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The Payment Eco-System and Building Sustainable Value


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Marek Forysiak, CEO, Russlavbank, Russia

Published in: Economy & Finance, Business
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The Payment Eco-System and Building Sustainable Value

  1. 1. CIS 12 PresentationJune , 2013Marek ForysiakChief Executive Officer
  2. 2. Your money. You earn it. You spend and save it.You send it to loved ones. Contact™ wants to helpconnect people and their financial transactions.No matter where you are in the world, Contact™ will be thereto make your payment, your transfer and to provide you withgreater access to financial products and services.Our roots are Russian and as such, we will remain focused onserving the needs of Russian and CIS communities first.At the same time, we are a global franchise operating in over100 countries and accept that responsibility withoutcompromise.Contact us and let us connect your financial world.Our Vision3
  3. 3. The consumer is more and more mobile and Contact™will set a new standard in comprehensive paymentsolutions.The aim for Contact™ is to create a balance betweenphysical and electronic access points for the customer,without compromising convenience or quality.Comprehensive Money Transfer SolutionsContact™ Global Reach“Our aim is to follow the customer”4
  4. 4. Contact™ was one of the pioneers in the Russianmoney transfer markets and maintains a number ofcompetitive advantages.At the core, Contact™ remains guided by 3 very simpleoperating principals; be accessible to the customer, havequick and simple processes and guarantee the safety of thesystem and the transaction.Competitive Advantages• Leading Russian and CIS network with long term banking agent relationships• Customer orientation towards higher value transaction• Quality focus• Full range of send and delivery options including cash and card• Extensive customer PAYMENTS “ECOSYSTEM”• Fully licensed and regulated by the Central Bank of Russia and member of the Depository Insurance System• Proven Management Team• Financial statements audited by PWC since 1996 changed to KPMG for 20115
  5. 5. Contact™ has developed one of the largest bankbased Agent network and today operates in over100 countries around the world.Market share is highly correlated with the number ofdistribution outlets. Contact™ has doubled the number ofagents in the past 12 month and will continue to expandamongst the banking segment, but also through its ownhighly effective cash points in Russia and through non-banking agents.In Russia, Contact has partnered with over 500 domesticbanking institutions providing an branch network exceeding8,000 locations. This makes Contact™ the 3rd largest bankbased distribution network in the country behind Sberbankand Russia Post.Leading Russian Money Transfer ProviderIn 2012, Contact™ was named the Number 1recognized money transfer brand in Russia forthe second year in a row.Top  10  Competitors  byDistribution  CapabilitiesProviderDistribution  Outlets RankingWestern  Union 386,000 1MoneyGram 207,000 2Unistream  (1) 200,000 3Contact 165,000 4Anelik 63,000 5Leader 30,000 6Golden  Crown 25,000 7Migom 15,000 8Blizt 10,000 9Bistri  Pozcta 7,000 10(1)  Unistream  includes  self-­‐service  KIOSKs  into  their  distribution  number.6
  6. 6. Global remittance volume is projected to increase from$483 billion to over $550 billion by 2013 driven largelyby the continued growth in migrant population.Global Remittance and Payments OpportunityContact™ is well positioned to continue andaccelerate growth within key corridors as well ascapturing market share from consolidation.$237$275$318$385$444$417$449$483$514$5502004 2005 2006 2007 2008 2009 2010 2011 2012 2013Market  Growth             16%      16%   16%   21%   15%   -­‐6%   8%   8%   7%   7%  Global Remittance Volume($ in Billions)Source: World Bank – December 2011Contact™ competitive advantages;1.  Accessibility and Convenience2.  Product Development3.  Local knowledge with Dominate Position4.  Reputation and Reliability5.  Regulatory (fully licensed commercial bank)7This represents person to person, cash to cash,cross-border remittance value ONLY and the GlobalPayments space exponentially greater. The GlobalAverage total cost for sending remittances, as per theWorld Bank (Mar-2013) was 9.05% or in value terms,almost $50 billion.
  7. 7. Evolving Landscape in RU & CIS Region8The remittance and payment industry has followed adevelopment path that can be clearly mapped bymarket circumstances over the past 10 years.Contact™ has participated during this developmentcontinuum and responded based on evolvingtechnologies and consumer behaviours.Pre-crisis, 2008 2009 - 2010 Pre-crisis Survivor, 20111.  Specialty providers, B to B focus;2.  Low level technology;3.  Few barriers for entry;4.  High availability of capital; and5. Little interest from Financial Institutions.1.  Capital flow limited;2.  Migrant movement curtailed;3.  Margin businesses under pressure;4.  Distribution outllets cut; and5. New interest from FIs and NON-Banks.1.  Renewed capital and migrant flows;2.  New demands from consumers, “pay as you go”3.  Technology and behavior convergence;4.  AVG Net Revenue still falling; and5. Competition now exists requiring DTC focus.Volume - ValueRemittance Rate
  8. 8. Our channel and product set has been established to maximize theefficiency of each customer and propensity to grow with Contact™.The continued focus on originating transactions through the bank agentchannel has resulted is a sustainable business model with a high correlation tovalue, this remains our core business. Near term we want to build newchannels for the other customer segments, largely focusing on non-migrants.Focused Customer Acquisition Approach9
  9. 9. Payments “ECO-SYSTEM”PaymentServicesValueCreatingProducts &ServicesAcquisition X-Sell/Up-SellTransaction CustomerLow Value High ValueThe Contact ECO-Systemstarts primarily with moneymovement transactionsIn 2013,Contact will process over22 million customer transactions,with an aggregate valueexceeding $8 billion.The Process is to converta transaction into acustomer.In so doing, creating longterm, sustainable value.bps. eWallet, enbled by Contact24 and a pre-paid card has increased the Average NetRevenue Yield per transaction from 51 basispoints to over 80 basis points and growing...
  10. 10. Money Transfer remains the CORE revenue product forContact™ as well as the platform for product extension.Over the past 18 months, Contact™ has been aggressivelydeveloping a comprehensive product portfolio, includingextension products such as Direct to Account Transfer,Payment Products, Pre-Paid Cards coupled with newcustomer transaction channels such as Online ElectronicWallets.Contact™ aims to address the needs of the market anddeliver innovative solutions that work, provide moreconvenience to the consumer and increases value.Product and Service SolutionsContact AccountContact™ Account launched in 2011• Direct to Account TransferContact PayContact™ Pay• Over 1,200 payment receivers integrated• Increasing to 20% of total volume in April, ‘12Contact™ Money Transfer launched in 1999• Over 50 million transactions processed worldwide•  At the end of 2012, the second largest regional remittance providerContact PrepaidContact™ Prepaid launched in 2012• Contact™ Visa Prepaid product• Phase 1 roll-out to RSB branchesContact 24Contact™ 24 launched in 2012• Full online self-service utility• Electronic WalletOpen NetworkContact™ Open Network by YE 2012• Reload Network for cash to card transactions• Pilot launch underway for RSB cards only11
  11. 11. By developing value added products and services, Contact™will focus on converting customer transactions into customerrelationships.The more often customers use the transactional fee based productsoffered by Contact™, the greater propensity exists to migrate thesame customers into longer term, value based relationships.Deliver Value from Cross Selling12
  12. 12. Response to the Evolution – Banking AlternativeMoneyMovemementseWalletPre paid CardsRewardsAdvancesThere has to be better, easier and moreefficient way to bank in Russia and thatwill be the aim of Contact Banking.Contact already serves millions ofresidents and non residents in Russia byhelping them move money. By taking anew approach to traditional banking,Contact will offer a new, more efficientbanking experience.1. Old Branch >> No branches2. Current Account >> eWallet3. Debit Card >> Pre Paid Card4. Deposit and Interest >> Rewards5. Loans and Credits >> AdvancesOLD approach NEW approachOur Target is to launch Contact Banking by the endof 2012 and grow the active customer base to over 1million by the end of 2014.13
  13. 13. Summary14Mobile technologies, mobile banking and mobilepayments are accelerating driven by rapid innovation inproduct and services combined with a consumerdemand that is yet to be fully understood.Non-bank participants in this payment ecosystem,both small and large, are at the center of how moneyis moved, better positioned to understand consumingbehavior and will play a stronger role in the industrytransformation.Alternative, non-bank participations are viewed as a threat by Banks…….why?•  New alternative providers are bigger, well-branded, profitable and control customer data;•  Alterative providers are attracting different segments (younger, under-banked, near-banked andthose simply looking for a better way to move money…faster, simplier and cheaper;•  Consumers around the world will continue to adopt alternative providers, leave traditional banks,so long at convenience, security and value requirements are achieved; and•  Alternative providers will take the lead in partnership discussions with Banks controlling therevenue streams and VALUE
  14. 14. Strong TechnologiesContact™ has made and continues to make significantinvestments in proprietary technologies to allow for seamlessintegration with partners and convenience to customers.In 2011, Contact™ developed and fully replaced the operationalfront end with it’s next generation application, Contact NG.Key Technology Vendors and PartnersIn 2012 we fully implemented ourautomated, self-service paymentsplatform,www.CONTACT24.com15
  15. 15. International rating agency Moodys Investors Service: Global rating scale,B3, outlook "stable“As of 11/01/2005 "RUSSLAVBANK" (JSC), is included in the register ofbanks participating in the federal deposit insurance system.Independent ISO 9001:2008 Certification valid until 07.27.2014 for qualitymanagement systems of Contact remittances and payments completed bythe international auditing firm Bureau VeritasMember of SWIFT Workers Remittances Users Group (WRUG), one ofonly several Russian banks fully certified for compliance with the SWIFTWorkers Remittances live servicesWinner of awards for the quality of Deutsche Bank settlements USD STPExcellence (2005-2009) and EUR STP Excellence (2009).Quality Orientation16
  16. 16. Grow and optimize customer acquisition networkExpand electronic channelsEstablished licensed Contact Money Transfer internationallyBuild Russian Pre Paid networkImplementation of CRM and DM to grow wallet shareDevelopment of alternative banking offer to under bankedStrategic Priorities17
  17. 17. Priority 1 – Grow and Optimize Agent NetworkThe world is getting smaller and Contact™ is building a globalnetwork to help individuals move money.The combination of banking and non-banking agents together withself-service terminals, Contact™ provides an enhanced andconvenient network to complete your financial transactions.Strategic Priority 1, Grow and Optimize Customer Acquisition NetworkIncrease the efficiency of the existing banking agent networkGrow the non-banking agent channel in Russia to capture greater share oforiginated transactionsExpansion of Contact™ Centers across Russia, to include an innovativefranchise modelExpand self-service terminal channelOver the past several years, Contact™ hasexpanded its domestic and internationalnetwork over 100% to now exceed over165,000 physical outlets in more than 100countries around the world. Our target is tocontinue our double digit growth rate intransaction volume from Russia and CIS.18
  18. 18. Priority 2 – Electronic ChannelsAnything – Anywhere – Anytime! Contact 24Contact™ in Q3/2011 launched a web-based paymentsolution supporting all forms of payments andtransfers – accessible at your fingertips and the convenienceof your home. Fund transfers via Wallet, Bank Card, Banktransfer. Keep track of your payment and transfer history.Generate templates and reminders for recurring paymentsand transfers. Manage your expenses.Our Target is to grow our alternative channel usage to10% of our total Russia SEND volume by 2014.19
  19. 19. Priority 3 – Contact InternationalNG Platform.GlobalMoneyTransferContact™ has a dominate position in the Russia and CISremittance business to serve as a global platform.The existing 165,000 agent network allows for cross borderremittances between over 100 countries around the world.Target is to double our global remittance volumefrom $5 to $10 billion by 2014 by expanding intoKEY sending corridors from the US, Europe andAsia.20
  20. 20. Priority 4 – Pre Paid CardsThere are millions of financially underservedconsumers in Russia with little access to financialservices.Contact ™ delivers the alternative to a traditionalbank account to this large consumer group in theform of Contact Pre Paid” and provides them withan entry point into the financial payment system.Contact Pre Paid is available to all Russian residentsregardless of age, employment or past credit history.ü  No Credit Check and No Interest Expense, ever!ü  Shop online, pay bills or use anywhere Mastercard orVisa debit cards are accepted.ü  Reload with cash at over 10,000 Contact Agent Locationü  Access cash at any ATMs nationwideü  Funds are insured by Depository Insurance AgencyopenContact™ Prepaid NetworkTarget is to convert existing banking agent network intothe largest Cash to Card reload Network in Russia andissue 2 million Pre paidcards by 201421
  21. 21. Priority 5 – Customer Centric ApproachProducts need to simple and relevant to the customers we serve. Themore we can sell to each customer, the more efficient our earnings.• Contact™ recognizes the needs of the unique customer segment weserve. We will continue to strengthen our core money movementproducts, but at the same time introduce those that enable our customergreater access to simple, secure and fair financial products.Strategic Priority 5, Develop Cross Sell Processes and Expansion ofRelationship Products•  Direct marketing to Contact customer base•  Introduction of pre-paid, card based products•  Movement of customers from pre-payment to credit•  Alternative domestic salary program based on wallet functionality•  Consumer to Merchant wallet based payment networkContact Customer Database Facts:1.  50 million transactions processed since 19992.  Over 4.8 million unique customer records3.  1.1 million new unique customers in 20114.  51% of customers have more than 1 transaction5.  350,000 active customers each monthTarget is to double the average net revenuegenerated from each active Contact customerin Russia by 2014.22