Global Consumer Credit Development Learnings

1. Global Consumer Credit DevelopmentLearnings Evangelos Stefatos Senior Director Business Line Development Payment Card 2007 Kiev, Ukraine 7th June 2007

2. Discussion Topics • Global Consumer Lending • Country Segmentation • Learnings from Credit Leaders • Product and Industry Developments Around the World

3. Global Consumer Lending Environment • At the aggregate level, consumer lending and credit card industry expected to grow at similar rate as economic growth (personal disposable income). Key Observations 2006 Global Consumer Lending • Global consumer credit (including mortgage and non-mortgage credit) estimated at $22T, or around 90% of personal disposable income (PDI) and personal consumption expenditure (PCE) • Non-mortgage credit estimated at $6T, around 25% of PDI / PCE • Credit cards represent 25% of non-mortgage credit; the rest includes auto loans, retail financing, personal loans, etc. $24 T $22 T 2006 Figures (US $ in Trillion) $6 T $1.5 T PCE Consumer Credit Non-Mortgage Consumer Credit Credit Card Segmentation Sizing Estimate Source: Global Insight; Morgan Stanley

4. Regional Consumer Lending Environment • At the regional level, opportunity for growth of non-mortgage lending varies according to level of country maturity. Key Observations 2006 Non-Mortgage Regional Sizing • In mature countries like US, Canada, and UK, mortgage lending taking share away from non-mortgage due to ease of home refinancing (some consumers view their home equity as “ATM machines”). • In newly developed regions like Asia Pacific, penetration of non-mortgage credit is high as the growing upper-middle class consumers are very responsive to all forms of credit vehicles. 110% = Total Consumer Credit 95% 75% % of Disposable Income 40% 25% 25% = Non-Mortgage 20% 20% US / Canada Asia Pacific Europe Latin America Non-Mortgage Regional Sizing Source: Morgan Stanley

5. Credit Card Growth Opportunities • Opportunity exists to shift share from alternative consumer lending vehicles – especially in emerging countries. Credit Card Debt as % of Consumer Non-Mortgage Debt Global Average Source: Morgan Stanley (2002 Data); general purpose credit card receivables as % of all non-mortgage loans.

6. Discussion Topics • Global Consumer Lending • Country Segmentation • Learnings from Credit Leaders • Product and Industry Developments Around the World

7. Visa Credit RSV as % of PCE <2% 2-6% >6% Regional View of Visa Credit Business Large Variation Around the World Need an alternative way to compare development of credit environments

8. > $10K $2K to $10K Economic Development < $2K Personal Consumption Expenditure (PCE) per Capita Segmentation of Visa Business by Market Economic Development

9. Long Term High Potential Economies Visa Debit DevelopmentVisa Debit RSV as % PCE 2% 6% Economic Development 2% 6% Visa Credit DevelopmentVisa Credit RSV as % PCE < $2K PCE per Capita

10. Emerging Economies Visa Debit DevelopmentVisa Debit RSV as % PCE 2% 6% Economic Development 2% 6% $2K to $10K Visa Credit DevelopmentVisa Credit RSV as % PCE < $2K PCE per Capita

11. > $10K $2K to $10K < $2K Developed Economies Visa Debit DevelopmentVisa Debit RSV as % PCE 2% 6% Economic Development 2% 6% Visa Credit DevelopmentVisa Credit RSV as % PCE PCE per Capita

12. Credit Card Clustering Segmentation Criteria PCE per Capita Non-Mortgage Lending Credit Card % of NM Lending Credit card Acceptance Credit Risk Mgmt Marketing Portfolio Mgt • Sample Countries: US, UK, Canada, Australia, Taiwan Developed Credit • Sample Countries: Thailand, Turkey, Brazil, S. Africa, Mexico Emerging Credit • Sample Countries: Japan, Spain Established Charge • Sample Countries: France, Italy, Germany Established Debit Long Term • Sample Countries: China, India, Indonesia, Egypt, Russia* Criteria • PCE per capita bands: <$2K, $2-$10K, >$10K • Non-mortgage credit of PDI bands: >20%, 5-20%, <5% • Credit card share of non-mortgage bands: >20%, 10-20%, <10% • Merchant acceptance of credit cards • Credit bureau and scoring • UW, line assign, collections • Prospect / customer data mining • Pricing, products, distribution • Active PM

13. Developed Credit Environment “Current State” Opportunity Areas • Regulatory pressure on pricing • Slower growth in prime segment Developed Credit • Mass affluent products • Selective subprime / niche segments • Merchant value proposition Merchant Value Proposition Lending Infrastructure Responsible Lending Product Innovations Common Themes and Opportunities Refine all aspects of consumer lending proposition to optimize value to merchants, consumers, and issuers.

14. Opportunities in Credit Card Environment “Current State” Opportunity Areas • Regulatory pressure on pricing • Slower growth in prime segment Developed Credit • Mass affluent products • Selective subprime / niche segments • Merchant value proposition Emerging Credit • Prime segment already penetrated • Large un-banked & subprime consumers • Some acceptance challenges • Credit risk management, especially subprime • Product differentiation • Portfolio management Merchant Acceptance Lending Infrastructure Portfolio Management Product Development Common Themes and Opportunities Strengthen fundamentals of consumer lending to improve product economics and deepen market reach

15. Income and consumer spending in Ukraine have been rising over the last few years Income and consumer spending increases are favorable for growth in demand for credit Yearly Average Nominal Wages of Persons Employed in the Ukrainian Economy (UAH) Yearly Nominal Consumer Spend per Capita (UAH) Source: National Bank of Ukraine, as of May 2007 Source: Planet Retail, as of May 2007

16. Discussion Topics • Global Consumer Lending • Country Segmentation • Learnings from Credit Leaders • Product and Industry Developments Around the World

17. Developed credit markets have very high RSV/CSV ratios in common Increasing credit card usage at POS is correlated with sustainable credit card growth Credit RSV/CSV Ratio Credit Penetration of PCE Source: RSV/ CSV from Visa Operating Certificates, 4QE Q42006 and subject to change; PCE from Global Insight, 2005

18. Proposition must remain valuable through Account Life Cycle Retention Usage Activation Acquisition Usage Start Using Get Use more Keep Time in months 0 1-3 6-12 Market Management Risk Management Prospect Risk and Demographic Market Strategy Acquisition Value Proposition Portfolio Management Reliable Information Systems Account Level Performance Tracking Risk Management Value Optimization Tools and Strategy Market Partners Account Mgt Value Proposition Product Potential Optimized with Discrete Streams (e.g. credit, debit, prepaid)

19. Discrete Products Serve Discrete Customer Needs and Market Conditions SUFFICIENT MARKET INFORMATION CREDIT DEBIT OWNFUNDS BANK FUNDS Prepaid NO MARKET INFORMATION

20. Robust and complete information structures outside and inside the bank are fundamental to healthy credit growth • Market • Efficient risk management • Ability to reach deeper segments • Better segmentation and targeting • Better estimation of overall prospect risk through positive and negative information sharing • Optimization of credit extension • Prevention of market-wide risk issues • Bank • Cost efficient and reliable account management • Better segmentation and product assignment • Optimization of Marketing campaigns • More accurate new and existing customer risk management • Product strategy support by correct economics

21. 35000 5.00% 30000 4.50% 25000 20000 4.00% 15000 3.50% 10000 5000 3.00% Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 The importance of sharing and using positive and negative information – the case of the UK in 2005 Charge-offs as % ofoutstandings Number of IVAs • “A PwC study of 1257 IVAs registered in July 2005 reported that: • Insolvent individuals had, on average, taken out 11 credit cards and other types of unsecured loan • The total average debt was around GBP 60,000, or 3-4 times gross annual income • 75% of insolvencies were caused by living above means” Source: Precious Plastic 2006, Consumer Credit in the UK, PriceWaterhouseCoopers 2006

22. Discussion Topics • Global Consumer Lending • Country Segmentation • Learnings from Credit Leaders • Product and Industry Developments Around the World

23. Lending Infrastructure – UK Example Credit Bureaux in UK Description • UK market experiencing increased credit losses as a result of high consumer debt service burden • UK already has three advanced credit bureaux providing positive & negative credit history • Four major UK issuers agreed to share additional cardholder data to improve credit risk assessment and portfolio management • New field include: amount of purchases, cash advances, and payments; changes to credit lines; bounced cheques; number of authorized users UK Credit Bureaux will have the most comprehensive data fields in the world Responsible Lending, Optimum Credit Allocation and Risk Management

24. Lending Infrastructure – Korea Example Credit Bureau Development in Korea Description • Korea market experienced severe credit loss crisis in 2002-2003, following a period of exceptional growth in credit card lending • Visa Korea demonstrated industry leadership by developing a roadmap to migrate Korea’s credit bureau system from sharing “negative only” to sharing both “negative and positive” information. • Extensive research to compare credit bureau systems in other Asian countries (Singapore, Thailand, Australia, Hong Kong) and the United States Responsible Lending, Optimum Credit Allocation and Risk Management

25. Responsible Lending – US Example Money Choices in US Description • Visa USA developed “MoneyChoices” – an internet based consumer education program • Integrated by Member banks through collections and delinquency prevention strategies • Enhance consumers’ understanding of credit and general financial information • Improve financial health to avoid delinquency, bankruptcy and charge-offs. Responsible Lending, Consumer Education

26. Product Innovations – UK Example Payment Rate Incentives in UK Description • Launched in October 2005, Barclaycard Flexi-Rate encourages cardholders to repay credit card balances more quickly • APR varies based on payment rate: • 9.9% APR (payment > 10% balance); • 12.9% (5% < payment < 10%) • 16.9% (2% min < payment < 5%) • Strong PR and consumer value in current UK environment, without giving up too much profitability • Another way of implementing risk-based pricing  those who can afford to pay more are generally lower risk anyway Barclaycard “Flexi-Card” Responsible Lending, Budgeting, Customer Empowerment

27. Merchant Value Proposition – US Example The Visa Incentive Network (VIN) is a robust platform that enables Merchant partners to deliver value to Visa consumer credit cardholders Visa Incentive Network (VIN) in US All-party value, Loyalty, New Customers

28. Portfolio Management – Brazil Example Private Label Conversion in Brazil Description • Private label cards in emerging credit environments tend to target growing middle class consumers who need financing for big ticket household items • Consumer finance specialists dominate this segment by mastering credit risk management and retailer distribution channel • Large global opportunity to convert private label credit card to Visa –successful conversion case studies seen in US, Europe, AP, and LAC • Example – C&A Brazil had 12 million private label cards (targeting segments C/C- segment); average credit line of US$150; decision to convert to Visa to grow spending and revolving Over 1 million Visa accounts from conversion of C&A private label portfolio! Reaching New Segments, Expand Credit Potential

29. Product Innovations – Taiwan Example Platinum Cards for Women in Taiwan Description • Targeting women • Business executives; entrepreneurs in 30’s to 40’s; high income earners • Wide Array of Benefits • Complimentary VIP club memberships (Howard Plaza) • Preferential discounts at selected merchants • Complimentary airport parking, 24-hour roadside assistance, annual vehicle servicing • Free Business Class upgrade on local carrier Headline : “Rose Platinum Ladies Love And Know How To Be Pampered.” Body copy : “Taishin Platinum Lady’s Card treats its women the way they deserve.” Affinity, Segmentation

30. Product Innovations – Spain Example Spain Leader in Mass Customization Description • La Caixa is leader in product customization and design • Focus on deep customer segmentation and multi-segment strategy oiptimization • Strength in customer lifecycle relationship management • Multiple and differentiated products • Unique card designs Affinity, Segmentation

31. Portfolio Management – Turkey Example Bonus Card in Turkey Description • Europe’s largest multi-branded credit card program • Launched in 2000, flexible and easy to use EMV-chip based rewards program • Multi-branded revolving credit card with over 1000 merchant partners in single rewards pool • Sophisticated CRM and rewards system – cash back pool, installment, discounts • Over 4 million credit cards (20% market share in Turkey) Efficient Account Management, Rewards, Security

32. Multi Segment Co-brand– Germany Example Description LandesBank X-box Visa • Co-brand product set with Microsoft Xbox tapping a new youth segment for the bank • Xbox Visa Premium – Embossed, floor limit card – instalment • Xbox Young – Unembossed, managed credit line • Xbox Prepaid – Unembossed, reloadable no credit line Results • 77% of cards issued as prepaid • 60% of cardholders aged 18-25 • New revenue stream/market • Basis for future cross-sales Empowering repeat use, Segmentation, Serving unbanked segments

33. Product Development – México Example Installment Cards in Mexico Description • Leading Visa issuer in México launched new revolving credit card product • Targeting entry level (C / C-) segments • Credit lines of ~US$300 to $500 (about equal to monthly income) • Fixed monthly payment – minimum payment set at 10% of credit line • Translates to higher percentage of O/S balances (typically 5-8% in México) • Customer can choose to pay in full (no prepayment penalty) • Domestic use only; basic card benefits • Promise to review account for future upgrade (higher credit lines, international acceptance, more card benefits) Tarjeta Congelada (“Frozen Card”) Responsible Lending, Reaching “Deeper” Segments

34. Product Innovation and Cross-selling – Philippines Example Description Loan Disbursement - Philippines Value Proposition • Bill Pmt, Fund Transfer, Net / Phone Banking • Loan reload once loan is at least 50% paid • Convenience, choice and control Bank Benefits • Back-office and front-office cost savings • Check handling cost savings • Interest income from float or unused loan • Revenue streams - POS, ATM fees, etc. • Cross-selling • Customer retention and extended account relationship Results • 100,000 cards issued • 92% of personal loans disbursed this way Chinatrust Loan Combi card Behavior Change, Retention, Convenience

35. Dual Line Private Label / Gen. Purpose US Example Dual Line Cobrand - US Description • Targeted to retailers with private label portfolios • Suitable for home furnishing and other big ticket financing • Two distinct revolving lines of credit • Private label (percentage of total line) • Visa general purpose card • One billing statement with detailed transactions for both lines. • Potential for differential rates and features • One monthly payment for both accounts • Allows retailers to ensure there will be a portion of line available for purchases in-store Wells Fargo / Pella Dual Card Affinity, Convenience, Enhancing POS Usage

36. Multi-product Co-brand– US Example Combi-product Innovation - US Description • Visa and Starbucks Card functionality • “Closed-loop” prepaid card, used to buy Starbucks products • Visa general purpose credit card used in Starbucks and everywhere else • Cash reloads from credit to prepaid card • 3% back on Visa auto-reload purchases • 1% Starbucks Duetto dollars back, on all Visa purchases • 40% higher average reloads on Duetto than on Starbucks prepaid-only • 58% percent of cardholders say will buy more Starbucks products with Duetto • 47% of Duetto cardholders have an improved image of Starbucks Starbucks Duetto Credit/Prepaid Card Affinity, Enhancing POS Usage

37. Instant Issuance Co-brand– Peru Example Mall instant issuance - Peru Description • Visa Co-brand program launched in shopping mall to compete directly with Ripley and Falabella (anchor stores with strong Private Label programs) • Bank developed process to approve and deliver Visa cards (Embossed Visa Flag) in 20 minutes. • “Fill out the application, go shopping and come back in 20 minutes” • Sales pitch: “6 months with no interest for 1st purchase today” • Sales module in food court and promoters along the mall • Instant prize through a game with credit card application • Results: 10,000 cards in first 3 months and delivering 100 instant cards daily Megaplaza Interbank Visa Credit Card Enhancing POS Usage, Instant Gratification of POS Demand

38. In Summary Long-term success in credit requires Overall • The Ukraine economy is growing and demand for credit is expected to continue to increase • Products will get more sophisticated and credit consumers will only get savvier and more demanding • Demands on banks for efficient and informed risk management will only increase as consumer credit exposure increases • Positive and negative market information sharing and use • Robust information systems in and out of the bank • Discrete product offerings and product reporting that allow products to reach full potential • Consumer propositions that maintain value and appeal • Strategies aimed at encouraging RSV spend

39. Thank you