Smart Cards in the Financial Services –From Chip Bank Cards to Mobile Payments?

Mario Fernandez, Research Analyst

Information and Communication TechnologiesInformation and Communication Technologies

2011 May 26

Functional Expertise

• Market research expertise, including:

- Primary and Secondary Research

- Smart Cards in the Payment, Mobile Communications industries

- Near Field Communication (NFC) technology

- Trusted Service Manager (TSM) solutions

Industry Expertise

� Experience base covering broad range of sectors, leveraging long-standing working relationships with vendors

and service providers:

- Telecommunications

- IT service providers

- Smart Card Vendors

What I bring to the Team

Today’s Presenter: Mario Fernandez

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What I bring to the Team

• Results-oriented analyst

• Full responsibility and ownership of projects assigned

• Holistic industry analysis

Career Highlights

� Expertise in corporate finance, supply chain management and risk management.

� Worked before for:

- Procurence Sp. zo.o, Warsaw, Poland

- Continental AG, Hanover, Germany

- Sparkasse-Nurnberg, Nuremberg, Germany

Education

• Industrial Engineer from Universidad de los Andes, Bogota, Colombia

• Master in International Business at the Warsaw School of Economics, Warsaw, Poland

Mario FernandezResearch Analyst

Frost & Sullivan

Europe

Warsaw, Poland

Focus Points

• Worldwide status of EMV – special focus on the U.S.

• Benefits of contactless technologies

• Mobile Payments – opportunities for participants of the payment

industry

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industry

More than 1 billion EMV active cards and 15 million POS terminals

EuropeEMV cards: 555 m.

EMV terminals: 9,4 m.

Russia, CIS countriesEMV cards: 22 m.

EMV terminals: 0,5 m.

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Latin America and CanadaEMV cards: 182 m.

EMV terminals: 2 m.

Africa and the MEEMV cards: 17 m.

EMV terminals: 0,3 m.

Asia PacificEMV cards: 305 m.

EMV terminals: 3,2 m.

Source: EMVCo, MasterCard, Frost & Sullivan

Penetration of EMV cards, EMV POSand EMV ATMs is above 50%

One or more banks are migrating or have migrated to EMV

No preparation for EMV migration

The U.S. hasn’t started yet - When will the U.S. Migrate to EMV?

- Low payment card fraud rates

- Customer behavior

- “Investment is not justified”

Ag

ain

st

EM

V

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- Isolation of the US in the payment industry

- US travelers’ negative experience in Europe

- Implications of the Dodd-Frank Act

Fo

r E

MV

What can be learned from the current payment contactless card deployments?

Possibility of targeting an specific

market

Reduced time at the POS terminals

Contactless payment cards have been deployed

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Customers still do not fully trust

contactless cards

Foothold for further introduction of

mobile contactless payment services

Source: MasterCard, Visa Europe, Frost & Sullivan

Contactless payment cards have been deployed

No commercial offerings with contactless payment cards

We believe that a majority of challenges have been successfully addressed by NFC market participants

Business Model• Secure Element rental mode

• Trusted Service Managers• NFC Forum , EPC, GSMA, GP

Standardization

Trial phase Commercial phase

200

250

300

Nu

mb

er

of

tria

ls/r

ollo

uts

Smart Card Market: NFC Trials/ Commercial Rollouts (World), 2010

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•NFC handset availability• Customer experience (?)

•Hybrid POS terminals• Low cost contactless terminals

Customer

Merchant

0

50

100

150

Nu

mb

er

of

tria

ls/r

ollo

uts

Time

Number of commercial roll-outs (trials)

NFC – What is the opportunity for participants of the payment industry?

• Provisioning of UICC as Secure Element form factor

• Delivering trusted services to mobile operators and service providers

Smart Card Vendor

• Delivering trusted services to banks

Personalization Bureau

• Delivering TSM software for banks, MNOs and new trusted service managers

IT software

• Provisioning of NFC banking services

• m-payments

• m-banking

Bank

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providers

Key Takeaways

Contactless cards Increasing awareness of the benefits of contactless cards.

EMV in the U.S.Fraud rates are likely to increase in the near future.

Market participants should reconsider their position towards EMV

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NFC is a reality Mass-commercialization of NFC is expected by the end of 2012

Necessity to educate customers

Capitalize on the fun interaction and entertainment value of NFC

NFC: Customer

Experience is still

an issue

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For Additional Information

Joanna Lewandowska

Corporate Communications

ICT Europe

(0048) 22 390 41 46

joanna.lewandowska@frost.com

Gustavo Cury

Sales Manager

ICT Europe

(0044) 20 7343 8310

gustavo.cury@frost.com

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Jean-Noël Georges

Research Manager

Smart Card - Global

(0033) 4 93 00 61 87

jean.georges@frost.com