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TRANSCRIPT
AGENDA
• China Today
• The Chinese Consumer
• About UnionPay ▫ Business Overview
▫ E-Commerce Products Overview
• Questions
Population
Over the past three decades, since the introduction of reforms, China has been an economic powerhouse charging ahead. Here are some interesting facts
Approximately 1.4 billion people live in China That’s about 20% of the world population and 4.5 X size of US
Youth
Second to only India, China has a youth population (10-24 years) of 269 million
At 269 mm the Chinese youth form about 22% of its population. (that’s more than the combined populations of the UK, France, Germany and Italy)
Economy
China’s economy has been growing at 9 to 10% on average over the last 30 years
China is now the 2nd largest economy, having overtaken Japan in 2011
Despite a slowdown, China still is
the fastest growing major economy in the world
Economy
30 years ago, all businesses were controlled by the state to a certain degree. Today, non-state owned companies account for 70% of the GDP
China is now the worlds largest manufacturing country by output. Fortune magazine’s latest rankings of the worlds largest companies includes 2 US firms in the top 10
China has three
Luxury
By 2020 China will account for 19% of global demand for luxury items
China is already LV’s largest market accounting for 15% of global sales The average Chinese millionaire is only 39. The
country already has 2.9 million of them
Different regions have developed at different rates
Distinctly different spending habits
Rising consumption of luxury goods
Evolving Landscape
Chinese consumers’ shopping habits have changed dramatically as incomes have risen and new products and concepts have entered the China market.
Source: CBR, McKinsey, Bain, etc.
The luxury market is undergoing a fundamental shift, brought on by evolving customer
dynamics, an influx of new, emerging luxury labels, and an economic slow-down. As a
result, luxury brands in China must step up their game in 2015 by adapting to new market
conditions and customer expectations – Bain & Co
Customer Segments
Customer segments are not clear cut, with common behaviors no longer observed across demographic groups
Value Seekers
•Search hard for the best deal
•Spend a lot of time researching products and comparing prices
•Applies to high and low income groups, but more apparent in lower income group
Sophisticated High Earners
•Generally in larger cities
•Shop to satisfy emotional needs and show individuality
•Willing to pay a premium for quality products and services
Pragmatic Masses
•Almost 400mm emerging middle class consumers
•Reside in smaller cities in inland areas
•Price sensitive and focused on basic functional products
Self-indulging Youth
•More self-indulgent in their purchasing
•More individualistic in their wants
•More loyal to their favorite brands
•More internet-savvy
Source: Forbes, Bain
Travel Trends
As the travel market matures, self guided and overseas trips have experienced rapid growth
•Mainland China became the world’s biggest source of
foreign tourists. Approximately 110 million Chinese traveled abroad in 2014
•These newly affluent travelers spent $164 billion overseas while they traveled, making them the biggest-spending tourists.
•Top 5 destinations in 2012 : HK, Macau, South Korea, Thailand and Taiwan
•Group travel is still popular for convenience and price as well as a history of restriction on individual travel, however it is slowing down
•FIT has seen a dramatic increase and is growing even faster than foreign travel in general
Source: Euromonitor, Skift,, Bloomberg etc.
Going Online: China’s e-Commerce market
With the number of internet users growing rapidly, eCommerce volume has followed suit
• In 2011, China’s online retail purchases surpassed Japan’s. The following year, its online retail
penetration hit 16 percent, cruising past that of the United States
• More than 600 million potential consumers have access to the Internet in the country today and 80% access it through smartphones and other wireless devices
• The popularity of e-commerce has quickly increased in China due to the economic development, the growing Chinese middle-class, rising disposable incomes and above all due to Internet and mobile penetration in the Chinese daily life
Source: Alizila
China Online Travel Market
A large and growing market, with consumption habits rapidly evolving to keep pace with other developed markets
Increasingly, travel bookings are made through mobile devices, with 77% survey respondents opting to search for online travel service on mobile devices.
In 2014, China online travel was aUS$50 billion market with an increase of 38.9% YoY. It is expected to grow to US$130 by 2018
Ctrip, at 23%, has the largest share of the online travel booking market, followed by Tuniu and eLong
Profile of the online shopper (contd.)
For cross-border purchases, Chinese online consumers purchase goods from the US (84%), Hong Kong (58%), Japan (52%) and UK (43%).
China UnionPay & UnionPay International
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Established in 2002 and headquartered in Shanghai, China UnionPay is the largest bankcard
association in the world
UnionPay International (UPI) is a wholly-owned subsidiary of China UnionPay and it:
Oversees the international business of UnionPay, accelerating entrance
and growth in global markets by collaborating with members and
merchants
Manages operating platform that connects UnionPay international
acquirers and issuers -- in line with global rules and standards
Creates product standards and manages the UnionPay brand in global
markets
Promotes usage of UnionPay cards globally through merchants and
direct to consumers
100% of domestic Chinese familiar with UnionPay brand (AC Nielsen)
CUP is a member of EMV Co.
UnionPay in Numbers
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Over 300 issuing and acquiring members around the world
More than 150 markets accept UnionPay card
No. 1 in Card Volume with over 4.7 Bn UnionPay cards issued worldwide
No. 1 in Purchase Volume by card type
International Acceptance
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Over 150 Countries/Regions accept UnionPay cards in n close cooperation with more than 300 overseas institutions
At 26 million POS terminals and 1.8MM ATMs worldwide
Comprehensive Product Range and Technology
QuickPass Contactless
Mobile (M-
commerce)
Virtual (e-
commerce)
Premium Concierge
Service
Global 24/7
Service hotline
UnionPay World
Privilege
Expense Manageme
nt System
Comprehensive
Protection Insurance
Diamond
Money Express
(Remittances)
TXN Mode POS, ATM,
CNP, MOTO
Dual Currency
Integrated Circuit (UICC)
Platinum
Gold
Classic
Service Packages
Program Enhancements
Delivery / Technology
Segments
Prepaid
Credit
Commercial
Debit
2015 e-Commerce Performance
The UPI e-commerce business has enjoyed strong performance in both transaction volumes as well as growth rate
2013 2014 2015E
volume
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Marketing Platform: Shop The World
The Shop the World platform is a bridge between UnionPay cardholders in China and overseas online merchants, thus enabling cross-border online shopping for cardholders
• Enables services such as:
▫ Display of popular merchants & products
▫ International logistics
▫ Proxy buying
▫ Secure Payment
▫ Discounts, warranty and other privileges
30 million registered UPOP users
5 national pavilions
120 initial privileged merchants
2000 selected merchandise
+1 million/month Page View
Future Plans: • Attract more global key merchants to accept UnionPay
• Promote the UPOP brand
• Provide a communication platform for cardholders and online merchants
• Create a similar platform for other markets
• Leverage it for overseas UnionPay CM and China merchants
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UPOP Products
SecurePay
• Multi-layered authentication mechanism
• Typically used in SEA and neighboring markets
• Greater security
• Fraud liability shifted to merchants.
• Pros: Secure/ Covers all 4.7 Bn cards
• Cons: Not supported by US merchants
• Enhancement: SecurePay Plus / ACP
ExpressPay
• A simpler method - minimal information gathered
• Widely adopted by the US, other similar markets
• High performing in terms of conversion rate
• Pros: Easy to implement, covers US
• Cons: does not cover debit
• Enhancement: ExpressPay Plus
Merchant Hosted
• An intermediate solution - one time-authentication of China issued cards, subsequently follow ExpressPay process
• Reduce the hassle and increase conversion rate
• Pros: Covers debit & credit / Covers US merchants
• Cons: Limited merchants
• Enhancement: Merchant Hosted (authenticated)
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Security of UnionPay Online Payment (UPOP)
UPOP takes advantage of multiple safety and security technical guarantee. With the aid of real time risk
audit, complete risk control and solve capability, fully assure the safety of online payment transaction.
UPOP related parts Security Features
Fund Security UnionPay card-not-present self-service purchase service rules specifically stipulate the verification elements and can be divided into self identification mode and auxiliary identification mode according to the strength of the verification information. Self identification mode requires the validation of card and dynamic verification information upon each payment. The issuers may choose to validate the ID number, password and other identity information of the cardholder
UPOP Server PCI DSS certification
Payment Account Each UnionPay card is Real-name Authentication
Payment Ways SecurePay provide one secure & comprehensive online payment gateway to avoid Card information leaving on Merchant/Acquirer side, which is supported by UnionPay UPOP server
Risk Control Real-time transaction is 100% monitored by UnionPay risk system, which can audit unusual txn, large amount txn, multiple trial payment, failure authentication txn and so on
Supporting Rules A unified dispute resolution mechanism with onboard members as a card scheme
Improved online
Acceptance through
partnerships
Improved
product quality & user
experience
Enable e-
Commerce on all international
Cards
Leverage B2B Trade Card
opportunity
Monetize "Shop
the World" Platform
Focus Areas
Our Strategy is to build scale in transaction volume through enhanced value and great customer experience
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A Rapid Business Expansion Opportunity
27
Hu
ge
Op
po
rtu
nity
• China – fastest
growing market for
e-comm globally
• World’s largest
online population –
650 million accounts
• Over 4 tr CNY in
2014 sales
• 120% annual growth
since 2003
Tru
ste
d B
ran
d
• UnionPay’s unique
access to all Chinese
consumers.
• Largest / fastest
card brand globally. –
over 4.7 billion cards
• Best known payment
brand in China and
most trusted
Fle
xib
le a
nd
Sa
fe M
od
el
• ExpressPay offers
convenience and
can be quickly
implemented
• SecurePay supports
all UnionPay cards
and risk is taken by
issuer
• Merchant-hosted
supports all cards
with ExpresPay
convenience Un
iqu
e P
latf
orm
• Huge ‘pent up‘
demand
• Shop the World - the
market place for
Chinese consumers
to shop globally
• Opportunity to jointly
market merchants,
products and
services through this
platform
A Winning Combination