVisa @ $0.50/$85 share
Source: FactSet. Based on data as of 2/17/2010. Ratios calculated based on median of S&P 500 data
IBES EPS Growth
Yiel
d
IBES EPS Growth
Payo
ut R
atio
112
Capital structure - uses of cash
Excess Cash ReturnedTo Shareholders
(Through Q1 FY 2010)
Dividends $0.5b 18%
Share RepurchaseClass BClass ATotal
1.80.42.2
66%16%82%
Total Returned $2.7b
113
Street Analysts Share Price Outlook
Range $93-121
Median $103
27 analysts as of March 9, 2010
Through Q1 FY 2010 $2.7 billion in excess cash has been returned to shareholdersA heavier weighting to share repurchase reflects dividend benchmarking and a favorable stock price outlook
Update on February metrics
U.S. payment volume growth
Cross border volume growth
Processed transactions growth
Recap FY 2010 financial metrics
114
U.S. payment volume growth
115
% growth
Total Credit Debit
2009 Oct 4% (4)% 12%
Nov 7 (2) 15
Dec 10 2 19
2010 Jan 10 0 20
Feb 12 2 20
Cross border volume growth - constant
116
% growth
Total U.S. ROW
2009 Oct 0% 1% (1)%
Nov 3 4 3
Dec 4 8 2
2010 Jan 7 8 7
Feb 11 11 12
Processed transactions growth
% growth
117
Total U.S. ROW
2009 Oct 11% 11% 10%
Nov 11 11 11
Dec 12 12 13
2010 Jan 13 13 12
Feb 13 12 14
Less than $1 billionMarketing Less than $1 billion
11-15% rangeNet revenue growth
Financial metrics for FY 2010
Operating margin Mid to high 50% range
16-17% of gross
revenueVolume and support incentives
118
Financial metrics for FY 2010
FY10: $200-250 million
FY11: Capital expenditures About $200
million
Diluted class A common stockEPS growth
20% +
GAAP tax rate 36.5 to 38.5% range
Free cash flow $2 billion +
119
Early thoughts on FY 2011
Revenue•Expect global debit and ROW credit to be primary drivers
•No clear trend yet on U.S. credit…
but seeing growing interest in acquisition programs
•Expect volume and support incentives to continue to grow as a % of gross revenues
Marketing•Expect to increase client marketing support with spend weighted more outside the U.S.
•Also targeting higher support for prepaid products and the eCommerce
channel
120
Early thoughts on FY 2011Product Innovation
•Plan to increase R&D spending in the eCommerce
channel with a particular focus on Rightcliq, related platforms, and security
•Plan to extend commercial functionality by enabling small business to accept mobile payments
•Expect to accelerate development spending in mobile, money transfer, and informational products and services
Processing•Plan to continue actively seeking investment opportunities to expand our processing footprint outside the U.S.
•Expect investments to focus on network, acquirer and issuer processing, with JVs a likely format
121
Early thoughts on FY 2011
EPS•Expect to grow at 20+%
Capital expenditures•Expect to rise modestly as we enter next phase of standardizing and optimizing Visa’s global technology platforms
Free cash flow•Expect to exceed $2 billion•Remain committed to return excess cash to shareholders
C shares•No later than March 25, 2011, all remaining C shares to be unlocked
122
Questions and Answers SessionJoseph SaundersJohn PartridgeByron Pollitt