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Case Study and Sample Slides India: Prepaid Card Market

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The sample contains excerpts from a study conducted by Sutherland Global Services for a client. the sample may not contain all the pages of the original document. THIS sample has been prepared by Sutherland Global Services, Inc. or its associates or affiliates (“Sutherland Global Services�) exclusively as an illustrative sample only and is sent to authorized recipients solely for the purpose of evaluating Sutherland Global Services' support service capabilities. THIS sample should not be considered as an offer to sell, a solicitation to buy, or an endorsement or recommendation of any company. Sutherland Global Services does not guarantee the accuracy, completeness or other characteristics of the data / information of the report. This Sample may not be reproduced or distributed (in whole or in part) to any third party without the express prior permission of Sutherland Global Services. Sutherland Global Services may also have (or have had) arrangements with entities whereby Sutherland Global Services receives or is in receipt of information relating to the subject matter of this Sample that is confidential or proprietary to a third party, and hence may not be utilized. Accordingly, Sutherland Global Services may be in receipt of relevant information that is not reflected in this Sample.

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India Prepaid Card Market Client • The client is a consulting arm of leading payment gateway

Client Ask • The client mandated SGS to understand consumer prepaid card product landscape in India • The study was focused on key consumer prepaid card product categories: Open loop and closed loop. The categories further classified based on specific end-use (e.g. meal card, gift card, etc.)

Sutherland’s Solution • Identified consumer prepaid cards offered by the shortlisted issuers and drew a list • Categorized cards offered by each issuer into open loop and closed loop, and further classified them based on specific end-use (e.g. meal card, gift card, travel card, etc.) • Evaluated each consumer prepaid card under each category & sub-category based on their features & benefits, fees & charges and reach (acceptability of card across merchants and geographies) • Prepared a detailed excel rating model based on above-mentioned parameters and identified the most attractive card under each category; further evaluated customer acquisition strategies adopted by each of the shortlisted issuers • Prepared a MS PowerPoint presentation highlighting key findings of the study • The presentation also briefly covered broad market (demand-supply) trends and regulatory environment • Conduct three levels of quality checks: Self Review, Peer Review, Supervisor Review

• Benefits to the Client • Results/findings of the research study helped the client gain insights on the gaps in the consumer prepaid card offerings, and the relative performance of key consumer prepaid card issuers in India

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India Prepaid Card Market Summary India Prepaid Card Market Summary Parameter Cards in Circulation (mn) Number of Transactions (bn) Transaction Value (INR bn)

2005

2006

2007

2008

2009

CAGR (2005-2009)

Growth (2009)

2.0

2.5

3.2

4.0

4.9

24.8%

23.3%

22.0

30.5

39.8

51.2

65.5

31.4%

27.9%

2,167.8

2,720.1

3,474.0

4,339.0

5,324.1

25.2%

22.7%

Source: Euromonitor: Prepaid Cards India 2009 Report

Factors Impacting the Market • • • • • •

Prepaid card circulation increased at a compounded average growth (CAGR) of ~25% during 2005-2009 to reach 4.9 million cards in 2009. Approximately 38% of the adult population in India doesn’t have a bank account and hence are potential targets for prepaid cards Payroll cards dominate the prepaid card market in India with a 34% share, followed by travel card (24%), multi-purpose cards (22%), remittance card (14%), and other (6%) Payroll card market witnessed significant growth as Government and a number of private sector employers took efforts to push prepaid card as a channel for issuing payroll payments. Close to 1,000 companies in India are using Visa prepaid cards (reloadable) for payroll payments As the economy grew at over 8% during 2005-2009, an increasing number of Indians travelled abroad for business and leisure purposes. The convenience of prepaid card over cash became apparent and adoption increased. According to Axis Bank, their travel prepaid card customers loaded USD1 billion during April-May 2010 Remittance cards is another segment that has witnessed significant adoption. The fact that India is the largest recipient of remittances across the globe (having received USD52 billion in remittances in 2009) and has a large unbanked population worked in favor of this segment Intrex India with Itz Cash products is the first prepaid card player to enter the market in 2003. Intrex entered with Itz Cash card, a multipurpose prepaid card and subsequently gained popularity/adoption

Source: Euromonitor, VRL Financial News, * Business Standard, Sep 21,2010 Visa Survey on Prepaid Cards India.

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Prepaid Card Segments Rating Summary Personal Prepaid Card Segments - Overview Travel Card

Gift Card

# of Cards

12

9

# of Issuers

11

9

Bank VI

Bank VII

Bank VI Travel Card

Bank VII Gift Card

Personal Prepaid Card Segments - Overview

Bank VI

Bank V

Issuer Rated Best for Rates & Fees

Bank VIII

Bank VII

Issuer Rated Best for Rewards & Benefits

Bank VI

N.A.

Issuer Rated Best Best Card Issuer Rated Best for Features

Note: Best Issuers and Best Cards are identified based on the 5-point rating model that evaluates cards on Rates and Fees, Card Features and Rewards & Benefits offered

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Bank IX offers the best prepaid card products (only travel and gift cards sub-segments included) RANK

1

2

3

4

5

Bank I

Bank II

6



Bank III Bank IV Bank V

Bank VI

Bank VII

 

Bank VIII Bank IX

 

7

8



   

9

10

11

12

 

13

14



 

   

Bank X

Bank XI

Bank XII

 

Bank XIII

Bank XIV

Features

Rates & Fees

Rewards & Benefits

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 



Overall Ranking

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Key developments** in the India prepaid card market

First multi-purpose card (ITZCash Card) launched by Intrex India Axis Bank launches Visa Travel Currency prepaid card

2003

Oriental Bank of Commerce prepaid card launch

Corp Bank remit card launch

HDFC Bank gift card launch

SBI Yatra travel card launch

Kotak Mahindra gift card launch

2004

2005

ICICI Bank food card launch

2006

SBI VISA mobile Check option added

ICICI Bank reimbursement card launch

ITZ noQ utilities card launch

IOC fleet card for transporters launch

Intrex India: Claims 2.5 million active card users

RBI allows FOREX purchase via prepaid, debit, credit card

PIF India launch

RBI regulates prepaid card issuance

2007

Citi-Reliance Money Travel Card launch

2008

Yes Bank-JPM travel card launch Union Bank gift, payroll card launch CBDT* to monitor NBFC card transactions

2009

Rev Asia Pacific, Central Bank & MasterCard launch prepaid card ENS survey: Indians prefer cash while traveling

Axis Bank travel card customers load USD1 bn during AprilMay 2010 alone Karnataka Bank launches Student Card

2010

PNB launches Travel Card Karur Vyasa VISA travel card launch Collaboration of ECS, 3rd party S/W provider with MasterCard

MasterCard survey: Indians wary of plastic card

HDFC EMV prepaid card launch

RBI to allow prepaid limit up to INR50,000

Andhra Bank, BoI & Barclays plan entry

Source: Economic Times, The Hindu, Business Standard *CBDT: Central Board of Direct Taxes **Please note the developments covered in this slide are not exhaustive .

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Prepaid Card Trends Key Trends Credit-averse nature of Indians: A big plus for prepaid cards •

Indians typically prefer to avoid debt. Since prepaid cards were introduced in 2003, adoption rates have been quite high, which resulted in prepaid cards reaching over 4.9 million cards in circulation in 2009

Unlike credit cards, prepaid cards do not have any element of debt accumulation, which helped these cards grow in India during the initial period, particularly in the aftermath of the global financial crisis when debt was diligently avoided Many parents preferred prepaid cards for their children to provide their children with the convenience of financial cards while enabling parents to control their spending

Organizations now require RBI approval to introduce prepaid cards •

Rapid growth in prepaid cards caught the attention of the Reserve Bank of India (RBI), who decided that the segment had reached an adequate size to be regulated and hence introduced the Payment and Settlement Act in April 2009

• •

According to this legislation, organizations wishing to issue prepaid cards need authorization from the Reserve Bank of India Banks are allowed to issue open prepaid cards that can be used for cash withdrawals, while non-bank financial companies are only allowed to issue what the RBI refers to as semiclosed prepaid cards, which do not permit cash withdrawals but can be used for such transactions as utility payments. Examples of these include Itz Cash Card, Done Card and I Cash

Travel and remittances emerging as new segments to drive prepaid card adoption •

With more Indians traveling overseas and within India; travel prepaid cards have emerged as an easy and popular means of payment

According to IRCTC (Indian Railway Catering and Tourism Corporation), a subsidiary of Indian Railways that handles online ticketing operations, almost 30% of its online transactions are via prepaid cards. As per Visa's International prepaid products' Regional Director, Neel Nilakantan, over 40% of business travelers in India are using prepaid cards to pay for business expenses Another big opportunity for prepaid cards lies in the remittance segment, where non-resident Indians (NRIs) can load money onto the prepaid cards for use by their relatives and friends back home

• •

India’s second largest bank, ICICI Bank, launched the Money2India Remittance card to provide an easy means for consumers to receive remittances from NRIs. These cards are available at a value of INR 400 with a validity period of 10 years and offer attractive currency exchange rates

Source: Euromonitor, Business Standard, Sep 21, 2010 Visa Survey on Prepaid Cards India

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Prepaid Card Market Competitive Landscape Market Share of Key Players based on Prepaid Cards in Circulation (2008)

10.6% 32.6%

9.4% 8.6%

100%

Total

7.7%

Intrex India

Citigroup Inc

ICICI Bank Ltd HDFC Bank Ltd

6.7%

Axis Bank

6.3%

IDBI Bank Ltd

4.3%

13.9%

State Bank of India

Others

Itz Cash Card by Intrex India, launched in 2003, is India’s first prepaid cash card. Itz Cash cards can be purchased at approximately 100,000 locations across India and are accepted at over 3,000 merchants

Other non-banking financial companies (NBFCs) in the pre-paid cards market include Done Card and I Cash cards. These players, which made an entry after Itz Cash, have only small presence as they are focused on select regions. They are primarily emerging in the western region of the country

Remittance prepaid cards segment is dominated by large private and public banks, including ICICI Bank and SBI

Foreign travel cards is another segment that is dominated by banks. ICICI, SBI and Citibank are among the large banks having strong offerings in this segment

Gift cards is yet another segment where most banks are working towards establishing a strong foothold

Source: Secondary Research

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Prepaid Cards by Issuers Number of Prepaid Cards Issued By Sub-segment and Issuer

Number of Prepaid Cards Issued By Sub-segment and Issuer

Banks

Open-loop Travel

Gift

Annuity

Remittance

General Purpose

Utilities

Axis Bank

1

1

1

1

Central Bank of India

1

1

Citibank India

1

Corporation Bank

1

HDFC Bank

2

1

ICICI Bank

1

1

Intrex India

1

1

Oxigen Services

1

GI Technology Pvt. Ltd.

1

Done Card Utility Limited

1

IDBI Bank

Student

1

1

Karnataka Bank Karur Vysya Bank

1 1

Kotak Mahindra Bank Punjab National Bank

1

State Bank of India

1

Standard Chartered

1

Yes Bank

Source: Sutherland Prepaid Card Database

1 1

Union Bank of India

Non-Banks

Closed-loop

1

1 1

Majority of the prepaid cards issued by issuers offer either travel or gift cards

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Travel Cards: Features (by Issuer)

Number of Cards

Bank I

Bank II

Bank III

Bank IV

Bank V

1

1

1

1

2

Features # of Currencies Available

9

1

3

1

3–9

Replacement Card Provided with New Account

SMS Alert after Every Transaction

Bank VI Number of Cards

1

Bank VII

Bank VIII

Bank IX

Bank X

Bank XI

1

1

1

1

1 Features

# of Currencies Available

6

3

3

3

3

1

Replacement Card Provided with New Account

SMS Alert after Every Transaction

Most Attractive

Least Attractive

Source: Bank Website, Primary Research

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Thank You

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Product development india prepaid card market