CEO's statement

One of our strategic objectives is to displace all other means of payment. So, clearly, point of sale (POS) activity is one of our most important business indicators – and this is where we made some of the most impressive gains. Overall, the value of point of sale spending increased by 12.7 per cent, to fall just short of €1 trillion.

“The value of POS spending increased by 12.7%”

As people use Visa for more of their everyday spending, average transaction values do of course drop, and this means that the number of point of sale transactions grew even more impressively.

During 2010, this figure increased by an impressive 14.2 per cent, to exceed 19.5 billion transactions. This is the strongest growth we have seen since 2005 – at a time when our business was less than two thirds the size that it is today.

Many of our members also chose to invest in the issuance of more Visa and V PAY cards. With a net gain of almost 27.5 million cards, growth exceeded seven per cent, representing more than 75,000 additional cards issued every single day of the year. In both relative and absolute terms, this is also the highest rate of growth we have seen for several years.

The level of growth achieved in 2010 exceeded expectations. We knew the proposition of secure, convenient cashless payments remained compelling. We also knew that our low-cost business model was bringing significant value to our members. But we had assumed that the uncertain economic climate would hamper growth, and we budgeted accordingly.

In the event, faster than expected growth combined with disciplined cost control led to a year-end budget surplus of more than €150 million. As Visa Europe is a membership association, the board agreed that we should waive €157.5 million of fees to our members by way of a reimbursement after the year end. At the same time, many of our members are directly benefiting from the new system of pricing that was put into place during 2009, and the flexible system of rebates this enables.

In spelling out its expectations for the new SEPA environment, the European Central Bank is calling on Europe’s banking community to favour lean, efficient, low-cost payment systems. At Visa Europe, we have shown that we offer by far the lowest fees of any equivalent SEPA-compliant payment system.

For me, one of the crowning achievements of the year was the full migration to the new Visa Europe Clearing and Settlement Service (VECSS) which complements the Visa Europe Authorisation Service.

I think it is important to recognise the sheer scale of this undertaking. Over six years, we have invested more than €500 million in our processing services alone. We have built two identical, state of the art platforms and installed them in two data centres. We have managed the technical migration of all Visa Europe members to these platforms. We have also recruited a team of more than 670 technology professionals.

In doing so, we have created the only ‘made-for-SEPA’ processing service, which combines unprecedented levels of speed, capacity, security and capability. As well as delivering a state of the art, highly cost-effective inter-bank processing service, this enables us to create many new value-added processing services.

Many of our recent innovations, such as our Real Time Scoring fraud detection solution, our cardholder loyalty proposition and our Visa Alerts text messaging service are based on this processing capability.

Against this background, growth of our processing business was particularly strong. We processed 9.3 billion transactions, which was 28 per cent up on the previous year. Also our cross-border processing business was supplemented by our domestic processing services in a total of 19 countries.

During 2010, the interest in innovation in the payments market has definitely intensified.

For example, the year has been punctuated by a continual series of announcements about new payment ventures and initiatives, many of which are directly related to the opportunity for contactless and mobile payments.

It must be recognised that, once new initiatives such as these gain traction, they will move incredibly quickly. This is why we are absolutely determined to protect the long-term relevance of our members’ payments business and the strength of the Visa Europe franchise.

As a membership association, our collective approach reduces the risks and the costs of innovation for our members. Through our decision-making forums we can also broker and co-ordinate the activity of many different participants – catalysing big, market-moving initiatives.

Several of our innovations are highlighted in the report, including our continued progress with V PAY, the progressive rollout of Visa payWave contactless payments, and the integration of mobile devices into the payments value chain.

In April 2010 we finally reached an agreement with the European Commission on the interchange fee on immediate debit cards. On the basis of this agreement, a fee of 0.2 per cent was agreed for cross-border immediate debit card transactions. Importantly, what was agreed was a methodology for setting the right fee level (based on the so called ‘merchant indifference test’). The European Commission has accepted that, to apply this methodology correctly, everyone needs a much better understanding of the true costs of cash. Regarding immediate debit, if the cost studies confirm that the prevailing cross-border rate of 0.2 per cent is too low, there is scope to revisit it.

With regards to deferred debit and credit, we still have the opportunity to convince the European Commission that the true comparator for credit is not cash and therefore under the merchant indifference methodology these programmes warrant a different comparator. In the meantime, we can continue to apply our prevailing rate of 0.61 per cent.

This settlement therefore brings us much closer to a sustainable long-term solution with the regulators, something Visa Europe welcomes. It gives individual members much more economic certainty, and it gives the wider payment industry much more legal certainty.

“our low-cost business model brings significant value to all stakeholders”

Another regulatory matter relates to the repeated calls, from both the European Central Bank and the European Commission, for the creation of at least one more payment system.

Our position is clear. Through our constitution, our systems and our pricing, we feel we have already met the requirements as set out by the European Central Bank and the European Commission, for a truly European payment system. We are always eager to compete, and believe that banks should be allowed to make their own decisions, based on business and marketing logic.

Ultimately, we operate on behalf of the European payments market. We are fully committed to the four party payment model. The dynamic nature of this model ensures that every Visa transaction must bring tangible benefits to each one of these four parties – namely the cardholder, the issuer, the acquirer and the retailer.

Finally, I should emphasise that our success this year – or any year – would not have been possible without the continued support of all participants in the Visa Europe payment system.

I want to thank our employees, our board of directors, our member banks, the retailers that accept Visa – and, of course, the hundreds of millions of European consumers who use Visa.

Together we have created a European system which enables commerce and delivers unequalled levels of convenience, security and efficiency to all.