Welcome

Welcome – New Members Murray Scott – Buropak Steve Hattersley & John Bottreill – Cognitronics Stephanie Wilson – SK Chase Rob Frome & Fatima Wessom – New Look Nicky Tollafield – Shoe Vouchers Carly Wickenton & Nick Warren – Starbucks Cassandra Cavanah - SpaFinder

Welcome – Guests

John Gaukroger – Joe Browns Debbie Hughes – Ten Pin Dominic Peachey – Financial Services Authority Diane Jackson - BAUGUR Group Susi Pink - Lavish

Membership Issuers - 40 Service – 38

78 total

New Members Murray Scott – Buropak Steve Hattersley & John Bottreill – Cognitronics Stephanie Wilson – SK Chase Rob Frome & Fatima Wessom – New Look Nicky Tollafield – Shoe Vouchers Nick Warren – Starbucks Ken Pearceson – Royal Mail Kevin Turnbull & Cassandra Cavanah – Spa Finder

New Executive

Natasha Toothill – payzone (S) - Chair Arun Glendinning – B&Q (I) - Vice Chair Philip Shelley – Voucher Central (S) Yvonne West – Sainsbury’s (I) Caroline Watson – Voucherline (S) Rachelle Smith – PPT (S) Denise Porter – Treatme.net (I) John Davis – Argos & Homebase Business Solutions (I) Bill Alexander – Red Letter Days (I)

Cabinet Roles

Regulation & Legal – John Davis PR & Research – Yvonne West & Denise Porter Liaison with other Associations & Membership Development &

Recruitment – Rachelle Smith & Bill Alexander Finance & Constitution – Philip Shelley Social Events & Marketing (web, exhibitions) – Caroline Watson Conference – Arun Glendinning (Vice Chair) Secretariat Liaison – Natasha Toothill (Chair)

Achievements membership year 2007/08

Natasha Toothill

Highlights

Increased membership Refreshed Aims & Objectives

Aims & Objectives

Promoting the use of vouchers and gift cards to business and consumers

Enhancing the standing and raise the profile of our industry, internally and externally through leadership and advocacy

Provide a forum for networking, training, events, best practices, information and education

Addressing consumer and regulatory issues relating to the industry

Highlights

Increased membership – Should be 100 in 2009 Refreshed Aims & Objectives Networking & Communication – meetings, social events, Voom!, BRC dinner, members

website Research – YouGov, Giftex Prepay PR – day-to-day, Christmas activity, Negative press at Christmas Speaking opportunities – NIS, PME, Retail Industry Forum, Prepaid Expo, Gift Cards

Europe Marketing – consumer website Legal – VAT, Fraud, Royal Mail, FSA Industry data – change in IRI data Conference – increase in delegates Liaison with other associations – PIF, BRC, MAA

New Fee Structure

Social membership phase out All members (Issuers & Service) pay same membership

fee - £2200 + VAT Complementary place at conference for all paid up

members Fee of £800 for Issuer members to collate IRI data

(reduction of £50 on last year) Only paid up members will be eligible to attend meetings,

social events and vote

The Future of The VA five year plan

The Executive

Five Years Ago

31 members (Full members £2600, Associate £1000)

Exec included: Sainsbury’s, M&S, High Street Gift Vouchers, Arcadia Group, Virgin, Capital Incentives.

Debenhams had launched gift card

What do you want from the VA?

Research Networking PR Marketing Website Special offers Conferences Exhibitions

Tax updates Legal advice Market news Newsletter Market stats Education Training Lobbying

Budget of £180k pa to manage VA activities gets you:

Doubled membership again in 5 years

What would budget of £300 000 buy you?

Do we?

Increase the membership? Stay where we are? More social events? Increase our lobbying power? Offer market specific training? Try to change consumer buying habits? Self regulation? Network new markets? Create member forums to share issues? To be the market spokesman for prepaid? Grow awareness in the B2B market? Pack it all in……?

What do YOU want from the VA over the next 5 years?

Ask yourself:

What are your 3 main requirements this year from the VA? In 2013 – what should the VA be offering members? Which areas of membership need to be developed? How do we categorise our members?

Brainstorm these areas in 3 groups

Brain Storming results – What VA members would like to see in 08/09 It was agreed that increasing the membership is key, encouraging the missing large retailers to join, but

that we do not grow too big that we dilute the message of the VA, we should enrich rather than simply enlarge membership

Up to date Legal Issues and a snapshot of how it applies to our market Lobbying – Concerns on Non-redemption Sub groups and Forums to share issues People from outside the sphere to learn about the market Accreditation / self regulation Research – Consumer (YouGov) & Supplier led Get the VA into the consumer eyes – use the Logo as a ‘Seal of Approval’ Like to see the website used as a resource Like to see Conference 09 address member issues –

back to the ‘dynamics in paper’ maintain a balance gift card / V New technologies and better understanding – more education More on prepaid Keynote Speaker – new blood

Plans for 08-09 continued

Members would welcome Industry related training programmes so they could send teams of people Voom! too big a file. Send email with link to website? Would like to see more PR on the website Need more instructions and procedure for negative PR to be sent to members Good mix of priced social events, like to see more, maybe include outside of London.

Brain Storming 5year Plan

We should understand more of the Market, understand how the market has changed from 2007 – 2013 Consumer Research Education Lobbying Voice of the Industry VA logo to represent ‘Seal of Approval’

Q&A FSA

Dominic Peachey

LEGAL & REGULATORY ISSUES IN PREPAID

The Financial Services Authority Prepaid - Q&A -

Dominic Peachey, FSA

The Regulatory Minefield

Why is the FSA addressing a retail conference?

Innovative Electronic Payments Products have attracted the EU

E-Money Directive (2000)

Payment Services Directive (2007)

Need to rationalise these two (2009)

Watch this space

Those EU Directives:

E-money directive currently in force

Regulates third party pre paid

Due for revision by Q2/2009

Payment Services Directive

Became European law on Xmas Day

Must be implemented in UK by 11/09

Will eventually absorb the revised e-money directive

E-money Directive

If you issue a prepaid card that is not closed loop you are forced to become a financial institution (or hire a bank)

The consequent regulation is prescriptive and onerous

But the EU is taking a long hard look at the future of EMD and is looking to ease the burdens

Payment Services Directive

Will apply to all payment services, not just prepaid

Is more principles based and less prescriptive than EMD

Contains a lot of Conduct of Business regulation

Likely to be a complaints led regime

Mediated by Financial Ombudsman

A Word On Principles Based Regulation

Instead of issuing detailed rules (could encourage a box-ticking mentality)

You issue a set of high level principles

And switch the focus of regulation to desired outcomes

Leaving Senior Management in firms with the freedom to choose how best to achieve those outcomes

PBR – The Example of Hong Kong

The HK Monetary Authority has adopted a Principles Based regime for e-money

Octopus is the ticketing system adopted by the HK Mass Transit Railway

Includes Pre Pay purse which can be used outside the basic transport system

OCTOPUS

Regulated by HKMA

Code of Practice drawn up by OCL and endorsed by HKMA

www.info.gov.hk/hkma/eng/bank/value_cards/code_of_practice_OCL_.pdf

“manage float prudently”

“back with sufficient, liquid, low risk assets”

“ensure sufficient cash flow to handle daily operations”

By Contrast with Hong Kong…

….and its 3 golden principles…

The European liquidity regime…

….as enacted by the FSA’s Handbook

Runs to 17 pages of rules and guidance

This is the difference between rules based and principles based regulation

Prepaid and E-money

Most (but not all) prepaid is e-money

Open, closed and restricted loops

Definition of e-money

Who can issue e-money?

Oyster

Storecards

Gift cards

Group Schemes and Cross Border

Exploring Those Loops

An open loop scheme is a network branded product (VISA, Maestro &c) that may be used virtually anywhere

A restricted loop implies the issuer has negotiated contracts of acceptance with a limited group of merchants

A closed loop scheme is one where issue and acceptance is limited to the same person

Definition of E-money

E-money is monetary value (as represented by a claim on the issuer) which is:

Stored on an electronic device Issued on receipt of funds Accepted as a means of payment by persons

other than the issuer

Surrogate for coins and banknotes

Not deposit taking

Who Can Issue Electronic Money?

Banks

Building Societies

Specialist e-money issuers (ELMIs)

Waivered firms

EEA firms who passport into the UK

Products Which Are Not Prepaid

Debit and credit cards

Mobile based proximity payments

Account based mobile payment schemes

These products are not currently regulated

But will become so from 1 November 2009

Oyster

2 elements – travel card and pre pay

Pre pay may only be used to buy travel rights from Transport for London

So it is a ticketing system and not a stored value product for paying third parties

Has escaped financial regulation to date

Despite extension to TOCs

Oyster Involves:

No straight revenue pass through

Discontinuity between transport services consumed by cardholder and payments received by operators

Use of parallel operators to complete same journey

Use of sequential operators to complete same journey

Effect of daily price capping

Storecards

Accounts mutated into charge cards and credit cards

If they only operate within the one store chain, they are not regulated

Intra-group and cross-border edge towards regulation

Commission says storecards exempt unless co-branded with VISA or MasterCard

Gift Cards

What exactly is a gift card?

Is it a token or voucher of nominal value or

Is it an electronic purse with a running balance

With whom can it be redeemed?

If in doubt, seek advice

Group Schemes and Cross Border

Whether a scheme is regulated or not often hinges upon third party acceptance as payment

That means legal third parties

Including acceptance by subsidiaries and by other group companies

This may cause problems cross border – even the Anglo-Scottish border

Limited Network Exclusions

Article 3 (k) of PSD

Excludes: limited networks of service providers limited range of goods or services

Commission guidance intends the exemption of storecards, canteen cards, petrol cards, transport cards

BUT

The Exemption Does Not Run To…

Cards which can be used in a long list of big chains of merchants

Because they are typically designed for a growing network of service providers

Which could take them out of scope of “limited network”

But shopping mall cards should be clear

Websites

These can be virtual marketplaces

So apply the same principles

Can the payment instrument only be used for purchases through a specific website?

Or can it be used for a certain range of goods and services offered over the Internet?

Questions

B&Q asked Dominic to confim the regulation of B&Q gift crads in different sceniros: Only in B&Q stores is OK B&Q on a Mall in another store – regulated B&Q merged with another company on a card – regulated

PPT would like shopping centre cards regulation confirmed. If it can only be used in the one centre it falls outside regulation.

payzone asked if the new directive will be down to legal interpretation? Yes! FSA will give support and advice, and essentially the European Court makes the decision on

how its run.

IRI Figures

Andrew Johnson

Figures

VA collate sales data from all members Recently reformatted data collected First draft of 2007 full year data including

gift voucher, gift card and e-voucher sales

Paper v Plastic v E

Paper 65% Gift Cards (closed, open, restricted) 32% E-vouchers 3%

Plastic Only

Closed 97% Restricted 0.5% Open 2.5%

Consumer

Paper 50.63% Gift Cards (closed, open, restricted) 45.05% E-vouchers 4.32%

B2B

Paper 90.4% Gift Cards (closed, open, restricted) 9.22% E-vouchers 0.38%

Total Sales by Channelincludes paper, plastic & e

Direct 93.21% On-Line 3.58% Gift Card Centre 0.59% Third Party 2.62%

Gift Card Only Sales by Channel

Direct 98% On-Line 0.78% Gift Card Centre 0.97% Third Party 0.31%

Category Breakdown

Retail 76% Agent 21% Leisure 3%

Conference 2008Conference 2009

Arun Glendinning

Conference 2008Feedback

244 delegates 16 exhibitors Excellent feedback Less panel sessions Free drinks in the evening!

Conference 2009

Wednesday 29th April 2009 QEII Conference Centre, London All members one complementary delegate (subject to

Terms & Conditions)

Member rates for colleagues & guests Exhibition area Sponsorship opportunities Free evening drinks! More information in Voom!, and members website

Housekeeping

Andrew Johnson

Calendar of Events

Pizza Fest – this eveningNext members meeting –

Wednesday 8th October

VA Endorsed Events

Prepaid 08 – this week – feedback Facts from conference

VA Endorsed Events

Prepaid 08 – this week – feedback Facts from conference Eastern Europe has the biggest market for prepaid as most government benefits are paid on prepaid cards Prepaid is forecast 23% annual growth rate globally 2008-2012, particularly unbanked and youth Gift cards are the entry point into prepaid, particularly youth 19.6% growth in prepaid card numbers and 40’5 growth in tranx value in Europe Turkey, Greece then UK are top three opportunities Transport cards will have big impact on UK market In rest of Europe prepaid is heavily bank orientated In Germany 75% of debit cards have prepaid function Consumers 8% growth in non-store vending and 0.8% growth in in-store vending Retailers through their distribution and brand strength hold the key to the success of prepaid in UK By 2015 the market will be dominated by open loop

British Retail Consortium DinnerWednesday 24th September

VA booked a table Members can book places at £210 + VAT

Over 1000 key retail figures meet for annual dinner

Grosvenor Park Lane, London

Prepaid Cards Summit22nd & 23rd October

Prepaid Conference The Brewery More details in Voom! Organised by VRL Knowledge Bank

Prepaid Awards Inaugural Gala & Gallery

Prelude to Prepaid Awards 2009 Wednesday 22nd October 2008 Sheraton Park Lane, London Member discounts to attend Awards voted on the night Event joint endorsement from VA & PIF More at www.prepaidawards.com

The Motivation Awards

Awarding motivation & incentive programs In association with the ISP 20 awards Discounts for members to attend and sponsor Wednesday 5th November, Royal Garden

Hotel, London More at www.motivationawards.org

Umbrella Association covering whole Prepaid Market Working Groups:

Business models – Rachelle Smith Legal & Regulatory – John Davis Consumer & Education – Andrew Johnson Transportation – available Two places available to VA members should any other member

wish to attend

Updates in Voom! PIF newsletter from VA office – includes profiles of

the Prepaid market in other European Countries More info on PIF website

PIF is looking at self regulation and accreditation for all PIF members

The VA needs a definitive guide on negative balances

PIF Code of Conduct has been incorporated into VA Code of Conduct

Research

Executive

Research membership year 2008/09

2007 – YouGov & Giftex Prepay YouGov - PR lead, gifting trends Giftex Prepay – research focus, gift cards and

voucher trends 2008?

Research Brain Storm results Consumer Questions Repeat questions from 2007 so results are

measurable and get Trend Data Consumer: Reasoning behind purchase? Why do you choose gift card / Voucher over

product? Awareness of Gift card? E-voucher / Mobile? Perceived value of all these? Are they buying by Brand? Do they repeat purchase? Do you find it difficult to understand value of gift

card? How many Voucher or gift cards not used? Do they ever club together? What is normal purchase value? Age of the purchaser?

How important is packaging? Have you recived gift card voucher? Would you

have preferred cash? What does the value tell you perception of the

giver? Appetite for Open Loop

Research Brain Storm resultsB2B Questions Why do they not like cards? What do they want from plastic? – top up /

reload / denominated Can they be used to increase brand loyalty Offer additional benefits for plastic Is presentation / packaging important?

Any Other Business?

The BBC’s the one show has been approaching Large Retailers for figures regarding non-redemption. The VA & Clareville are happy to field these questions, so that we deliver the same answer. Please call Andrew if you would like advice