2. Topics considered
What is mobile payment?
Mobile’s impact on payments
Mobile’s impact on value chain
Mobile’s value proposition
Mobile payment barriers
Mobile payment options
Mobile payments – paradigm change or hype?
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3. What is mobile payments
First & foremost it is a payment
$
An electronic payment utilizing a mobile phone as the device to :
Give consumer access to the payment source
Deliver payment authority to the seller
It is not
Mobile banking
Mobile selling
Mobile advertising
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4. The payments paradigm
Financial
Intermediary
1. Manage cash
2. Access credit
Settle non-cash transactions
Payor
1. Buy/Sell
2. Return
Payee
Mobile payments does not break this paradigm
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5. Mobile’s impact on payments
Evolution of mobile payments will have as
disruptive an impact on today’s payments as
credit card did on checks & cash
The future is coming & fast
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6. Mobile payment revolution
Ubiquitous channel
Opportunity e-wallet realization
#1 Interact Channel
Cost
Interactive model
Pay-net reformation
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7. Mobile drivers of payment evolution
Ubiquitous channel Interactive model
• Natural adoption progression • High customer touch
• Social use influence • Customer choice driven
• ‘Always on’ identity validation
• On-demand offering
e-wallet realization Pay-net reformation
• Any source, any type, anywhere, • Front-end becomes mobile hub
any time • 2-part select/approve process
• “Full relationship” model • Consistent network mechanics
• Trust & acceptance branding moves • Transaction compatibility
to mobile e-wallet • Interchange rate competition
• Flexible funding models • Condensed acceptance branding
• Consumer usage controls
• Electronic issuing
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8. Impact of mobile access device
Ubiquitous, programmable, interactive,
graphical, multi-mode
– 50+ million more U.S. subscribers than there are
Internet users, and mobile phone penetration is
surpassing 90% of the U.S. population
All payments through a single device possible
– It is agnostic to payment type or source
Can improve the payment select/approve process
An additional layer for fraud, theft, misuse
An additional layer against fraud, theft, misuse
Already the channel for some purchases
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10. e-Wallet realization (multi-source)
Easy, secure universal payment mechanism
Account selection at time of use
Connection to selected payment network
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11. Fraud implications of mobile payment
Pros Cons
Adds tools to detect/prevent (i.e. Adds layers of possible penetration
encryption, device validation, (i.e. phone, cell transmission, hub
interactive approval, multi-factor, interaction)
tokenization, location) Phone config & programs are
Can make counterfeiting, theft & consumer controlled
merchant fraud unappealing Exposure broader than single card
Superior to EMV in protection
Eliminate CNP scenario risk
Approaches
Phone will be penetrated, don’t hold meaningful
identity/auth information
Use tokens in phone to hub level transmissions
Hub should hold authentication details in
secure/isolated data vault
Validate the phone used
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12. Mobile evolution outcomes
Rise of e-wallet Network shift
e-wallet presence vs. wallet share Move to IP foundation
Family/social network helps Move to cloud delivery
drive e-wallet choice Transaction format convergence
Situational/offer driven pay Dilution of existing acceptance
source choice brands
Customer service to mobile Redistributed & reduced
Micro-issuing feasible interchange
Disappearance of cards
NFC key requirement???
Move to electronic issuing
Security leap
Major TPF loss reductions
CNP fraud eliminated
Broader FPF evaluation
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13. Mobile’s impact on payments
New access device
Multiple payment source delivery
– not a new payment source
Accelerating payment mechanics convergence
Opportunity to redesign transaction network path
More complex commerce interaction at time of
purchase
Path for un/under-banked enter electronic
payment fold
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14. M-payment network shift
Legacy Pay Network
Payment
Network M-Pay
Network
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15. Accelerating payment convergence
Establishes common mechanics for any payment
source
Single payment execution device
Can/will support any payment type
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16. Opportunity to redesign network path
Open front-end transport network
– Payment type & source agnostic
– IP-based
Drive network convergence
– Transaction format
– Technical interface
Improve transaction security capability
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17. More complex commerce interaction
Purchase search/compare
Merchant choice influence
Purchase motivation
Purchase tracking
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18. Un/under-banked pathway
Gen-Y is already seeking out
Mobile penetration vs. bank penetration
Lack of national boundaries
Non-bank account support
Peer-2-Peer support
Easy access
Better security than cash
Can couple with money management
Brings un/under-banked into electronic
transaction fold
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19. Explosion of value chain providers
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20. Impact on payment value chain
Banks are more isolated
from the consumer
Banks
Payment network brands
Networks
weaken over time
Merchants
Acquirers Carriers may gain some
Product
relationship stickiness
Customer Payment Payment Clearing & Account
development acquisition initiation processing settlement management
Major opportunity is for 3rd
party providers
Network clearing, settlement
Customer engagement Transaction Processing
& backoffice management Acquirers could become
Banks
less relevant
Networks New critical alliances will
Merchants form
Acquirers
Carriers
Major shifts in transaction
3rd Party
revenue model
All depends on dominant
provider model
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21. Currently fragmented marketplace
Product Customer Payment Payment Clearing & Account
development acquisition initiation processing settlement management
Mobile payment
gateway
Mobile e-wallet
3rd party payment Retailer Interface
Mobile swipe
Mobile Bank
Services - Solutions
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22. Mobile payments’ value proposition
Lower fraud costs
Lower origination costs
Higher transaction volume
•offset by lower transaction fee
•net increase in transaction revenue??
Deliver robust combined payment vehicle
•Lower risk per $ balance
Ease of access Lower cash handling
Ease of use? Should be's???
Flexibility/choice •Transaction cost
Control •Sales increase
Security Eventually's
Information •Market presence/awareness
Purchase pricing (eventually) •Sales incentive
Payment pricing (eventually) •Consumer intelligence
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23. Fed Mobile Business Model
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24. Mobile evolution deterrents
Consumer security concerns Working with elephants
– Perception vs. reality – Payment $’s in legacy players
– Provider assurance – Major legacy players self-
Merchant acceptance protection
– Solution investment – Big firm slowness
– ROI – “Follow the herd” mindset
Initial market fragmentation
– Too many directions
– Best approach clutter
– Unclear leaders
Demographic resistance
– Younger & tech savvy adopt
faster
– Remainder slowly
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25. Mobile payment barriers
Protectionism by players
Merchant ROI for acceptance
Cost of usage to parties
No viable business model
demonstrated
Confusion on regulatory
oversight
Current fragmentation of
solutions
Failure to meet consumer
needs & expectations Rapid adoption depends on
Security perceptions mitigation of these barriers
Lack of interoperability &
technical standards
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26. Mobile payment solution choices
Decisions in each dimension
critical to solution success &
survivability
Breadth of type & sources
Provider Payment coverage aids convenience
model types factor
– “One device to rule them
all”
Current solutions/pilots are
all over the range on these
Interaction Payment – Industry is hunting for
model sources what works
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27. New paradigm or hype?
Will reform payment value
chain
Potential for disrupting major
chain players
Suspect NFC element is more
hype than a driving change
Technical capability still early
in hype cycle
Significant barriers to broad
adoption constrain pace
Major & minor participants
are exploding
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28. Pace of mobile interest
Mobile growth is still in early
stage maturity
Pace is exploding
N.A. has been lagging
(largest market value)
2010 showed continued
acceleration
Mobile banking is ahead of
mobile payment in maturity
Represents best model of
payment adoption potential
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30. Key takeaways
4+ Billion phones globally, greater penetration than banking
Major change impact to the Point of Transaction
Mobile pay interaction is source of new products, services &
revenues
Path to Gen-Y, un/under-banked, & cash transaction reduction
Ease of use, security, freedom of choice are consumer keystones
Clear merchant ROI is key impediment
Disruption of existing payment players is high potential
Big payment players & carriers are rushing in
Solution & participant space highly fragmented, unclear leaders
Will drive payment mechanics convergence
Will drive payment network improvement
No dominant mobile pay offering has arrived yet
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31. Further information on this
Contact me
BCI provides focused consultation and assistance in the
payment systems area
Payments solution evaluation Project advisory or management
Strategy and issue consultation Architecture direction & rollout
• Quicker and more accurate problem identification and solution
• More dependable delivery of key payment initiatives/projects
• Creative and tested solutions to payment systems improvements
• An objective viewpoint that sees the whole picture
• Deep experience delivering business value through technology
Executive IT help & leadership on payments when you need it
Contact: Mike Batton, President, Batton Consulting Inc. | mike@battonconsult.com | 630-443-7735 (O) 630-862-6799 (M)