Presented on Axiom Groupe conference "Innovative payments, Security and Cards 2014" in Brussels, march 2014

1. Mobile banking & innovative payments –
technologies, trends and strategies
Special for Axiom Groupe
- 4th Innovative Mobile Payments, Security & Cards conference, Brussels
Alexey Kazakov
Head of Electronic banking, OTP bank, Russia
March, 2014

2. Is a Mobile bank is ONE MORE "window" to
client's account?
NO!
- Mobile world
- Mobile apps
- M-wallets
- M-payments
- M-commerce

3. Mobility landscape in Russia
3
184% - Mobile penetration
in Russia
36% - Mobile internet
penetration (0.6-1%
monthly growth)
6,6 mln Russians pay from
mobile at month
LiveInternet, May 2013
Markswebb Rank and Report e-finance
User index 2014
37% - Smartphone penetration in Russia
18,5 mln. devices were sold in 2013 (51% yearly growth)
Wearesocial.sg, 2014
“Svyaznoy” research, 2014
Sources:
- Nielsen report - Mobile consumer, Global snapshot, Feb 2013

4. Mobile - Incredible opportunity for banking
4
Smartphone is
always with a
client
Mobile internet
connection, and
SIM access
Hard/Software
interfaces (BT,
NFC, QR)
Geo-positioning
and geo-location
data (GPS)
Social media
(SM) and text-
messaging APPs
Unique user
experience
across Apps
IN OPPOSITE TO WEB-
BANKING
Mobile banking have
advantages, based on
unique combination of
hardware technologies,
are native for
Smartphone and
universality of Mobile
Apps

5. • P2P and P2B transactions
in a chat/messaging
fashion
• Bill payments from service
providers
• Scheduled transactions in
one-click-action
• Physical goods purchasing
on QR-codes/NFC or other
technologies
• Special offers and
discounts with a usage of
geo-location data
• E-invoicing - bank fills up a
payment bill with received
requisites, and client just
may to accept or decline it
in one click
5
Mobile Apps - “born to do sales”
Instant P2P transfers on QR,
BUMP, or Card-2-Card
Discounts and special offers in
physical shops nearby
Extra quick payments on templates
WITHOUT authentication
EXAMPLES:
SHARED PRACTICES in sales:

6. Mobile wallet – client acquisition channel
Electronic wallets (EW) become finally legal in 2011, and in 2013:
• 16 mln. Russians use EW for everyday purposes (56% of internet
audience)
• 7 mln. - do regular online transactions/payments using EW
• $4500 mln. – total yearly turnover on EW (72% - growth)
6
ELECTRONIC WALLETS – technical “account” in IT systems, with prepaid “balance”, which might be
opened, credited and debited without KYC.
• There is a huge own self-serviced network (kiosks, etc.)
being utilized (e.g. “Russian Standard Bank”, QIWI)
• Permanent focus to e-commerce development is
present
• Payments business is developed enough to become
attractive for non-clients
• There are partners with significant P2P traffic for cash
(e.g. money transfer services like Western Union, etc.)
• OR if there is a brilliant marketing idea
Sources:
- Markswebb Rank & Report, e-finance User index 2014
- ARG Обзор рынка электронных платежных систем. Март 2013
- Price free agency 2013 / www.futurebanking.ru
ELECTRONIC or MOBILE WALLETS to be launched if:
Providing “absolutely free” payment tool for non-
identified users of Tinkoff Mobile Wallet, TCS bank
attract new clients for Credit and Debit Cards, are
delivered by couriers directly to a client
BEST CASE – Tinkoff credit systems

7. Mobile operators – “out of the game”
7
M-PAYMENTS without MNO – is a today’s reality: Host Card Emulation
• No SIM or particular device dependency
(only OS is matter)
• No Mobile network operator
dominating
• Any Interface: NFC or QR …
• Any Applications; Finance transactions,
Loyalty programs, Couponing … -
“First bird”: PRIVATBANK (UA) had presented own HSE wallets on
FinNext – 2014 in February
Bank’s cloud”
BEST CASE – Privatbank (UA)

8. Mobile NFC - “dead on arrival”
PAYPAL have announced its technology in Q4’13:
• No additional equipment - "beacon" is connected to
USB (and Bluetooth exists in each Smartphone);
• Hands-free payments – it is enough verbally confirm
a payment from PayPal account
• Individual offers and discounts – right at a time
when they may excite the customer (based on inside-
building geo-positioning)
• Safe (it's PayPal!)
APPLE had featured IOS 7.0 with BLE support, shell we expect
mobile payments system from TOP1 player on technologies
market?
8
M-PAYMENT APP with a BLE (Bluetooth low energy) technology support – is a revolutionary solution
of “lack of infrastructure” issue in contactless

9. Is your Bank ready for NEW challenges in
online business?
NEW …
- clients
- financial behavior
- lifestyle
- process innovations
- user experience
- business models
- market players

10. New clients & new ideas
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• Like to do payments on regular basis
• Have a lot of needs in banking products during life
(card -> cash / auto loan -> mortgage -> PFM …)
• Will become an “affluent” in close future
• Might be “on-boarded” easily regarding
innovative technologies or products
• Spread out new banking experience on others
(friends, parents) and influence them
A lot of Banks worldwide focused on getting new, young, active client segments, because they:
BANK should earn Y-GEN respect on
a new ideas, but not on adaptation
of old ones
NEW CLIENTS have no loyalty and trust to old (“granny”)
brands

11. New financial behavior
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NEW CLIENTS do not ever think (or have no time) about financial
planning. They are thinking about financials, but … backward
BANKs don’t even try to give them “living
advice”, just provide a honest support and
fancy solution:
BEST CASE - Westpac bank (NZL)
How to sell term deposits widely - make a
“virus” App
1. Download the application to your
Smartphone
2. Open deposit account remotely
3. ….
4. Press the RED button, and top up you
deposit on $5 instead of "impulse buying“
during shopping
5. Share your success with friends thru
Social media

12. New lifestyle
12
BANK should provide them familiar
workflow: funds transfers – as a text
messaging, balance check – as social
media follow
NEW CLIENTS bring first “online experience”
out of finance area
That is why Facebook acquires WhatsApp!

13. Innovations pipeline
13
BANKs should follow up simplicity, and
proper market positioning of online tools
– proposing “APPs supermarkets”:
NEW CLIENTS are looking for “killing feature” but not
universality of financial tool
Alfa bank propose different online tools and Apps under
separate trademarks for different audience, but all solutions
based on general technologies, invented in Alfa Innovation LAB
BEST CASE – AlfabankNEW CLIENTS change their minds rapidly, always
request for an new innovations
BANK should be ready to accomplish
“cool-not-cool” rhythm and follow up
trends.

14. Loyalty rocks!
14
BANKs should do a business on loyalty
and brand recognition, but not on
direct fees …
NEW CLIENTS pick up “awesome” things, which are not
highly priced at all
BEST CASE - Starbucks
1. $1,4 bln. – cumulative turnover on STARBUCKS cards in Q4’2013
2. 10 mln. ppl uses IOS and Android STARBUCKS Apps worldwide
3. 5 mln. transactions goes thru Apps in a week only in Northern
America
4. $146 mln. were embezzled by STARBUCKS in last 3 years
(unclaimed balances)
5. STARBUCKS and SQUARE - joined opportunity for mobile
payments in 7000 locations in U.S.
IF STARBUCKs being a BANK, it would be listed in
first 170 retail banks in USA

15. Social media – new look
Social media are not for DIRECT SALES, because there are no BUYERS in SM …
HELP, CARE, ENTERTAIN – use different social
medias for appropriate tasks:
• for being transparent and getting more respect
• for teasing and getting customers to be
involved
• for education and advertising
KNOW YOUR CLIENTS, be aware where they are staying
online and be a friend to them, especially, when advice is
needed.
GAMIFICATION – it is not a “GAME”, is a power tool to explain
complex things (or products!) on a most simple language for
widest audience
15

16. E-commerce – new era
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Cash
Card (AN+secure code)
MobilemPOS
Card, linked to e-wallet
Internet bank (e-invoicing)
Card, linked to account
41%
34%
Innovative e-commerce
“Classic”
e-com
Sources:
- e-commerce User index 2014, Markswebb Rank and Report
• Online experience: do the deal like on Apple or
Google (i.e. built-in purchase)
• Convenience: no need to remember a lot of digits &
letters
• Secure (mentally): no need to fill up card details
• Secure (visually): 3DS + additional personal controls
In ONLINE SHOPPING world card branding is disappearing
16
Client chooses better:

17. New merchants
MERCHANT is a major “customer” for payment innovations
• Merchant resists to payment innovations in
acceptance, if there isn't long-term and
transparent value (lower MDR, loyalty features)
• Any acceptance equipment brings freedom
restriction for a Merchants and exchange it to a
dependency on external factors (internet
connection, physical damages, etc.)
Customers Merchants
BanksBanks
Devices
(HW)
Devices (HW)
Issues Acquirers
Apps (SW) Apps (SW)
Card systems
Banks
MS, Chip, NFC
Alternative PS
17
U.S. and Canada based payment acceptance network, with extra
low fees (FREE for <$10, $0,25 FIX for else) and convenient
Web, Tablet and Mobile Apps
Cards acceptance enough expensive for a Merchant
BEST CASE - Dwolla

18. New competitors
Finance aggregators:
• IT start-ups, but not finance organizations
• … able to modify online products very fast , according new
trends and technologies
• … may choose Partners (banks, micro-lending orgs, payment
providers) and create value proposition combining different
finance products
• … keep marketing and advertising efforts on desired client
segment
• ... have no bureaucracy
• ... have less operational expenses
• ... have no social obligations or "historical products" which
need to be supported
In PAYMENTS WORLD banks are competing with new players – finance aggregators
BANKs should resist these expansion, by using their TOP-3 STRENGTHs:
• Physical presence – as a visible symbol of stability and reliability in customers eyes
• Accumulated customer data and behavior information - banks can successfully handle these
data forming successful product offerings, using industrial CRM
• The opportunity to buy complete solutions, technologies and even teams - banks can, though
not as quickly form a scalable and efficient IT landscape.

19. Future of payments - to be invisible
IDEAL PURCHASE:
Come in – Choose – Take away …
… Some settlement stuff (which nobody really doesn't want even to think about)
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20. О группе ОТП
Дирекция розничных бизнес - технологий, ОАО
«ОТП Банк»
Thanks for your attention!
Alexey Kazakov, a.kazakov@otpbank.ru