Carlisle Webinar Consolidated v06!20!12

7/31/2019 Carlisle Webinar Consolidated v06!20!12

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Looking at the Mobile

Payments Market

Do You Want to Be Top of Wallet?

20 June 2012

CEB TowerGroup

Commercial Banking & Payments


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is initiated from a mobile phone on an anytime, anywhere, anyone basis for

delivery to:

Another mobile phone

An e-mail address

A point-of-sale terminal

A deposit account with or without online banking

A contactless payment sticker does not a mobile payment make.

A Mobile Payment


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Mobile Payments Represent Four Payment Types

Source: CEB TowerGroup

Mobile Point-of-Sale Payment

Based on contactless and near-fieldcommunication (NFC) technology

Eliminates cash and plastic for transitfares or tolls and other payments

Technologies exist, but solutionspending

Mobile Remote Payments

Mobile Internet service

Used for mobile top-up, content,tickets, account funding

Mobile Remittances

Builds off traditional internationalremittance market

Cross-border, multicurrency

New solution for a big market

Mobile Person-to-Person

Adds transactions to social networking

Convenience of immediate valueexchange


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4 2012 The Corporate Executive Board Company. All Rights Reserved.

A majority of globalcommercial banks arecurrently undertakinginitiatives to add orimprove their mobilepayments capabilities.

Nearly 80% of global banks

perceive mobile payments

solutions to be a high value

technology investment.

While 27% of banks

currently employ an active

mobile payments systems, 7 in

10 are adopting new mobile

payments technology for thefirst time or upgrading their

current systems.

Banks Investing in Mobile Payments

Global Commercial Banks Current Mobile Payments Technology State

Percentage of Respondents, 2012

5%

Does Not Have

31%

Adopting

27%

Installed

37%

Replacing

N=107

Global Commercial Banks Perception of Mobile Payments TechnologyPercentage of Respondents, 2012

46%

33%

10% 9%

1%

Very high value Somewhat highvalue

Moderate value Somewhat lowvalue

Very low valueN=69

Source: CEB TowerGroup Research


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Recent Mobile Payments Startups

The Mobile Payments Market Has ExplodedOver the Last 12 Months

MerchantsSmartphone Companies

Traditional Payments Players


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The Mobile Payments Market Has Exploded Over the Last12 Months

???


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Apple Passbook Could Change Everything

Source: Apple


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What is your institutions approach to mobile?

5%

10%

19%

19%

24%

24%

8%

8%

8%

8%

23%

46%

0% 10% 20% 30% 40% 50%

Mobile payments

Mobile banking and payments

No mobile offering

Mobile banking, payments, and RDC

Mobile banking

Mobile banking and mobile RDC

Large and Mid-size Banks

Credit Unions

87% of banks and 77% of credit unions offer mobile banking

24% of banks and 34% of credit unions offer mobile payments

Financial Institutions Fragmented in Their Approach toMobile (2011)


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What do you (or plan to) charge for mobile services?

5%

53%

42%

11%

39%

50%

0% 20% 40% 60%

Fee for both mobile banking and mobilepayments

Free for mobile banking, fee for mobilepayments

Free for both mobile banking and mobilepayments

Large and Mid-size Banks

Credit Unions

89% of banks and 95% of credit unions will give away mobile banking

50% of banks and 58% of credit unions will charge for mobile payments

To Fee or Not to Fee (2011)


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0

10,000

20,00030,000

40,000

50,000

60,000Check -7.6%

Credit Card 2.3%

Debit Card 8.1%

Credit Transfer 7.8%

Direct Debit 7.8%

Bank Cards are the Primary Funding Vehicle for Mobile,and Debit is the Dominant Payment Type by Volume

Noncash Transaction Volume by TypePercentage of Total Transaction Volume by Type of Transaction, 2011.

19.8%

20.6%40.3%

7.8%11.5%

Check

Credit Card

Debit Card

Credit Transfer

Direct DebitTrends in Noncash Transaction Volume by TypeNoncash Transaction Volumes (in millions) by Type 2005 2016(E).

Source: TowerGroup Payments Database


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One View of a Mobile Wallet

Source: SapientNitro, CEB TowerGroup

Focus is entirely onpayments

Key missing elements:

ID/Insurancecards

Loyalty andrewards programs


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Source: Company websites, CEB TowerGroup

Name Players Supported Payment Types/Sources Usability

GoogleWallet

Citi, Google,MasterCard,Sprint

Citi MasterCard or Google prepaid card

Gift cards

Also supports loyalty/rewards programs

At contactlesscard readers atpoint of sale(POS)

Serve AmericanExpress

Cash, credit/debit card, transactionaccount, prepaid card

Comes with separate prepaid reloadablecard

At contactlesscard readers atPOS

Online

V.me(formerly Visa

Digital Wallet)

Visa Consolidates multiple Visa and non-Visapayment accounts that can be used in

mobile, eCommerce, social network andretail point of sale environments

Supports merchant-driven discounts andpromotions

At contactlesscard readers at

POS Online

Sample Mobile Wallet Offerings (2012)


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Whats in My Wallet (and on my Phone)?

ID/Insurance

WeeklyDaily

Coupons/Deals

Tickets/Shopping

FinancialManagement

Payments

< MonthlyMonthly

14 cards, 6 apps another 20 cards at homeSource: CEB TowerGroup


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INSPIRED TO HELP YOU SUCCEED

Do You Want to be Top of Wallet?

June 20, 2012


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INSPIRED TO HELP YOU SUCCEED 2012 Carlisle & Gallagher Consulting Group. Proprietary and Confidential.15

Consumers Like the Options, but Struggle with the Complexity

Most Frustrating Issue with Credit, Debit and Loyalty Cards

Getting offers has neverbeen easier for customers :

Groupon

Living Social

Amazon

Retailers

Consumers struggle to

keep track of the Terms andConditions for theirpayment cards

Due dates

APRs

Reward terms (esp.bonus points and caps)

0% 10% 20% 30% 40% 50% 60%

I don't always have them with me

Too many cards

Keeping track of payment due dates

Keeping track of offers


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2012 Carlisle & Gallagher Consulting Group. Proprietary and Confidential.INSPIRED TO HELP YOU SUCCEED16

Many Consumers are Using Simple Manual Payment Strategies to Manage the Complexity

26%

74%

I use many differentcards due to loyaltyprograms

I use one or twoselect cards

22%

25%

53%

I change the way I usemy cards based on offers

I change the way I usemy cards based onfinancial situation

I always use my card(s)the same way

How Many Cards Used?

What Causes You to Change How You Use Your Cards?

Many consumers haveadopted a strategy tofocus on a primary card(and only use a secondcard if the primary carddoes not work).

Additionally, over half ofconsumers use their cardsthe same way regardlessof offers or their financialsituation.

No statisticaldifferences by age


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2012 Carlisle & Gallagher Consulting Group. Proprietary and Confidential.INSPIRED TO HELP YOU SUCCEED17

Mobile Wallets Represent a Way to Automate the Complexity

48%52%

Yes

No

48% of the Survey Responders Expressed Interest in Mobile Wallets

0%

10%

20%

30%

40%

50%

60%

70%

18 - 30 31 - 50 GT 50

LT $50K $50K - 100K GT $100K

%w

ithhigh

interest

Interest is Driven by Young Consumersand Affluent Consumers

Age Income


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Our Analysis Found Distinct Segments for Mobile Wallet Value Propositions

Traditionalists Payment Optimizers Techno Shoppers

Value of Mobile WalletServices

Limited value, more concernedabout security

Payment optimizationdecisions and administration

Shopping experience &payment optimization

decisions

% of Survey Respondents 52% 21% 27%

Description

Not interested in mobile wallet Interested in mobile wallet

Prefer to keep mobile walletwith primary bank

Open to banking alternatives

A simplified card and paymentstrategy

Comfortable with mobile banking

% Currently/Intend to UseMobile Banking

23% 64% 86%

Believe mobile wallet willmake shopping more fun

15% 38% 62%

Prefer open mobile

wallet with accounts &loyalty programs acrossmultiple institutions

36% 66% 58%

Change the way cards areused based on financialsituation

25% 62% 60%


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8 in 10 Consumers Interested in Mobile Wallets Would Consider an Alternative Provider

TAKE AWAY

The competitive threat from new entrants is real.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

PayPal Google Apple PayPal Google Apple PayPal Google Apple

Techno Shopper Payment Optimizer Traditionalist

%p

referen

ceoverbank

Consumers are Favorable towards Tech Titansto Provide their Mobile Wallet

Choose Consider


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What about getting other Banking Services from Alternate Providers?

TAKE AWAY

Techno Shoppers and Payment Optimizers will consideralternatives to their primary bank for banking and mobile wallet.

81%of respondents have a high degree of

satisfaction with their primary bank.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

PayPal Google Apple PayPal Google Apple PayPal Google Apple

Techno Shopper Payment Optimizer Traditionalist

7 in 10 Consumers Interested in Mobile Wallets Would Consider Alternative Banks


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So What Does the Future Mobile Wallet Look Like?

The mobile wallet of the future will incorporate acustomer-driven variety of services to support anenhanced shopping and transaction experience.

The wallet will support multiple payment optionsfrom multiple financial institutions AND will

understand the details of the each account (e.g.,balance and credit limit) and the terms andconditions for the account.

The branding from the Financial Institution mayget lost as the wallet allows the consumer to

personalize the payment card (e.g., add anickname or an icon that makes sense to the

consumer.)


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Consider the Mobile Wallet Scenario

The customer decides to buy an item with their mobilewallet loaded with several payment cards from several

Financial Institutions.

The customer scans a bar code on the item. The walletrecognizes the store location.

The wallet application helps determine which payment cardshould be used for this particular transaction:

Does not consider any cards that might incur an extra

fee due to the transaction (e.g., Overlimit, FX).

Price below revolve threshold, therefore not the card

with the low APR.

Checks for special coupons / discounts. Determineswhether any would require a specific card.

Checks for any bonus points (e.g., 2x, 3x) programs

applicable to this particular purchase. Optimizes float by putting the transaction on the card

that has most recently cycled.


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So What Does It Take To Be Top of Wallet?

SEGMENTATION - Focus on behavioral market segments rather than traditionalsegments of age or income level.

FLEXIBILITY - Update core transaction processing capabilities to align with 21stCentury requirements.

SHOPPING - Elevate features to appeal to consumer interest in both shoppingand payment optimization.

TOOLS - Recognize the tools that will be available and define product offeringsappropriately.


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Do You Want to be Top of Wallet?

Peter Olynick | Card & Payments Practice Lead

Carlisle & Gallagher Consulting Group

212 South Tryon Street, Suite 800, Charlotte, NC 28281

O: 704.936.1600 | C: 704.965.6997 | F: 704.936.1631

[email protected]

www.carlisleandgallagher.com

APPENDIX 1


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2012 Carlisle & Gallagher Consulting Group Proprietary and ConfidentialINSPIRED TO HELP YOU SUCCEED25

APPENDIX 1

Overall mix of respondentsreflects a higher income base

Higher income goals resulted in a highermix of respondents above 50 years of age

A high percentage ofrespondents had a highdegree of satisfaction withtheir primary bank

Age DistributionHousehold Income

Satisfaction with Primary Bank

METHODOLOGY

605 survey responses

All respondents live in the U.S.

The survey was conducted

online

Participants were recruited

from an online research panel

There were no specific

requirements to be on the

panel

Participants were required to

be over 18 years of age

The study targeted 50% of

respondents to have

household income over

$100K and no more than

25% below $50K

The data was weighted to

represent the actual gender

composition of the U.S.

population

20%

28%49%

3%

Less than$49,999

$50,000 to$99,999

$100,000 to$249,999

$250,000 ormore

18%

38%

44%

18-3031-50

Over 50

5%

14%

81%

Low

Moderate

High

Carlisle Webinar Consolidated v06!20!12

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