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INTERVIEW: Visa's Clark Reveals Plans To Target Asian HNW Wealth
Tara Loader Wilkinson
14 August 2012
As the world's economic power shifts from West to East, US financial services firm Visa is aiming for half of its revenue to come from outside of North America by 2015. North Asia is currently its fastest growing market, with thirty per cent of payments volume stemming from the region last year. Chris Clark, North Asia group country manager, discusses how the firm is setting its sights firmly on the burgeoning wealth in Japan, Korea, Greater China, Hong Kong and Taiwan. The increase in millionaire population and wealth is
significant in North Asia as the region’s markets experience continued economic
growth and strong gains in other key drivers of wealth. Why go after this
segment? They spend a large amount, they’re the most resilient and, if we don’t
go after them, our competitors will. To do this, we know that we need to provide
a broader set of products and services to meet the complex needs of today’s HNW individuals,
especially since much of the wealth in North Asia is newly generated. What this
means is that many HNW individuals may require sophisticated and multifaceted services,
but they have limited experience with—or access to—the scope or scale of
services that exist in highly developed markets. Fortunately, our experience in the region
has taught us about ways that Visa and its client banks can effectively target
wealthy individuals. For example, today’s affluent customers love to travel –
which is why so many Visa benefits platforms deliver travel offers to premium
cardholders. We’ve also found that card usage can be lifted by increasing the
use of Visa’s concierge services. Customers who use concierge services multiple
times will generally spend more than customers who have only used concierge
services once. Besides expecting customized/bespoke services, today’s UHNW individuals also contribute substantially to charity, so
we’re encouraging banks to make this a part of the mix of offering for their
affluent segment. And, in some markets like China where prestige is important,
card design elements such as a diamond on a Visa Infinite card can serve to
differentiate a bank card. Q: What
are the spending behaviors and spending patterns of high net worths and ultra-high
net worths in Greater China versus Korea versus Japan versus Hong Kong versus
Taiwan – their similarities and differences? In terms of investment, Asia Pacific HNWIs
invest most heavily in real estate and equities, with Japan’s HNWIs behaving
the most conservatively, according to the 2011 Asia-Pacific Wealth Report by Capgemini
and Merrill Lynch Global Wealth Management. However, many Asia Pacific HNWIs are using 'investments of passion' as a diversification tool, and this is consistent with
some of the trends that we’re also seeing here at Visa. For example, sales of
luxury cars are way up in North Asia. Mercedes-Benz said its sales in China
(including Hong Kong) jumped 112 per cent in 2010, and Ferrari reported China sales in
2010 surged nearly 50 per cent from 2009, marking its best ever year. Ferrari added
that the Greater China area is now one of
its top five international markets. Jewelry, gems and watches also hold
economic and cultural appeal for HNWIs. Indeed, Christie’s International
reported that its 2010 fine and rare watch auctions saw “exponential growth in
buyer participation from Asian countries, led primarily by China and Hong
Kong”. In North Asia, Taiwan HNWIs lead as buyers
of luxury collectibles which includes automobiles, boats, etc.) at 38 per cent,
with Chinese millioniares just behind at 35 per cent. Japan’s HNW individuals follow at 30
percent. China millionaires are the largest
buyers of other collectibles (which includes coins, wine, antiques, etc.) at 22
per cent, with Japan’s HNW individuals second at 18 per cent. More than half of Chinese consumers’
luxury purchases are made abroad when they travel. China’s young wealthy also
increasingly seek a more spiritual, socialized and personalized level of
consumption (The Chinese Luxury Consumer White Paper, March 2012). Traveling is
Chinese HNW individuals' favorite leisure activity. Q: How
do high net worths and ultra-high net worths define luxury? The Capgemini and RBC Wealth Management
World Wealth Report 2012 confirmed that HNWIs and ultra-HNWIs are defining
luxury in terms of their 'investments of passion', especially in emerging
markets. China is now the largest market for art and antiques, which has driven
up prices for traditional Chinese art. Diamonds also continue to be a strong
investment with prices increasing 20 per cent over the previous year. But the North Asian high net worths and
ultra high net worths may not be satisfied with just these luxurious
investments of passion. In its 2012 white paper on The Chinese Luxury Traveler,
the Hurun Report looked at how the Chinese luxury travel market is flourishing
due to the rapid increase in the number of millionaires in China. According to
the white paper, luxury travel is the most popular form of entertainment and
the biggest area of consumption for Chinese millionaires. Chinese tourists are
collectively the biggest spenders across the world, with growth of more than 50
percent over the last three years. When traveling, the most popular luxury
goods purchased are watches and jewelry, with Hong Kong the undisputed first
choice destination for Chinese millionaires to buy luxury goods. Interestingly, a majority of Chinese
millionaires want their private banks to provide luxury travel advice. On a micro level, Visa provides a useful
service to travelers by providing a safe, secure, convenient way for them to
pay. Electronic payments reduce the need for paper currency, and the various
aspects that can irritate a traveler, such as the inconvenience of money
transfer, the threat of theft/loss, or the fear of “not having enough money” to
pay for goods and services or emergencies while away from home. On a macro
level, Visa’s involvement includes working with partners (clients, airlines,
retailers, hotels, airports) to run marketing campaigns that incentivize
spending by travelers, and by using our data and market intelligence to provide
valuable insights to governments, retailers and clients into what drives
tourist spend, thereby aiding targeted efforts by the local industry in
boosting a country’s tourism revenue. Q: How
do you think Asia's wealthy view the internet and
its various applications for managing their wealth and finances? The HNW population has always demanded -
and paid for - more personalized and varied service than the mass market. When
it comes to financial services, HNWs typically want a choice of suitable
value-added products and services that will properly align to their risk
profiles, as well as meet their local market preferences. With the proliferation
of the internet, the HNWIs are finding that they can do more with their wealth
online than they ever did before, so clearly the internet can play a key role
in helping to attract and retain HNW customers. In China, for example, the internet is the
most widely used source for millionaires who want to obtain travel information.
According to the 2012 Hurun white paper on The Chinese Luxury Traveler, more
than half of millionaires prefer to research travel destinations on their
own and make decisions on the information they have personally acquired. However, the internet alone won’t fully
satisfy the needs and preferences of the HNWs. Most people know that North Asia
is leapfrogging, much faster than the rest of Asia, in terms of embracing technology.
In fact, according to a 2012 Nielsen study, North Asian countries have some of
the highest smartphone adoption rates across the entire Asian region. In China
and Taiwan, 42 and 51 per cent of mobile users own a smartphone respectively. In
South Korea, an impressive 67 per cent of mobile users own a mobile phone. North
Asian countries far surpass other countries in the region such as Malaysia (28
per cent), Thailand (27 per cent), Indonesia (19 per cent) and India (10 per cent). Q: What
are your biggest growth markets in North Asia? The trend to switch away from cash to
electronic forms of payment continues and this is something from
which we and our bank clients benefit. Our fundamental strategy is very simple.
We work with financial institutions (our clients) to ensure that more people
have: (1) a Visa account; (2) a way to pay using that account (via card,
mobile); and (3) more places where they can do that (increase acceptance). Our China business is strong but it is
restricted to what we call “cross-border” transactions – that is, when Chinese
cardholders use their cards abroad. However, even when excluded from the
domestic market, China business is one of our fastest-growing markets. Still, there is a lot of growth for Visa
outside of China, so our strategy for the region does not focus on one country.
Nearly 30 per cent of Visa’s global payments volume last calendar year came from
Asia. US$1 trillion in payment volume passed over our network in Asia-Pacific
in the year ended Dec 31, 2011. That
growth is widespread across North Asia with more than 50 per cent payment volume
growth in China and almost 20 per cent growth in the more established market of
Japan. Q: How
does growth differ from market to market in North Asia? What characterizes
growth in markets such as China, versus growth in the mature markets in Japan,
Korea and Hong Kong? Growth in mature vs. developing markets
varies by the level of infrastructure that is in place to develop and nurture
mature electronic payments networks. In more developed and mature markets,
including Korea and Hong Kong, Visa will drive growth by allowing people to
shop anywhere using diverse payments options and providing new products and
services like person-to-person money transfer, recurring bill payment, transit
and event tickets and top-up of prepaid mobile cards. Growth in these markets
will also happen by enabling Digital Wallet payment services for online and
mobile transactions. PCE penetration in Hong Kong stands at more
than 50 per cent, in China at more than 45 percent and in Korea at more than 70
percent. In Japan, on the other hand, electronic payments aren’t as widespread,
with PCE penetration still only at 12 percent. Therefore, the focus on Japan is
a lot more about building out the infrastructure, new product lines (Debit) and
growing acceptance rather than rushing into Digital Wallet.