Visa Inc. · NYSE:V
Visa — Investor Day (March 2010)
123 slides from Visa's investor day presentation, Mar 11, 2010
Slide 1: 2010 Investor Day
2010 Investor Day March 11, 2010
Slide 2: Agenda – Morning Session
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 Manage
Slide 3: Agenda – Afternoon Session
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,
Slide 4: Safe Harbor Reminder
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 tho
Slide 5: A View from the Top
A View from the Top Joseph Saunders Chairman and Chief Executive Officer
Slide 6: Overview
Overview Growth Innovation Opportunities & Challenges 6
Slide 7: Post IPO Track Record
Post IPO Track Record Instilled Enhanced Renewed Completed Delivered on Public Relationship Key Integration of IPO Financial Company with Visa Customer Visa Inc. Commitments Focus Europe Contracts 7
Slide 8: Challenging Landscape
Challenging Landscape Economy Regulatory Disintermediation Legal Trust/Data Security 8
Slide 9: Innovation as a Central Priority
Innovation as a Central Priority Mobile Prepaid Technologies Revenue Diversification Future • U.S. versus ROW Investment – Innovation • Core Products versus Newer Initiatives Money Transfer eCommerce 9
Slide 10: Strategy Overview
Strategy Overview Oliver Jenkyn Global Head of Strategy and Corporate Development
Slide 11: Global Industry Revenue
Global Industry Revenue Total Global Industry Revenues, 2008 (US $Billion, approximate) 1,113 1,097 914 531 525 489 354 120 Retail Telecom Payments Airlines Asset Hotel TV Film/Music Mgmt Source: McKinsey 11
Slide 12: Payments Industry Landscape Complexity
Payments Industry Landscape Complexity Business System Payee Transaction Acquirer Network Issuer Payment Payer Payment Instruments (Merchant) Acquirer Processor Processor Instrument Issuer (Consumer) Credit Card American Express JCB Discover Individuals TSYS Bank of America Wal-Mart ICICI Cpi card F
Slide 13: Visa Landscape Perspective
Visa Landscape Perspective Payee Transaction Acquirer Network Issuer Payment Payer (Merchant) Acquirer Processor Processor Instrument Issuer (Consumer) MDEX DPS Acquiring JVs VPS (emerging markets) Domestic Processing Options Supporting Value Added Services Loyalty Risk Services Info services eComm
Slide 14: Key Industry Trends and Visa Position
Key Industry Trends and Visa Position Key Industry Trend Visa Positioning Secular electronification of paper payments Capitalize on market leading position Growth in “ready-funds” preference Play to strength in debit & prepaid Recovery in volumes Global macroeconomic recovery Increased travel and cr
Slide 15: Visa Corporate Strategy
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 lo
Slide 16: Visa Corporate Strategy
Visa Corporate Strategy Vision: The world’s best way to pay and be paid Mission: Accelerate the electronification of commerce Grow participants of network: Issuers, acceptors, cardholders, new users Grow usage of network: Drive brand preference, expand channels, increase processing penetration Enhan
Slide 17: Strategic Aspirations for 2015
Strategic Aspirations for 2015 Aspiration By 2015, Visa will… Accelerate Reach X% payments volume share of global PCE electronification Diversify Generate 50% of revenue from outside U.S. geographically Ensure X% of all our transactions are Embed processing processed on VisaNet Drive X% of revenue f
Slide 18: Corporate Strategy Pillars
Corporate Strategy Pillars “Touch” and drive Focus on core products, revenue from as many and invest in new clients transactions as possible and capabilities that enhance the value of the network Products Processing & Services Local Market Aspire to “partnership”, Clients Focus Brand with a focus on
Slide 19: Local Market Focus
Local Market Focus Local 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 bure
Slide 20: Processing Strategy
Processing Strategy 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 processi
Slide 21: Product and Services Strategy
Product and Services Strategy Focus on core products, and invest in new clients, capabilities, and acquisitions that enhance the value of the network New New Clients / Diversify New Capabilities Customer Protect and Extend Grow Current New Capability 21
Slide 22: Product and Services Strategy
Product and Services Strategy Focus on core products, and invest in new clients, capabilities, and acquisitions that enhance the value of the network New Money Supply Transfer Mobile Chain Non-FIs Money Mgt Health- Transfer care Mobile Payment Remote Customer Prepaid eComm Gateway Mobile Comm- Payme
Slide 23: Brand Strategy
Brand Strategy Become the Universal Currency of Life by consistently delivering a message of “Better Money for Better Living” Better Money for Better Living 23
Slide 24: Acceptance Strategy
Acceptance Strategy Grow our network of merchants through country-specific application of the acceptance lifecycle, targeted segment prioritization, and creative acceptance investments Partnership Build sustainable partnerships to increase Visa loyalty Drive preference to increase share Preference w
Slide 25: Client Coverage Strategy
Client Coverage Strategy 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 Right People, Team, Talent Planning / Decision-making • “Partnership” aspiration • Structure and discipl
Slide 26: Visa Corporate Strategy
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 lo
Slide 27: Expectations and Stakes
Expectations and Stakes Of the 500 companies that Investment Case: Growth, Growth, appeared on Fortune’s first and more Growth. list, in 1955, only 71 have a place today. As we have stated multiple times, the most important corporate objective V should Nearly 2,000 companies have have is the preserv
Slide 28: Visa's Long-Term Focus
Visa’s Long-Term Focus 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
Slide 29: Visa Corporate Strategy
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
Slide 30: Driving Growth: Assets and Capabilities
Driving Growth: Assets and Capabilities Established and Proven New Levers • Best-in-class employees • Expanded business model opportunities • Strong secular “tailwind” • Integrated global view of • Superb client relationships capabilities and best practices • Unsurpassed acceptance • Opportunity for
Slide 31: Strategic Aspirations for 2015
Strategic Aspirations for 2015 Aspiration By 2015, Visa will… Accelerate Reach X% payments volume share of global PCE electronification Diversify Generate 50% of revenue from outside U.S. geographically Ensure X% of all our transactions are Embed processing processed on VisaNet Drive X% of revenue f
Slide 32: Organization and Strategy Built on Client Needs
Organization and Strategy Built on Client Needs John Partridge President
Slide 33: Client Needs Inform Our Strategy
Client Needs Inform Our Strategy Products Processing & Services Local Market Clients Focus Brand Acceptance 33
Slide 34: John Partridge, President
John Partridge, President , , , 34
Slide 35: Client Needs Inform Our Organization
Client Needs Inform Our Organization Country / Country Global Support Groupings Functions Americas International Under President U.S. Japan • Elizabeth Buse Korea Functional Canada • Antonio Lucio China Support Brazil • Marc Luet Greater China Mexico • Bill Sheedy Southeast Asia Rest of Latin Americ
Slide 36: Defining Success
Defining Success Innovation Differentiation Growth 36
Slide 37: Driving Growth Through Visa Products and Innovation
Driving Growth Through Visa Products and Innovation Elizabeth Buse Global Head of Product 37
Slide 38: Product and Services Strategy
Product and Services Strategy Goal: Drive sustainable growth for all Products stakeholders in the network Processing & Services • Continue to penetrate cash and check Local Market • Enhance network value through differentiated products & services Clients Focus Brand • Invest in Innovation Initiative
Slide 39: Visa's Strategic Framework for Growth
Visa’s Strategic Framework for Growth New New Clients / Diversify New Capabilities Customer Protect and Grow Extend Current New Capability 39
Slide 40: Continuous Innovation
Continuous Innovation Products NEW Credit Debit Commercial Prepaid TECHNOLOGY Money Transfer Unique Services Services – Processing Services – Visa IntelliLink Management – Advanced Authorization – Partial Authorization – Visa Incentive Network – Loyalty Platform Services 40
Slide 41: Differentiated Debit Innovation
Differentiated Debit Innovation Extend Visa’s leadership in debit by providing an integrated product offering and tailor services to local market geographies Purchasing Capability ATM Access VISANET Global Network Full Service Issuer Processing Authorization ATM Terminal Card Exception Network Fraud
Slide 42: Differentiated Prepaid Innovation
Differentiated Prepaid Innovation Accelerate growth across all aspects of the Prepaid business by providing comprehensive products, services and infrastructure Products Consumer Corporate & Government Employee Benefits Platform Services Partial Authorization Auto-Substantiation Advanced Authorizatio
Slide 43: Differentiated Commercial Innovation
Differentiated Commercial Innovation Drive penetration and usage across Commercial segments to grow the core, while extending to new customers & capabilities Grow core usage Extend capabilities to Target new customers and penetration new geographies and verticals Visa Multinational Visa IntelliLink
Slide 44: The eCommerce Opportunity
The eCommerce Opportunity Unique characteristics make eCommerce a critical channel 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 cli
Slide 45: Global eCommerce Initiative
Global eCommerce Initiative Drive continued preference for Visa as the leading payment method for online purchases FAST GROWTH CROSS BORDER Visaperks.ca Hong Kong, China, Taiwan FAST GROWTH & CROSS BORDER Dynamic Challenge Response Visa / Borderlinx Canada, Australia, GCC Mexico, Brazil Hotels.com O
Slide 46: Rightcliq by Visa
Rightcliq by Visa A new, innovative, managed service from Visa that enhances the end-to-end eCommerce shopping experience Online shopping tool for consumers, delivered by Visa Convenience tool to improve shopping experience • Browse: Wishspace, get advice, discounts/offers • Buy: Auto form fill, dig
Slide 47: Visa Money Transfer Solution
Visa Money Transfer Solution Globally, domestic and cross-border remittances represent an $11 trillion opportunity Sender Recipient Sources: AITE Group, World Bank, IMF, McKinsey Payment Practice, 2007 47
Slide 48: Benefits of Visa Money Transfer
Benefits of Visa Money Transfer Visa Money Transfer provides a new value proposition for all stakeholders 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 merchan
Slide 49: Visa Money Transfer Momentum
Visa Money Transfer Momentum Significant global momentum, with 51 Visa Money Transfer programs across 15 countries Russia: 16 bank- managed programs China: 70m+ (Alfa Bank, Severnaya Kazna) accounts (ICBC, EPS Hong Kong Ltd.) UAE: India: 17 bank-managed United States: (UAE Exchange) programs (US Ban
Slide 50: Mobile Ecosystem
Mobile Ecosystem Handset Citi Retail Wells Fargo OEMs Banks The Royal Bank JP Morgan Nokia of Scotland RIM Samsung Chase CIBC Sony Ericsson Apple HSBC Barclays Android ICICI Bank Bank of America Motorola Banco Do Mobile Bradesco docomo Brasil Airtel Operators RBC AT&T MTN Emirates NBD Beeline Vodafo
Slide 51: Mobile Ecosystem
Mobile Ecosystem Handset Citi Retail Wells Fargo OEMs Banks The Royal Bank JP Morgan Nokia of Scotland RIM Samsung Chase CIBC HSBC Reducing Complexity & Enabling the Sony Barclays Ericsson Apple Ecosystem Android ICICI Bank Bank of America Motorola Mobile • Establish Standards Bradesco Banco Do Oper
Slide 52: Global Mobile Strategy
Global Mobile Strategy Visa, in partnership with financial institutions and the wireless industry, has introduced 23 mobile programs in 19 countries Value-Added Acceptance Canada India Services Rogers Wireless Airtel bharti RBC Vancity mChek Malaysia Payments Maybank POS maxis Nokia United States Br
Slide 53: Developed Markets Mobile Approach
Developed Markets Mobile Approach Enhance the consumer purchase experience and enable consumers to manage their spending better Transaction Alerts Mobile Offers Mobile Contactless Existing Visa Accounts 53
Slide 54: Emerging Markets Mobile Approach
Emerging Markets Mobile Approach Extend Visa’s financial services network to underbanked populations in emerging markets Money Transfer Mobile Top Up Remote Payments Prepaid Accounts 54
Slide 55: Extending Visa's Value
Extending Visa’s Value: Industry leading products and services to reduce costs Visa Visa Advanced Visa Risk IntelliLink Authorization Manager 55
Slide 56: Extending Visa's Value
Extending Visa’s Value: Innovating relentlessly to improve the point-of-sale experience Visa ReadyLink Auto-substantiation Visa Account Updater Partial Authorization Balance Inquiry 56
Slide 57: Extending Visa's Value
Extending Visa’s Value: Driving unique benefits to merchants and consumers TAQC Visa Incentive Visa Visa Extras Platform Network (VIN) Passfirst 57
Slide 58: Innovation from Visa: Experience It Yourself!
Innovation from Visa: Experience It Yourself! 58
Slide 59: The Role of Marketing in Driving Results
The Role of Marketing in Driving Results Antonio Lucio Chief Marketing Officer
Slide 60: Role of Marketing
Role of Marketing Driving transactions and revenue while building equity and differentiation for the Visa brand 60
Slide 61: Visa Strategy
Visa Strategy Vision: The world’s best way to pay and be paid Mission: Accelerate the electronification of commerce Marketing Objectives: Grow share from cash and X% payments volume check through education share of global PCE Drive differentiation through Brand Equity gap brand equity and innovation
Slide 62: Global Marketing Investment Approach
Global Marketing Investment Approach A simultaneous top-down and bottom-up approach is used to ensure budget alignment with global strategic priorities TOP-DOWN – Key Metrics Decision Factors MROI • Electronic share of PCE 1 Market Development Global Optimize • Acceptance locations 2 Growth Marketin
Slide 63: Proven Marketing Activities
Proven Marketing Activities Specific activities have been proven effective for certain stages of country and product development Sophisticated U.S. Credit Australia U.S. Credit Debit Product Maturity Developed Brazil Credit Australia Emerging Brazil Debit Debit India Emerging Developed Sophisticated
Slide 64: Proven Marketing Activities: Brazil
Proven Marketing Activities: Brazil Drive debit usage through education and credit usage through affluent and cross border marketing E – Emerging, D – Developed, S – Sophisticated S Product Maturity Brazil D Credit Brazil Debit E E D S Country Maturity • Debit Marketing Objective: – Educate consumer
Slide 65: Proven Marketing Activities: Australia
Proven Marketing Activities: Australia Drive debit usage through education of benefits vs. EFTPOS and credit usage through affluent and cross border marketing E – Emerging, D – Developed, S – Sophisticated S Product Maturity Australia Credit D Australia Debit E E D S Country Maturity • Debit Marketi
Slide 66: Proven Marketing Activities: U.S.
Proven Marketing Activities: U.S. Drive debit usage versus cash and check, credit usage through mass affluent and eCommerce marketing E – Emerging, D – Developed, S – Sophisticated U.S. Credit S Product Maturity U.S. Debit D E E D S Country Maturity • Debit Marketing Objective: – Drive usage of Visa
Slide 67: Driving the Category
Driving the Category These proven marketing activities executed at the local level, continue to help Visa drive category growth by: Demonstrating commitment to our Issuing and Merchant Clients Building brand equity Educating consumers on the benefits of our products Encouraging new usage patterns 67
Slide 68: Driving Effectiveness, Efficiency and Accountability
Driving Effectiveness, Efficiency and Accountability Marketing drives both short- and mid-term revenue growth Short Term 10% Marketing Activities 20% Brand Equity MROI Marketing drives revenue at multiple levels: Momentum • Short-term lift •Increase Cards in Wallet • Brand equity 70% •Increase Accep
Slide 69: Scientific Tools Provide Key Insights
Scientific Tools Provide Key Insights Understanding of key revenue drivers helps quantify returns from marketing investments Sophisticated Analytical Tools – Econometric Models and Factor Analyses Input Data Analysis Actions Marketing Investments 6 5 4 Optimize Transaction Data 3 marketing 2 mix by
Slide 70: Analytical Tools Guide Decisions
Analytical Tools Guide Decisions Insights and analysis inform key decisions Campaign Sponsorship Maximized ROI Optimization Portfolio Optimization Olympics ; Beijing vs. Vancouver Increased ROI: short term and brand equity • 5 local campaigns NFL ─ 100% brand ─ 90% TV ; FIFA • Global campaign ─ 50%
Slide 71: Driving Differentiation: Innovation
Driving Differentiation: Innovation Driving innovation with focused targeting in prioritized countries through relevant channels Visa Prepaid Debit card RightCliq by Visa Proximity Payments and Money Transfer other mobile application 71
Slide 72: Brand Strength
Brand Strength Visa Has Unsurpassed Global and U.S. Brand Strength and Equity 136 139 150 150 126 137 119 106 98 98 89 88 100 100 79 79 84 79 80 79 61 62 51 56 47 50 50 29 0 0 Q4'09 Q4'09 Brand Brand Brand Brand Brand Uniqueness Popularity Quality Familiarity Relevance Global Brand Equity U.S. Brand
Slide 73: In Conclusion…
In Conclusion… Vision: The world’s best way to pay and be paid Mission: Accelerate the electronification of commerce Marketing Objectives: Grow share from cash and X% payments volume check through education share of global PCE Drive differentiation through Brand Equity gap brand equity and innovatio
Slide 74: Break
VISA Break
Slide 75: The Global Roadmap
The Global Roadmap Bill Sheedy Group President – The Americas
Slide 76: Client Strategy
Client Strategy Goal: Partner with clients to drive their business Products Processing & Services • Fully integrate at client business level • Customize delivery of global Local capabilities to align with individual client Market opportunities and pain points Clients Focus Brand • Invest and rebalan
Slide 77: Visa Inc. Countries & Territories
Countries & Territories 115 Visa Inc. Financial Institution Clients Payments Volume1 > 1,800 $ 734B Visa Share of GPC2 41.3% Visa Penetration of PCE3 15.0% Cards1 712M Russia Canada CIS/ SE Europe U.S. Korea South China Japan Asia GCC India Mexico Africa Southeast Asia Brazil Countries & Territories
Slide 78: Client Value Creation Strategy
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 benef
Slide 79: Why Clients Choose Visa
Why Clients Choose Visa Product 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 r
Slide 80: Global Country-Level Segmentation
Global Country-Level Segmentation Emerging Developed Sophisticated Canada U.S. Australia Japan S. Korea Brazil Russia India Morocco Nigeria Thailand Number of Countries 140 32 19 Avg. PCE Per Capita $2K $13K $27K Card Penetration Low High High / Saturated Acceptance Low Medium High Payment Infrastru
Slide 81: Investment Focus
Investment Focus Emerging Developed Sophisticated Build share Grow Optimize Objective and scale revenue profitability Early All core Value-added Products & Services adopter products services Awareness and Usage and Brand Differentiation activation product attributes Everyday spend Card-not-present,
Slide 82: Current Client Challenges
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,
Slide 83: U.S. Is Still a Growth Story, But Not Everything Is Growing Equally
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
Slide 84: Sources of Incremental U.S. Growth
Sources of Incremental U.S. Growth Strong Growth Opportunities Visa Growth Through Differentiation 2009 U.S. PCE Drive growth in new channels by Visa delivering innovative solutions Cash & $2.0T Check • eCommerce $3.0T • Mobile Other Card, Paper & Deliver unparalleled value to clients Electronic • P
Slide 85: Global Country-Level Segmentation
Global Country-Level Segmentation Emerging Developed Sophisticated Canada U.S. Australia Brazil Japan S. Korea Brazil Russia India Brazil Morocco Nigeria Thailand Number of Countries 140 32 19 Avg. PCE Per Capita $2K $13K $27K Card Penetration Low High High / Saturated Acceptance Low Medium High Pay
Slide 86: The Global Roadmap - Brazil
The Global Roadmap - Brazil Ruben Osta Country Manager - Brazil
Slide 87: Local Market Focus: Brazil
Local Market Focus Goal: Brazil Products • Enhance multi-year client Processing & Services relationships with major banks and expand new strategic offerings Local • Expand domestic processing Market Clients Focus Brand • Continue innovating and launching new products • Maintain Visa’s leadership pos
Slide 88: Outstanding Compounded Growth
Outstanding Compounded Growth Calendar Year 2009 Card Issuance Acceptance Locations PCE Penetration (millions) (millions) 1.8 11.1% 220 4.9 0.2 0.4% 1994 2009 1994 2009 1994 2009 CAGR 29% 16% 21% Source: Visa Inc. 88
Slide 89: Brand Awareness
Brand Awareness Question: What is the first credit card brand that comes to mind? 45 40 39 37 35 33 30 29 30 31 Percentage of Respondents 28 28 25 26 27 26 27 26 26 27 24 23 20 21 15 16 17 17 15 15 14 15 13 13 14 14 12 12 12 10 10 11 7 7 8 5 5 5 6 6 2.5 3.5 2 2 2 2 2 3 0 0 1 1992 1993 1994 1995 1996
Slide 90: Getting the Cards Issued
Getting the Cards Issued 29% CAGR – 220 million cards issued 1 • Right Banks – strong brand & branch network 2 • Right Sales and Marketing Support – building trust 3 • Right Customers – appealing demographics 90
Slide 91: Building Acceptance
Building Acceptance VisaNet do Brasil (Cielo) is born 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
Slide 92: Marketing
Marketing Yesterday: Brand Building; Today: Activation and Usage 1 • Aligning issuers, VisaNet and merchants 2 • Merchant co-op programs, POS signage 3 • Consumer product promotions, sweepstakes, discounts 4 • Educational campaigns 92
Slide 93: Penetrating PCE
Penetrating PCE 21% CAGR – 11.1% of PCE 1 • Right Products – credit, debit, prepaid, verticals 2 • Right Innovation – chip, eCommerce, Visa Passfirst 3 • Right Relationships – multi-year contracts, incentives 93
Slide 94: Focus Going Forward
Focus Going Forward Acceptance/ Product Penetration Innovation Early days on debit eCommerce Focus on • Debit • Growing Prepaid • Verified by Visa economically active Commercial population Mobile • Increasing wages • Top up • Emerging middle Interiorization class projects (non- • Banked population m
Slide 95: Questions and Answers Session
Questions and Answers Session Oliver Jenkyn John Partridge Elizabeth Buse Antonio Lucio Bill Sheedy Ruben Osta
Slide 96: Financial Review
Financial Review Byron Pollitt Chief Financial Officer
Slide 97: Today's topics
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
Slide 98: Volume and support incentives
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
Slide 99: Customized price discounts
Customized price discounts Contractually committed, typically for 5 years Common U.S. practice, spreading to Rest of World (ROW) Contract Term - 2009 5% Under Volume (Years) Contract <3 US 79% 30% >5 3-5 ROW 80% 12% 58% 32% VISA 80% 18% 99
Slide 100: Customized by client
Customized by client Incentive Type Illustrative Examples Basis points (bps) on • 2 bps on all PV Payment Volume (PV) • 10 bps on year-over-year Pay for growth growth • $2 per card converted; Conversion and/or milestone payments Fixed • $5m signing bonus Fixed with hurdle • $3m when PV exceeds $1b 1
Slide 101: Contract terms drive the accounting
Contract terms drive the accounting Visa amortizes up front incentive payments only if 1 Not yet earned 2 Recoverable if client breaches or early terminates 3 Visa has intent and ability to enforce repayment 4 Future profit exceeds amount deferred 101
Slide 102: Incentives expected to grow over time
Incentives expected to grow over time With client payment volume growth Mix of Incentive Types Growth Fixed FY 2008 FY 2009 Q1 FY 2010 28% 38% 34% 72% 62% 66% 15.6% 15.1% 16.0% Incentives as a % of Gross Revenues 102
Slide 103: Incentives expected to grow over time
Incentives expected to grow over time As client portfolios grow larger Major Bank Consolidations Portfolio Payment Involving Visa Issuers Volume 1. Chase / Washington Mutual 2. Bank of America / Merrill Lynch 3. Wells Fargo / Wachovia 4. PNC / National City Incentives as % of Gross Revenue 103
Slide 104: Incentives expected to grow over time
Incentives expected to grow over time As more clients enter multi-year contracts Number of Contracts 2008 Q1 2010 US 512 805 ROW 555 638 Total 1,067 1,443 104
Slide 105: Managing foreign currency (FX) exposure
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 105
Slide 106: What drives Visa's FX exposure
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” Net FX Gross Revenue = Exposure Less Incentives and Expenses 106
Slide 107: How significant is the exposure
How significant is the exposure Approx % of Currency Distribution Exposure Hedged Net Revenue Expenses 26% 18% 30% 74% 82% 70% Other Currencies U.S. Dollars Other currencies Hedged 107
Slide 108: What is Visa's approach to hedging
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
Slide 109: How hedges impact revenue growth
How hedges impact revenue growth Impact of FX on Visa revenue growth FY 2009 Q1 Q2 Q3 Q4 FY (1)% (4)% (5)% (3)% (3)% FY 2010 Outlook Q1 FY 0% Flattish 109
Slide 110: Capital structure – uses of cash
Capital structure – uses of cash Guiding Principles • 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 re
Slide 111: Capital structure – uses of cash
Capital structure – uses of cash $ billions Capital Structure Snapshot Q1 FY 2010 After fully funding litigation escrow, cap ex, Available Cash $3.6 working capital, JVs, dividends and share repurchase Credit Line +3.0 ___ Total Sources $6.6 Debt Capacity ~ $6-7 Settlement Risk (~5) @ A rating Set A
Slide 112: Capital structure – uses of cash: Payout Ratio
Capital structure – uses of cash Dividend levels are guided by comparisons to S&P 500 dividend-paying companies with EPS growth above 20% Dividend Yield Dividend Payout Ratio Visa @ $0.50/$85 share Visa @ $0.50/share Payout Ratio Yield IBES EPS Growth IBES EPS Growth Source: FactSet. Based on data a
Slide 113: Capital structure - uses of cash
Capital structure - uses of cash Through Q1 FY 2010 $2.7 billion in excess cash has been returned to shareholders A heavier weighting to share repurchase reflects dividend benchmarking and a favorable stock price outlook Excess Cash Returned Street Analysts To Shareholders Share Price Outlook (Throu
Slide 114: Update on February metrics
Update on February metrics U.S. payment volume growth Cross border volume growth Processed transactions growth Recap FY 2010 financial metrics 114
Slide 115: U.S. payment volume growth
U.S. payment volume growth % 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 20 115
Slide 116: Cross border volume growth - constant
Cross border volume growth - constant % 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 12 116
Slide 117: Processed transactions growth
Processed transactions growth % growth 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 14 117
Slide 118: Financial metrics for FY 2010
Financial metrics for FY 2010 Net revenue growth 11-15% range 16-17% of Volume and support incentives gross revenue Less than Marketing $1 billion Mid to high Operating margin 50% range 118
Slide 119: Financial metrics for FY 2010
Financial metrics for FY 2010 36.5 to 38.5% GAAP tax rate range Diluted class A common stock 20% + EPS growth FY10: $200-250 About $200 million Capital expenditures million FY11: Free cash flow $2 billion + 119
Slide 120: Early thoughts on FY 2011
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 cli
Slide 121: Early thoughts on FY 2011
Early thoughts on FY 2011 Product 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 developmen
Slide 122: Early thoughts on FY 2011
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 shar
Slide 123: Questions and Answers Session
Questions and Answers Session Joseph Saunders John Partridge Byron Pollitt