Visa has identified Latin
America’s emerging cards markets as a major opportunity for driving
transactions onto its network. Marketing efforts in the region
include helping banks penetrate unbanked segments, migrating
remittance traffic from cash to prepaid cards and tapping affluent
customers. Robin Arnfield reports.

 

table showing Visa card payments volume growth in 2010 in Latin AmericaBoth Visa
and MasterCard have a big focus on Latin America, because of the
region’s demographics, the sheer numbers of people and low card
penetration levels,” says Ali Raza, executive vice-president at
US-based consultancy Speer & Associates.

“Latin American countries are
cash-based economies that are transitioning to cards, while their
governments are working to bring more people into the formal
economy.”

Visa has a legacy advantage in that
it enjoys strong brand recognition in Latin America.

“There is a fair amount of brand
consciousness in Latin America, as demonstrated by the appetite for
designer accessories such as Louis Vuitton handbags,” he says.
“Visa is very active in Latin America’s mass media through
sponsorship and advertising.”

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Vai de Visa

An example of Visa Latin America
and Caribbean’s (LAC) advertising is the Vai de Visa (Go with Visa)
campaign in Brazil.

“Visa cardholders register their
card with Vai de Visa, make a purchase, and are eligible to win
prizes such as property or prepaid cards loaded with BRL10,000
[$6,265],” says Ruben Osta, Visa Brazil’s general manager.

“The ads are a hit on YouTube and
are considered funny because they use a mariachi group that sings
to anyone paying with cash. If Brazilian merchants don’t have
change, they give consumers candy, which people hate. So they sing:
‘Candy as change, how sad.’”

Visa LAC is heavily involved in
football promotions such as its sponsorship of Mexico’s national
team, as well as FIFA-related marketing across the region in the
run-up to 2014 FIFA World Cup in Rio de Janeiro.

As the exclusive financial services
sponsor for FIFA until 2014, Visa is offering its customers
priority access to tickets for the 2011 FIFA Under-20 World Cup in
Colombia.

E-commerce promotions by Visa LAC
include a deal with freight forwarder Skybox, enabling Latin
American Visa cardholders to shop at US websites that don’t ship
outside the US; and an alliance with discount deals website Groupon
offering Visa cardholders special rates on tickets.

 

Affluent
cardholders

Visa says its total LAC payments
volume across all card types grew by 23.2% year-on-year to $270bn
in 2010. Visa also saw “considerable growth” in Visa Gold, Visa
Signature, Visa Platinum and Visa Infinite credit card volumes in
the region as a result of its promotions targeting affluent
cardholders.

“The upscale market is very
important in Latin America,” says Raza. “The Visa Luxury Hotel
Collection is a good example of how to target affluent cardholders
– those who travel and have high spending levels, and are therefore
more profitable customers for banks.”

Launched in January 2011, the Visa
Luxury Hotel Collection offers cardholders access to perks such as
the best available room rate, VIP guest status and free valet
parking.

Unlike the US, where the difference
between different credit card categories is blurred, segmentation
is still very important in Latin America for higher and lower-end
cards.

“The Latin American high-net-worth
and mass-affluent consumer segments are expanding, and Amex, Visa
and MasterCard all want to tap into them,” says Raza.

“However, Amex occupies a very
strong position in the Latin American affluent card market, and
neither Visa nor MasterCard are as important in this segment.”

 

Mexico and
Brazil

“Two areas where Visa Mexico is
concentrating its efforts are the affluent market and the SME
sector,” says Eduardo Coello, head of Visa Mexico.

“We are working with all the
country’s banks to make affluent card products available,” he says.
“Benefits such as concierge services and travel insurance have
helped Visa Mexico achieve a high growth rate starting from almost
zero in the affluent cardholder segment.”

A TV campaign to be launched this
summer will further help Visa Mexico promote its Visa Gold,
Platinum and Infinite affluent cards – a programme that launched
five years ago.

Osta says Brazil’s affluent market
has grown due to the strength of the country’s economy.

“Visa Brazil offers Visa Infinite
Experience, which provides special events for affluent cardholders
involving upscale brands such as BMW and Chivas Regal,” he says.
“We organise events with BMW where the cardholder is able to do a
test drive on a speedway to simulate being in a race.”

 

Encouraging card
transactions

Box showing characteristics of remittance recipients“Visa is very big
in debit in Latin America, especially in Brazil,” says Raza.

“But, although there are a lot of
Visa debit cards in issue, they are mostly used as ATM cards. There
is a big opportunity for Visa to persuade its debit cardholders to
use debit for purchases at the point of sale.”

According to Luis Peña, head of
HSBC Mexico, only 12% of Mexican debit card transactions are for
POS purchases, with the remainder being for ATM withdrawals.

“Around 22% of all Brazilian
consumer spending is via credit or debit cards, with cash and
cheques accounting for the balance,” says Osta.

Raza says Visa is working with
Latin American credit card issuers in two areas.

“Visa is helping the big banks sign
up more credit cardholders,” he says. “Secondly, it is working with
banks on credit card account management.

“This includes building transaction
volumes by persuading credit cardholders to use their cards for
transactions such as paying bills they previously paid by cheque;
helping issuers to identify their more profitable cardholders; and
enhancing their risk management systems.

“Visa is also looking at
opportunities to provide outsourced processing services to Latin
American issuers and acquirers.”

To promote card usage at the POS,
Visa Mexico is working with banks and the government to increase
the number of POS terminals installed in Mexico, Coello says.

“Getting consumers to use cards
depends on increasing merchant acceptance,” he notes.

Visa is also collaborating with the
government to promote the use of POS terminals for depositing and
withdrawing money from accounts at any Mexican bank as well as for
bill payment and mobile top-up.

Such agent-based banking services
are very common in Brazil, where banks supplement their branch
networks through partnerships with retailers.

“I expect 15,000 POS terminals with
expanded functionality to be available by the end of 2012 in
Mexico,” Coello says.

 

SMEs

“In Latin America, small business
credit card markets are lagging several years behind consumer cards
markets,” says Raza. “However, there is huge potential in SME
cards.”

“Visa started to promote cards to
SMEs in Mexico four years ago,” says Coello. “We offer SME cards
with all the major banks but the number of SME cards in issue is
very low.

“To encourage SME owners to use
business credit cards, we have developed SME rewards programmes
that match the rewards available on personal credit cards.”

As in most Mexican banks, SME cards
were managed by the consumer cards business, Visa had to set up a
special sales team to work with the banks. The team helps them to
understand the SME market and create a separate dedicated SME cards
operation.

In Brazil, Visa has seen an gap to
develop business credit cards for niche markets.

“A third [34%] of Brazil’s GDP is
connected to agribusiness,” says Osta. “We offer a specific card
for farmers called Visa Agri, which gives them access to various
lines of credit from the government and from banks.

“We offer Visa Cargo for the road
haulage business, a market which is worth BRL85bn. The card is
designed to replace the paper vouchers which transportation
companies give truckers to pay their expenses and salaries.”

Visa Cargo cardholders can use
their cards to build up a credit record, which helps them obtain
bank loans. Cardholders can also obtain additional Visa Cargo cards
on their account for family members.

 

Prepaid

Coello and Osta see prepaid cards
as a very important play for Visa in Latin America.

“There is a great opportunity for
Visa to help the Mexican government migrate all its welfare
programmes onto prepaid cards,” Coello says.

“Prepaid cards are also a huge help
in bringing people into the banking system. But once newly-banked
consumers gain access to credit cards, they need guidance on how to
handle their cards. Visa Mexico offers financial education
programmes explaining how to avoid credit card debt.”

Visa is a major player in prepaid
cards in Brazil. Since 2003, it has operated the Visa Vale
programme, enabling employers to deposit food related benefits onto
prepaid cards. Visa Vale is issued by 70,000 Brazilian firms to
3.2m employees.

Visa offers Visa Travel Money
prepaid cards with all the major Brazilian banks, says Osta.

“In June 2011, we launched our
first Brazilian general-purpose reloadable [GPR] prepaid card,
Mundo Livre [Free World], with prepaid card issuer Banco
Rendimento,” he says. “We will be launching a range of GPR prepaid
cards with Brazilian banks that can be used for general purchases
and for cellphone airtime top-up.”

 

Remittances

Visa launched Visa Giro (transfer)
prepaid cards and debit cards in 2002 to remittance recipients in
Latin America, for many of whom Visa Giro is their first bank card.
Visa Giro is available in 10 countries including Mexico, the
Dominican Republic, Guatemala, Peru, and El Salvador. Currently,
Visa operates 19 Visa Giro programmes in the region.

With Visa Giro, the sender
initiates a transfer at an agent’s office and the funds are
remitted to a bank in the destination country. The recipient opts
to have these funds loaded onto a Visa Giro card and has future
transfers routed direct to their Visa Giro card without having to
visit the bank.

Visa Giro can also be used as a
savings vehicle, enabling cardholders to transfer remittances
direct to their savings account.

In June, Visa published the results
of a survey of remittance recipients including Visa Giro
cardholders in Mexico, Guatemala and El Salvador. These three
countries received $28.94bn in remittances in 2010 – 50% of the
total volume of funds remitted to LAC last year.

Visa’s study found 22% of Visa Giro
users in Mexico and 26% in Central America use their card to buy
food and medicines and to pay for services. However, purchase
volumes are low, accounting for 6% of Visa Giro cardholders’
remittances in Mexico and 14% in Central America.

The majority of Visa Giro users
withdraw their remittances from ATMs and pay for purchases and
utilities by cash, partly due to habit and also because they are
unaware they can use the card to make bill payments.

Only half (48%) of Visa Giro
cardholders use their cards to receive all their remittances,
according to Visa.

Visa Giro-issuing banks are able to
sell additional products such as savings accounts and credit cards
to Visa Giro cardholders, Visa says.

“After Visa Giro cardholders start
using their remittance cards, their access to credit cards and
debit cards other than Visa Giro increases,” Visa’s survey says.
“Also, around 30% of Visa Giro users save a portion of the funds
they receive.”

In Mexico, 8% of Visa Giro users
have open-loop credit cards, 7% have debit cards other than Visa
Giro and 10% have store cards.

In Central America, 16% of Visa Giro users have open-loop credit
cards, 12% have debit cards other than Visa Giro and 28% have store
cards.