Emerging Payments Mobile Contactless Gateways v 1.ppt

Emerging Technologies in Financial Services

Mercator Advisory Group Update

George Peabody

Director, Emerging Technologies Advisory Service

Mercator Advisory Group

January 2010

Mercator Advisory Group 2010 1

2

Mobilizing Financial ServicesMobile Banking Update

Agenda

• Mobile Commerce, Banking and Payments

• Contactless and NFC

• Payment Gateways

• Wireless POS

Fr: My BankChecking 1,251.11Pending 220.00RLSCheck 199.11Savings 3,215.32VisaBal 613.23Visa Avail 386.77

Mercator Advisory Group 2010

Cards and Mobile: the Mute User Interface

3Mercator Advisory Group 2010

A Very Interactive User Interface


Enough said…


Where We are Headed: Pervasive Ambient Computing


The Mobile Financial Services Aggregation Point is in Your Pocket


8

Mobility has become part of our social DNA and data-oriented activity is rising

• 262 million US subscribers, nearing 100% penetration

• 58% of mobile subscribers have done non-voice data activities

• 53% are active text users, 149 M

• > 12% of subscribers have flat rate data plans

• > 15% now own smartphones

• iPhone – 7 million sold in Apple’s 4th quarter alone. One million 3G S sold in one week, 70 million sold.

• 120,000 apps, 2 B downloads in 18 months.


20% of all mobile subscribers are prepaid account s using both text and

voice (Mercator Primary Data Series research)

250 Million iPods

1 Billion PCs

1 Billion Accounts

1.5 Billion Cards

1.6 Billion Internet

2 Billion TVs

3.6 Billion Mobile Phones

Mobile Marketing has gone mainstream:Multiple industries and leading brands

• Consumer packaged goods• Apparel• QSRs• Electronics• Sporting goods• Financial Services• Manufacturing


Mobile Banking and Payment Feature Hierarchy

10

Source: CashEdge survey, Mercator Advisory Group

% I

nter

este

d


The Mobile Channel, while just another channel, has unique attributes that amplify the others


Situational Relevance:It's About the Data About the Payment

• Data Analytics– Beyond “how much?” – answer “Who, What, When and Where?”

• Customer Experience Management / Social Networking• Fraud Analytics / Risk Analytics• Rewards and Loyalty, Merchant Funded Discount Networks• Give accountholders and customers information about their

money and their value to you.



NFC-based Proximity Payments face business model barriers and technology competition

• Business Model Barriers– Entry of MNOs into payment ecosystem a cause for stress in FI and

card network communities– Trusted Security Manager (TSM) role is expected to provide neutral

third-party role and business model breakthrough but that has not yet happened

– MNOs are still considering their moves

• Competitive Software Technologies– Barcode scanning to create

“physical web” similar to NFC “smart posters”– Consumer Experience Management

on the handset– What will Google do?

“There are four or five of us and each of us wants 40% of the action.” - Sprint VP


MNOs are still considering their moves into Financial Services

• Technically, there are few barriers– MNOs experimenting with NFC and POS acquiring– Over The Air (OTA) provisioning well understood– Reliable networks and messaging applications

• But Financial Services industry comes with regulatory oversight– MNOs already under supervision by OCC– Scrutiny by financial regulators will be burdensome

• Blended approaches may emerge– NCF may grow based on merchant use for merchandising, mobile commerce

and marketing and then payments– Card Issuing via partnership with major bank


MNOs are still considering their moves into Financial Services

• Technically, there are few barriers– MNOs experimenting with NFC and POS acquiring– Over The Air (OTA) provisioning well understood– Reliable networks and messaging applications

• But Financial Services industry comes with regulatory oversight– MNOs already under supervision by OCC– Scrutiny by financial regulators will be burdensome

• Blended approaches may emerge– NCF may grow based on merchant use for merchandising, mobile commerce

and marketing and then payments– Card Issuing via partnership with major bank

Mobile Operators could lose their grip

Apple could step in to be a Trusted Services Manager to link FIs and MNOs.

The company could expand iTunes into a

payments wallet.

Key Takeaways

• Expectations of mobile access are rising• Convenience and Situational Relevance will drive mobile banking

and payments success• Mobile ways to pay will proliferate: Amazon, Twitpay, Facebook

payments, PayPal's Adaptive Payments API, embedded in the “App for That”

• The smartphone as aggregation point for multiple financial services functions and brand manager

• The shift from online to mobile• Consumer reticence falling to convenience and familiarity• One size won’t fit all:

• SMS, WAP and platform-optimized websites (iPhone sites) provide good value


Contactless Card Payments



The Contactless Cautionary Tale – Failure is an Option


Contactless cards could be considered a payments industry tactic without benefit to consumers

Uptake is low

Out of the 1,096 million cards in use in 2007, just 45 million cards are contactless, just 4% with remarkably low usage

400,000 readers in 80,000 merchant locations

Contactless feature activation rates are 10% - 30%

90% of those using contactless feature use it less than once per week

Industry has ignored the Consumer and not helped the Merchant

Value proposition for contactless cards has primarily benefited issuers and processors eager to shift cash transactions on to plastic

Network rules allowing no signature transactions at QSRs for under $25 have reduced need for contactless

What benefits do contactless cards provide the consumer? Not many!


Contactless cards could be considered a payments industry tactic without benefit to consumers

Uptake is low

Out of the 1,096 million cards in use in 2007, just 45 million cards are contactless, just 4% with remarkably low usage

400,000 readers in 80,000 merchant locations

Contactless feature activation rates are 10% - 30%

90% of those using contactless feature use it less than once per week

Industry has ignored the Consumer and not helped the Merchant

Value proposition for contactless cards has primarily benefited issuers and processors eager to shift cash transactions on to plastic

Network rules allowing no signature transactions at QSRs for under $25 have reduced need for contactless

What benefits do contactless cards provide the consumer? Not many!

And now, Best Buy is refusing to accept Visa contactless payments

because of the signature debit rates it is charged for

those transactions

Payment Gateways


Gateways Have Been About Switching and Transaction Volume


ProcessorsProcessorsPOS

PED

vPOS

e-Commerce integration

App integration

Mobile integration

wPOS

Gateway Channels

Gateway Features are the new Competitive Battleground – with some operating on the handset


Potential Offerings

Merchant-facing:

• Recurring payments

• Tokenization

• Signature Capture

• Mobile payment support (CNP)

• Fraud controls

• Rewards/Loyalty

• Smartphone / AppPhone support

• USB / Bluetooth card reader and printers (Woosim, Blue Bamboo)

• Mobile Enterprise Application support via Web Services, APIs, etc.

• Others…

Consumer-facing:

• AppPhone payment terminals (iPhone, RIM, WinMo, Android, Palm Pre)

• “Sellers” card readers (Square, Inc.)

Who ISN’T in the Gateway Business?


Direct to

Merchant

ISO Channel

Software VAR

Payment Service Provider

Super ISOsSuper ISOs

Payment Technology Enablers

Payment Technology Enablers

POS Hardware VendorPOS Hardware Vendor

All connecting to processors, Multiple Segment Types Provide Gateway Services to 4 Markets


MobileMobileE-CommerceE-Commerce

PayPalPayPal

vPOSvPOSPOSPOS

Gateway PureplaysGateway PureplaysMobile

Channel Experts

Mobile Channel Experts

E-Commerce

Channel Experts

E-Commerce

Channel Experts

Wireless Point of Sale


Wireless POS includes Purpose-built, Smartphone and Feature-phone Approaches


ProcessorsProcessors

Smartphones

Gateway

Mobile NetworksPurpose-built Terminals

Feature Phones

Plenty of Mobile Merchants• 1,300,000 Service Pros• 320 Amusement Parks• 570 Ski Areas• 16,000 Golf Courses• 15,000 Specialty Retailers• 44,000 Temporary Retailers• 75,000 Taxis

Plus enterprise fleets and growing “sellers” cadre

Plenty of Mobile Merchants• 1,300,000 Service Pros• 320 Amusement Parks• 570 Ski Areas• 16,000 Golf Courses• 15,000 Specialty Retailers• 44,000 Temporary Retailers• 75,000 Taxis

Plus enterprise fleets and growing “sellers” cadre

How far up-market stream can the AppPhone Ecosystem swim?

How far up-market stream can the AppPhone Ecosystem swim?

In-person Mobile Payments Methods:AppPhones Move Up, More Evolution to Come


Merchant Size

P2P Sole Proprietor Service FleetSmall Biz (2 – 5) Taking Pmts

“Seller”

29

Thank you

George PeabodyDirector, Emerging Technologies Advisory Service

[email protected]


Emerging Payments Mobile Contactless Gateways v 1.ppt

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