Commercial Payments Overview Visa, Inc. NAEP April 2012

91st Annual Meeting & ExpositionApril 1 – 4, 2012

Anaheim, California

Commercial Payments OverviewVisa, Inc.

NAEP April 2012


Anaheim, California

Agenda

• Commercial Payments

VisaNet

Commercial Payments

• Industry Trends

• Payables Automation

Economic Factors

RPMG Review

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VisaNet

Note: Data for four quarters ended June 30, 2009Source: Visa Inc. for four quarters ended June 30, 2009* As reported by client financial institutions and therefore may be subject to change; includes merchant outlets in Visa Europe territory

Acquirers Issuers

Card ProcessorsMerchant Processors

CardholdersMerchants

$2.7 Trillion in Payments Volume

1.8 Billion Cards

30 Million Merchant Outlets*

64 Billion TransactionsIncludes payments

and cash transactions

16,600 Financial

Institutions

$4.6 Trillion in Total Volume

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Global Commercial Opportunity

U.S. Commercial Opportunity

2009 Global CCE Distribution 100% = $88T

The U.S. accounts for 21% of global CCE

Small Business

19%

U.S.23%

2009 U.S. CCE Segment Distribution100% = $19T

Canada 2%

U.S. 21%

Europe 32%

Asia Pacific29%

CEMEA 9%

LAC6%

Small Business<$25M

Medium Business$25-500M

Large Business>$500M

Government

22.6%

19.0%

51.8%

6.5%

U.S. CCE = $19T

Source: Visa Commercial Consumption Expenditure Index; Economist Intelligence Unit (EIU) modeling and analysis, July 2010. Global CCE index data sources include Bureau of Economic Analysis (BEA), U.S. Census Bureau, Organization for Economic Cooperation and Development (OECD), STructural ANalysis (STAN) Database, EuroStat Database, General Government Accounts from the National Accounts of OECD Countries, United Nations Statistics Division National Accounts Main Aggregates Database, EIU proprietary databases, government data and EIU model estimates where government data was unavailable. Large contracted defense spending not included in CCE index.

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Consumer Cards Still Dominate

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$17.4 $18.5 $19.5 $20.1$17.5 $18.7 $20.0 $21.2 $22.5 $23.8 $25.3

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

US Commercial OpportunityUS Commercial Opportunity is estimated at $18.7T in 2010 and is forecast to grow at a CAGR of 6.2% during the next 5 years

Source: Visa Commercial Consumption Expenditure Index; Economist Intelligence Unit (EIU) modeling and analysis, September 2011. Results include retail and wholesale intermediate inputs and prior year results reflect revisions in published government data. 2010 results are estimates only - government sources typically publish actuals within two years of estimates. CCE Forecast by EIU

Forecast

5 Year CAGR: 6.2%

$USD Trillions

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Payables Automation TrendsPurchasing Card Spending in North America (in $ billions)

Sustained electronic B2B payments growth is being driven by organizations seeking the achieve great cost savings with

traditionally inefficient functions.

Source: RPMG 2010 Purchasing Card Benchmark Survey Results. (This data does not reflect any forecast, prediction or expectation regarding Visa’s performance or revenues.)

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Payables Automation Adoption

Source: Practical Guide to Accounts Payable Automation, Visa PerformSource 2010.

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• Cash/treasury management top of mind given recent economy; companies focused on tools that provide spend visibility and control

• Automating the accounts payable process continues to gain momentum, driving deeper penetration of B2B spend

• Middle market companies are receiving increased attention from many issuers given comparative profit dynamics

• Companies increasingly operating globally and issuers partnering to serve them at an accelerating pace

• Public sector drives adoption of payment products and solutions

Global Large/Middle Market Trends

Global Commercial Payment Card Purchase Volume by Type

2005 - 2014 Large and Middle Market Trends

$Billion USD

Source: Packaged Facts, December 2009

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Payment Strategies


Anaheim, California

Payment Strategies

Buying Organization Payment Type Decision Factors

Source: NAPCP / First Annapolis, “End-User Perspective on Suppliers’ Acceptance of Card Payments,” June 2010 (n=146).Question: How often does your organization consider the following factors when determining how to pay a supplier willing to take any form of payment?

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Transaction Cost

Source: Aberdeen Group Analysis May 2010. Cited in “E-Payables 2010: The Strategic Value of Accounts Payable Automation” Aberdeen Group August 2010 .

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Payment Strategies

Change in Use of Electronic Payments

Source: PayStream Advisors, “Electronic Payments: Streamline P2P, Reduce Costs,” Q2 2010.

Supplier Types:

Strategic

Catalog

Direct

Indirect

Large Ticket

Small Ticket

On-Going

One-Time

In the context of these considerations, ACH and purchasing cards have been increasing while check payments have declined.

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Payment Strategies

Most common form of B2B payments, but highest cost to process Suppliers will often permit 45 – 60 day payment terms Check payments take 3 – 5 days to settle, increasing a supplier’s DSOs

Most common form of B2B payments, but highest cost to process Suppliers will often permit 45 – 60 day payment terms Check payments take 3 – 5 days to settle, increasing a supplier’s DSOs

Generally offer same day settlement for the buyer and supplier High transaction fees to send and receive Typically reserved for large dollar or international transactions, since for smaller,

reoccurring transaction the high cost can be prohibitive

Generally offer same day settlement for the buyer and supplier High transaction fees to send and receive Typically reserved for large dollar or international transactions, since for smaller,

reoccurring transaction the high cost can be prohibitive

Utilizes an electronic network via a daily batch process with a 1 – 2 day settlement delay

Standardized payment files with limited remittance information Can be easily integrated into AP systems

Utilizes an electronic network via a daily batch process with a 1 – 2 day settlement delay

Standardized payment files with limited remittance information Can be easily integrated into AP systems

Most widely used card payment product for procurement of goods by various channels

Can replace the traditional PO / invoice / approval process May have embedded controls to ensure compliance

Most widely used card payment product for procurement of goods by various channels

Can replace the traditional PO / invoice / approval process May have embedded controls to ensure compliance

Traditional Checks

Wire Transfers

ACH(Automated Clearing

House)

Conventional / Traditional Use of P-

Cards

Source: First Annapolis primary research as of April, 2010.

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Economic Overview


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General Fund Spending

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General Fund Expenditure Growth

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General Fund Spending by Category

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RPMG Benchmark Survey Review


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Purchasing Card Spending

Source: RPMG Purchasing Card Benchmark Survey 2010

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Average Growth Rates


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Type of Change in Spending


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Average Growth Rates


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Type of Change Expected


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Expected Growth Rates


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Type of Change Expected


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Expected Growth Rates


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Payment for All Under $2,500


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Payment for All ($2,500 - $10,000)


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Unanswered Questions?

Commercial Payments Overview Visa, Inc. NAEP April 2012

Documents

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