Towards cash free day

Gabriele Zuliani, MasterCard Worldwide
November 25, 2010

Towards a Cash Free Day
Delivering Innovation with Insights

©2010 MasterCard.
Proprietary and Confidential ADVANCING GROWTH. ADVANCING COMMERCE.

In 2010, we started looking more closely at the

Today we explore some of

©2010 MasterCard. December 2, 2010
ADVANCING GROWTH. ADVANCING COMMERCE. Proprietary and Confidential Page 2

order to understand how to better meet their
needs

Could I live How much cash
without cash? do I like to keep
in my purse?

What do I What would
& my family spend make me use
on everyday, my card more?
week, month or
year?
What are

Where do I want to everyday payment
What stresses needs & are they
use my card where its
& frustrates me currently being
not accepted or
when I want met?
welcomed ?
to pay?

We used 5 different methodologies designed

MasterCard
Advisors
Transactional
Data Analysis
Life of
4
4 country
Ethnography

360°
Study
without Cash

6 country blog

6 country POS
experience 5 country Quantitative Study


How much cash
do I like to keep
in my purse?

How much
do I usually draw
from the ATM?

How often do
I actually pay
with cash ?

What do I spend
on everyday,
week, month
or year?


Each month, an average German consumer pays
about 21x in
out of ± 32 payment transactions.

Total Nr of
payment 42 32 37 35 32
txs

3 1 3 1 3
Credit

14 16
12
5 8
Debit

23 21 24
17
12
Cash

PL DE IT NL SE

Q8. Frequency of usage of payment means last 12 months, by country Base: All
Source: TNS, Towards a Cash Free Day research, 2010

For same everyday payments, Germans use
mainly cash vs. heavy card habit Swedes
who use cash in just 40% of payment occasions

100
Parking fees Newspaper
tolls Newspaper
% low value payments (>10 )

Parking feestolls
Public transport Food/snacks/
80 day ticket Beverages/sandwiches
Public transport day
Foodsnacksbeverag
Books and ticket Books and essandwiches
magazines Parking fee/tolls magazines
Food 60
snacks
Everyday groceries
beverages sandwiches
from corner shop

10 30 50 70 90
40

Everyday groceries from Everyday groceries
supermarket from supermarket
Everyday groceries
from corner shop 20 Everyday groceries from
corner shop

Everyday groceries
from supermarket
0

% paid for in cash money
Base: 5 countries, Payment occasions yesterday,
Categories: Transportation, Groceries / household items,
Source: TNS, Towards a Cash Free Day research, 2010 Entertainment /hobbies / leisure


What is my
path from a
cash only
consumer to a
more regular
debit user?


Understanding where cardholders are on their

Cash Content Incidental Use Confidence Builds Comfort Sets In Habit is Formed

emergency
grocery & fuel plateau
grocery & fuel
clothes & shoes
(core debit territory)

socialising

draw cash from big ticket
branch or ATM health & personal care
rail & bus
impulse

Expanding merchant acceptance & continuous industries
18.4 communication are

key to migrating customers along the card adoption path

Source: MasterCard Advisors Transactional Data Analysis


What are
my everyday
payment
experiences?


What are
my everyday
payment needs?


around speed, no matter the sophistication level
of the country!
1. Speed be on my way
quickly
2. Avoid carrying cash, going to
1. Speed be on my way quickly
ATM
2. Avoid carrying cash
3. No transaction cost
3. Use my preferred payment
Very functional needs
method
Very functional needs

2. Feel in control of my spending
3. Go with the norm, pay as
everyone does, not stand out,
not hold up the queue
1. Speed be on my way quickly Most emotional needs
2. Feel in control of my spending
3. No transaction cost or fee

2. Feel reassured, not hold up the
queue, easy merchant
interaction
3. No transaction cost or fee
Their payment needs are less
extensive as if other things
matter more


scale groceries where what
matters most is NOT having to carry cash

Consumer Payment Needs for
Specific Everyday Payment Occasions
Emotional
Go with the norm Control
Parking Everyday groceries
Public transport day ticket Food/snacks/beverages/
Newspaper sandwiches

No transaction cost
Avoid carrying cash
or fee Large scale groceries
Fuel Fuel
Books and magazines

Speed be on my way Security
Acceptance
Functional Speedquickly
Basic condition, but not top of mind
Basic condition
Consumers do not know what they are
liable for. Very different from the
Source: TNS, Towards a Cash Free Day research, 2010 online world where security is the key
concern.

Could I live a week
without cash?


and preconceived notions
Habit!

Cash gives me power Card makes me feel liberated

Feel empty without it I don't have to go to ATM all the time

Physical incarnation of money (look,
feel, smell) Its fast and easy

Cash is comfortable, its accepted Card is easy its widely accepted
everywhere
Not accepted everywhere
Go with the norm - socially not
always accepted to pay by card More electronic payments could
mean less meaningful interaction
with merchant

last penny slips out of your hand Less need to spend

Its safe
Not safe (carrying large
amounts & pick pockets)
Card fraud


Merchants reactions have significant impact

CARDS ACCEPTED
Large shops
Large amounts

reaction
Surprise
First reluctance, after acceptance of
CARDS NOT ACCEPTED card
Smaller shops Feeling embarrassed
Small amounts

Irritation
Cash only accepted he/she
Refusing the card can do, leave shop
brought so without goods

Participants were very inventive on seeking solutions, but these were only
temporary. In everyday situations cardholders land up using the method
most insisted on by merchant or following societal norms

Do I want to
use my card where
its not accepted or
welcomed ?

What reaction
do I get ?

What stresses &
frustrates me
when I want to
pay ?


Merchants in Munich & Turin had most card
unfriendly attitude, refusing card acceptance,
even at indicated minimum spend
Rotterdam
100% card acceptance Gothenburg
100% No restriction for Expressed preference for card 1%
card transactions Refused card offered 1%
Minimum amount 4%
Card transaction surcharged 1%

Manchester
No terminal 6%
Minimum amount 3% Warsaw
Card transaction surcharged 2% for card transactions
100% card acceptance
100% No restriction

Munich Turin
No terminal 25%
Expressed preference for cash 8%
Refused card offered 6%
Refused card offered 15%
Minimum amount 7%
Minimum amount 19%

Italians and Germans had highest cash usage at 75% and 71% respectively

What do consumers want ?

Payment solutions that can
simplify and facilitate their day to
day lives

For the industry & all its
stakeholders, its about delivering


Personal Finance 1 Tollroads
10
Management
2 Parking

9 3 Transit
Internet
banking & security

Identification 4 LVP solutions / e-purse
8
Card

7
Retailer Loyalty 5 e-Com

6
Multiple
Credit and
Debit cards

ADVANCING BANK
ADVANCING GROWTH. COMMERCE. Proprietary and Confidential Page 20

one card!
Relevance
Mass Small
Youth Loyalty Families Mass Affluent 50+
affluent Business

Small ticket items
Eg. tolls, parking,
Improve
coffee etc. Remove barriers Increase appeal
convenience
Everyday Convenience Control
Convenience

necessities Making debit faster, easier Giving consumers ways
eg. groceries, and universally accepted of managing their money
petrol etc. Increase across channels more effectively Increase
relevance relevance
Large necessities
eg.bills, rent, Security Relevance
insurances etc. Improving all aspects of Tailoring payment solutions
payment security from to the needs of different
Improve
Large indulgences prevention to recovery consumer segments
convenience
eg. electronics,
holidays etc.
Enhance security

Improve control


Expanding Debit cards into Low Value Payments

Debit cards accepted on
Italian, French, Croatian,
and Polish Tollways since
2009
1
Tollroads

Parking (garage and on-
street) debit card solution 2 Parking
now available

First transit PayPass 3 Transit
contactless transit
solution introduced in
Turkey (Asya Bank) 4
e-purse
National e-purse
migration plans to
Maestro/MC PayPass
implementing

BANK
©2010 MasterCard. Page 22
ADVANCING GROWTH. ADVANCING COMMERCE. Proprietary and Confidential

MasterCard Low Value Payments strategy is
developed around 3 pillars addressing the
core needs of all stakeholders
Need to drive profitability Mixed view on the cost of cash
Increase POS use Think of cards as just more costs
Develop acceptance for new Acquirers Retailers Believe card transactions are
card sectors slower than cash

Believe LVP transactions are Perceive cash as free
loss making
Issuers Consumers Expect ubiquitous acceptance
Free-cash trap
Believe card transactions are
ATM to POS migration slower than cash
requires time and investments

1. New Technology & 2. Lower Cost 3. Marketing &
Solutions Model Awareness
Increase speed and Lower end-to-end Change Consumers / Retailers
acceptance transaction cost attitude towards cash vs. debit

There is no one-solution in the LVP space, but a combination of solutions
that must fit each stakeholder and offer an improvement over cash
©2010 MasterCard.

MasterCard view of the opportunity for Low
Value Payments

The key LVP objectives:
Transaction

Debit LVP
Today Opportunity
Increase card usage by:
Value

extending the acceptance of
debit cards at
Existing New Merchant categories
Facilitating card
Merchants A
payments at existing
Supermarkets debit card accepting
ATV Petrol merchants
Taxis, Doctors, Butchery,
Groceries Bakery
Current Fast-Food Expanding to new
Break-even Movies B B
Point
acceptance channels by
leveraging the latest
Future technologies
Break-even
Point
A Provide an attractive
solution for all stakeholders
that is a faster, more secure,
more convenient and a more
economic equivalent to cash
Acceptance Locations and bring the barrier down

©2010 MasterCard.

Migration from e-purse to mobile/contactless
A cost-effective way out of the cash trap
and long-term vision for Low Value Payments

Mobile Integrated NFC
PayPass

PayPass
Mobile tag

Mobile
Info
EMV chip
EMV Chip with PayPass
Front-End Technology Magstripe
Dip & Go
No CVM
(customer experience)

Pre-Load/ Online/offline/ Auto top-up
Structural Online only e-purse chip pre-auth. e-purse
(Back-end)

©2010 MasterCard. Page 25

One card to unlock the door to simpler cash free


Towards cash free day

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