Developing the next generation of payments

NeuPai Confidential

Dion LisleMobile Payments Advisor

dion.lisle@gmail.com

3 Simple Ideas

1. Payments is a business worth defending

2. Mobile is the platform that will decide the winners but the competitors come from all fields

3. Silicon Valley is the HQ of the future of mobile payments

Payments Business Pressure

New Companies

Growth of Non-Bank Payments29% CAGR

Increased RegulatoryOversight

Basel III

AML

ATF

Unbanked Growth

Mobile Regulations

Technology Advances

Customer Demands

Payments

Banks

Processors

Networks

PayPal Owns Payments ?Are Banks Ready to

accept that PayPal is the center of the mobile and internet payment universeNote: Banks are now a

footnote in the PayPal view

Paypal plans to own:Payments - PlatformPayments - InnovationPayments – X-BorderPayments - THE DIGITAL

WALLET

PayPal MobilePayPal mobile transactions show dramatic growth, increasing

nearly six-fold, from $25 million in 2008 to $141 million in 2009.

Paypal closed out 2010 with over $750 million in mobile payment volume, and more than 5 million members regularly using PayPal from mobile devices.

Paypal predicts over $3 billion in mobile payments for 2012

2008 2009 2010 2011 2012$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Mill

ions

of $

200% CAGR

Payments is Big BusinessWhat How Much

RETAIL IN PERSON

Annual Retail Credit Card Charges $ 3.2 trillion

Annual Cash and Check Spend $ 1.2 trillion

Total # of US Cards – Debit and Credit

1 billion

ON-LINE RETAIL

On-Line Retail - 2009 $348 billion

On-Line Retail – 2014 $778 billion

MOBILE RETAIL

Mobile Payments Actual in 2009 $ 68 billion

Mobile Payments Projected in 2014 $ 633 billion

• Mobile is more Important than On-Line • Mobile can replace In Person - On-Line Can’t.

Source: CapGemini

Non Bank Players Grow PayPal facilitated $92 billion in total payments volume in

2010 PayPal had revenue of $4.2 billion in 2010

Amazon’s payments business is now growing strong with a set of 10 different payment products and an entire team dedicated to dominating payments

Apple is recruiting a SV based payments team frequently sites their 100 million plus credit cards in iTunes as a differential advantage.

Apple has filed a bevy of patents on NFC

Google has hired Osama Biedier from PayPal to lead their fledgling payment efforts focused on mobile.

Google is working with a major US bank to dominate payments.

Facebook announces the only payment method on FB will be FB.Non-bank Payments are growing at 30% per year

Mobile Money Market

Mobile Commerce Mobile Banking

M-CouponsMobile

PaymentsMobile

AdvertisingBank Account

ServicesBillPay By

Phone

ProximityPayments

RemotePayments

P2MP2P

NFC or Barcode

MoneyTransfers

P2MTransit

Most likely to disrupt retail payments

Google Gets It

• On-Line commerce• Swing and a miss• Good design• No consumer uptake

• Location• Places matter• NFC based

• Lessons applied• The right partners• User experience effort• No charge to consumers

• Consumer Data• Connection to merchants• Breaking the payments and

merchant paradigm

Google’s Goals• Contextual dialog with

consumers• Driving Android sales• Beyond e-comm to POS

Outcomes

Groupon Doesn’t 10

Groupon’s recent S-1 filing provides details behind the meteoric rise of the deals space

These details highlight the issues around being deal-centric

Groupon’s CPA – Customer Acquisition Cost

12 Months

Further data shows that merchants do NOT grow their customer base with deals

VISA

VISA is acquiring innovation in the areas of payments

VISA is in a weak position as they go to consumers through intermediaries – the issuing banks

VISA like all players in payments needs to figure out a new model

VISA have great assets:Real-time payment networkGlobal brand

Just Added

MasterCard

MasterCard smartly connected with Google for their NFC Wallet

MasterCard has a variety of mobile products on the marketNone of the products have been market

changing

• MasterCard is a clear #2 behind VISA in Debit and Credit

• MOTAPS - Mobile Over-the-Air Provisioning Service- NFC provisioning system for card

payments

New Players - Square Started as a “Person as Merchant” play with an iPhone dongle

into the audio port on an iPhone

Added a consumer wallet called Card Case in May of 2011

Processing $3 million per day in payments at razor thin margins

Took in VISA investment when their market cap climbed to $220 million – now at $1 billion market cap

Square Card CaseDigital Wallet and

Receipts

Square Device Card Swipe for

Micro-Merchants

Square Device sold by Apple in store or on-line

Payments - EMVEMV = Europay | Mastercard | Visa

A standard for a chip+pin smartcard that has shown drastic reduction in fraud rates

Widely deployed around the world the US being the one glaring exception

Region EMV Cards

Adoption Rate

EMV Terminals

Adoption Rate

Canada, LatAm + Caribe

207,715,356

31.2% 3,900,000 76.5%

Asia Pacific 336,602,681

27.9% 3,480,000 43.0%

Africa and Middle East 23,003,747 17.6% 345,000 60.7%

Europe Zone (Western) 645,472,323

73.9% 10,500,000 89.0%

Europe Zone 2 (Eastern)

27,516,286 12.7% 513,600 65.4%

USA 0 0 0 0

Totals 1,240,310,393

40.1% 18,738,600 71.1%

Digital Wallets 15

Google Square Isis Visa Serve

NFC Yes No Yes Yes No

Merchants Large Small Large   No

Partners Citi/MC Apple ? Carriers + Small BanksAmerican Express

Network Mastercard MC/VISA Discover +  VisaNetAmerican Express

Open Yes No Maybe Sort of No

All Smartphones No Yes No Yes Yes

All Phones No No No No Yes

Credit Yes Yes Yes Yes No

Debit TBD Yes Yes Yes Yes

Loyalty Yes Yes Yes Yes No

OTA Provisioning Yes No Yes No No

SIM Control Yes No Yes no No

Strength Partners Easy to use Carrier Reach Bank Channel Prepaid

Weakness Limited phonesSmall

Merchants Limited phones Bank Channel Reach/Brand

Reality from 1-10 8 9 5 5 7

Mobile Invests in Mobile Money

Nokia partners with Obopay to offer Nokia Money Including a $35 million investment in Obopay Nokia just opened a new Silicon Valley center with 156,000

square feet and a SV based CTO

Ericsson’s infrastructure team adds a mobile payments business. In flight for the past 12 months “To take a driving role in mobile P2P.” Ericsson owns over 200,000 square feet in development in

Silicon Valley

ISIS is officially launched by AT&T and Verizon with Discover and Barclays. ISIS is investing billions in re-inventing payments with a non-

VISA / MC network.

Nokia Siemens Networks and MoreMagic Solutions Partner to Deliver Mobile Commerce and Financial Services

Silicon Valley StartupsCarrier Billing companies such as Boku and Zong

have billed hundreds of millions of dollars in virtual goods and have plans for real goods. Both companies have deals with Verizon Zong has a deal with Facebook for Facebook credits

Square is processing tens of millions in payments for small merchants with big plans to tap into social money.

Shopkick is a startup focused on connecting merchants to their customers for offers and loyalty.

2009 2011

Square $20 million $220 million

Shopkick $10 million $80 million

Zong $25 million $115 million

Boku $25 million $100 million

5X increase in 2 years

Company Valuations

* Valuations are estimates based on knowledge and rumor

$1 Billion

Its Commerce Not Payments

Physical Retail

On-Line Retail and Identity

Transaction Data

Location Data

Personal Data

Preferences

Affinity

ServiceProviders

Contextual Relevance

Consumer Chooses

Brand Preference

Device/OS

UXBrand

experience