citi mobile update march 2010

7/31/2019 CITI Mobile Update March 2010

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CITI MOBILE UPDATE

MARCH 24, 2010

Dion F. LisleExecutive Vice President

Citi Growth Ventures


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2

Full Disclosure

I work in Citi Growth Ventures I am not a real banker I just work at a bank I worked for Obopay a mobile payments startup I belong to 12 different mobile groups on LinkedIn I have worked in technology as a non-technologist for 20 years and the

past 10 in startups.

I love gadgets (my iPad is already on order)


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Time Flies

I willGoogle

that

There isan appfor that

Elapsed Time = 1 Year


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Mobile Background


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5

Phone Interaction

SMS

160 Character limit

Not guaranteed delivery

SimpleNo download to phone

APPLICATION

Download to Phone

Requires Discoverability

High level of functionality

Brand able

App Stores changedeverythingWAP

Wireless Internet

Covers 60% of phones

Not easy to use

Doesnt require Phone

Carrier Cooperation


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6

Phone OS Wars

This is NOT the PC Wars

Eventually you will wish it was


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Smartphone Vendors


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Good Business for Apple

Apples iPhone is 6% of the marketbut 32% of profit


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Unabashed Commercial for theGreatest Mobile Device Ever

No I am not a Paid Spokesperson just a fan


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Thoughts Before Apple Launched the iPhone

Weve learned and struggled for a fewyears here figuring out how to make adecent phone. PC guys are not goingto just figure this out. Theyre not

going to just walk in.

$500? Fully subsidized,with a plan? It is the

most expensive phonein the world and it

doesnt appeal tobusiness customers

because it doesnt havea keyboard.So, Ikinda look at that and I

say, well, I like ourstrategy, I like it a lot.

Apple is slated to come out with a newphone.And it will largely fail.

The iPhone is nothing more than aluxury bauble that will appeal to a few

gadget freaks.


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12

1

Check email forUAL Alerts

2

Check Weatherfor NYC

3

Kill Time onFlight VideoGame andMusic

Check IntoHotel

Find Train fromJFK to Mid-Town

4

5

Look UpRestaurant onLocalEats

6

RechargeiPhone andListen to

Music

7Take Picturesand email to

Family

TextKidsand goto Bed

8

Fly to NYC


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13

iTunes as an App Delivery Mechanism

Total Active Apps (currently available for download): 159,611

Number of Active Publishers in the US App Store: 32,183

App Submissions

This Month (Games): 2,009 ( 84 / day )This Month (Non-Games): 14,387 ( 599 / day )This Month (Total): 16,396 ( 683 / day )

Current Average Overall Price: $2.85

Most Popular Categories1 - Books (28705 active)2 - Games (24551 active)3 - Entertainment (20656 active)4 - Education (11056 active)

5 - Utilities (9788 active)


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iPhone Drives Mobile Web Usage

Activity iPhone Smartphone Market

Any news or info via browser 84.8% 58.2% 13.1%

Accessed web search 58.6% 37.0% 6.1%

Watched mobile TV and/or video 30.9% 14.2% 4.6%

Watched on-demand video or TV programming 20.9% 7.0% 1.4%

Accessed Social Networking Site or Blog 49.7% 19.4% 4.2%

Listened to music on mobile phone 74.1% 27.9% 6.7%

Source: M:Metrics


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15

AT&T Investment Pays Off

30% of US consumers who purchased Apple iPhone 3G in the summerof 2008 switched from other mobile carriers to join AT&T,

47% switched from Verizon Wireless 24% switched from T-Mobile 19% switched from Sprint.

3G iPhone Impact on the SmartPhone Market Pre-3G iPhone Apples share was 11% Post-3G iPhone Apples share was 17%


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Not just in the USA

Japan has enjoyedthe most advancedmobile phones foryears with the

exception of Apple every phone in theirtop 10 list is made inJapan


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What Apple Taught Us

A Great UserExperience is Key

Build a CompleteEcosystem

Partner with theCarriers


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The Network

2G

2nd Generation

GSM or TDMA/CDMA

Digitally Encrypted

Digital NOT Analog

1G Signal could decay slowly

3G

3rd Generation

GSM / EDGE / UMTS andCDMA2000

Capable of Data andVoice Simultaneously

Being rolled out now

4G

100% IP Packet EnabledSmoother roaming andtransitions betweennetworks

Still mostly being

developed by standardsbodies


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The Downside to Success

AT&T has taken a great deal of grief for their network speed

Verizon took advantage of the opening with an ad that plays up theweakness of AT&T 3G

Note: The iPhone accounts for most of the traffic usage on AT&T


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20

Global SMS v 3G - Disparity

0

20

40

60

80

100

120

0% 5% 10% 15% 20% 25%

United States

Canada

Mexico

Brazil

U.K.

Spain

Hong Kong

Singapore

0

20

40

60

80

100

120

0% 5% 10% 15% 20% 25%

0

20

40

60

80

100

120

0% 5% 10% 15% 20% 25%

United States

Canada

Mexico

Brazil

U.K.

Spain

Hong Kong

Singapore

S

MSUsageSMSS

entper

S

ubscriberperMonth

3G Penetration As a % of All Subscribers

India

Czech

Philippines


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Sensitivities for Each Attribute Caching Concurrency System Throughput Thin Client: Avg,. Web

page size

Thick Client: Data refreshrate

PERFORMANCE SECURITY Encryption Intrusion Detection Code Security Role Based Security Authentication URL Spoofing Audit Trail

FUNCTIONALITY Business Rules Expectations User Experience

Product Scalability Hardware Scalability

VARIABILITY

3rd

Party Integration Change Configuration

MODIFIABILITY

Hardware Compatibility OS Compatibility Application Compatibility

PORTABILITY

Mobile Sensitivities


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Carriers Want

New Revenue Sources

Avoid being a big dumb pipe

Less churn more customer loyalty

Less Regulation

Reduction in CapEx big investment in networks

New customers often at the expense of current customers


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Mobile Money


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Mobile Money Taxonomy

Mobile Commerce Mobile Banking

M-Coupons MobilePayments

MobileAdvertising

Bank AccountServices

BillPay ByPhone

ProximityPayments

RemotePayments

P2MP2P

NFC orContactless

MoneyTransfers

P2MTransit


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A Three Level Basis to Offer Mobile Financial Services

III.

Advanced:location-based

services (LBS),contactless capability,full-featured browser,

mobile social networking

II.Progressive:

Peer-to-peer payments,

investments/trading, richerrewards management

I.Basic Consumer Mobile Financial Services:

Account balances, bill presentment/payment,marketing response, basic rewards

Service Progression

PlatformProgression

SMS

Thick/Thin

Handset

Modification

Technology Enablers

Network CapabilityHandset

Development

Most networks notyet enabled forAdvanced Services

5-10% of PhonesEquipped to handleAdvanced Services

50-60% coverageof wireless dataconnections

sufficient to supportProgressive

services

40-60% of Phonesalready equipped tohandle Progressive

Services

Most networkssupport BasicServices; SMS is astandard feature

~95% of PhonesEquipped to handleBasic Services


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Mobile today is a cluttered arena with multiple stakeholders

MobileEcosystem

Regulators TechnologyDriversFinance

Ecosystem

GTS Cards RetailPvt

Bank

Geographies


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Mobile Money Ecosystem

CardIssuer

HandsetMaker

MobileCarrier

SoftwareDeveloper

ChipsetMaker

PaymentNetworks

CardAcquirer

ProcessorCardAssociations

SIMCard

Consumer

Merchant

MobileApplications

POSVendor


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Around the World


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Across the Globe Mobile Financial Services are Growing

The number of consumers using Mobile Financial Services across the world is forecast togrow to nearly 1 Billion by 2014

15 MillionU.S. consumers use

mobile banking serviceseach month

3.5 MillionBank of America customers

are active users of BofAsmobile banking services

$61 MillionWas deposited by USAA Federal

Savings Bank customers via mobilecheck capture in only 6 weeks

$200 MillionHandled per month by GCash and Smart

Money in the Philippines by the end of 2008$140 MillionValue of transactions handledby M-Pesa in Q3 20083 Years

Before mobile banking ispredicted to surpass Internetbanking for Banco do Brasil

100% GrowthIn number of customers using mobile to

access Barclays banking services inthe U.K. in thefirst 6 months of 2009

35 MillionMobile handsets with Osaifu-Keitai

NFC payments and eWalletcapabilities in Japan

Market Leader

Market Leader

Market Leader

Market Leader

Market Leader

Market Leader


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Kenya

Kenya has a population of 40 million people

Kenya has 300,000 landlines Kenya has nearly 4 million internet subscribers Kenya has nearly 20 million mobile phone subscribers Kenya has a Per Capita income of $1,400 Kenya has nearly 9 million mobile money users

It is estimated that 40% of Kenyan Adults use the MPESAservice. MPESA has changed the financial lives of millions of Kenyans.


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The Secret to MPESAs success in Kenya

Nearly 14,000 Agents By the time you read this it has probably grown by 5%

A Human ATM Network across Kenya Rural and Urban

Reality Mom goesto an agent to pick up

the Money

Brochure Send MomMoney Anywhere


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Be an MPESA Agent

Research by: Mark Pickens, Sarah Rotman,Ignacio Mas, Olga Morawczynski


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Mobile Payments in ME and Africa to Rise to $5 + Billion in2013


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The Philippines

The Philippines has 2 successful mobile money systems Gcash offered by Globe Communications Smart Money offered by SMART Communications

Like MPESA in Kenya the Philippines relies on a network of incentedand trained agents

Unlike Kenya the central bank was very involved in the design androllout of Mobile Payments in the Philippines.

In accordance with BSP Circular 471, which was issued in January 2005,non-bank agents must first attain a Remittance Agent license to performcash in/out.

The Philippines has been a Texting country since the advent of theirmobile phones this Texting literacy made the transition much easier.


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India The RBI Weighs In

Mobile Payment in India - Operative Guidelines for Banks 2.1 Only such banks which are licensed and supervised in India and

have a physical presence in India will be permitted to offer mobilepayment services to residents of India.

2.2 The services should be restricted to only to bank accounts/ creditcard accounts in India which are KYC/AML compliant.

2.3 Only Indian Rupee based services should be provided.The RBI only took 12 pages to outline what can and cant be done withmobile payments in India.


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Osaifu-Keitai (Mobile Wallet)

Japan is the most advanced Mobile Money Market in the World !

NTT DoCoMo drove the entire ecosystem to deliver a complete MobileWallet

Get on a train, buy a soda, pay at a store It is the unique dynamics of the Japanese Market that allowed such a

complete solution to be delivered

Even with NTT driving it took 10 years 30 million users out of a subscriber base of 60 million Osaifu Keitai is accepted at 700,000 retail locations


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22%

17%

7%

27%

22%

9%

0%

5%

10%

15%

20%

25%

30%

eMoney Holder IC card Mobile

2007

2008

Prepaid and eMoneyusage (to total

population)!

21 2225

3033

38

4

4

12 12

12

12

13

14

32

21

3436

39

45

50

56

0

10

20

30

40

50

60

2005 2006 2007 2008 2009 2010

Suica, Pasmo Edy Others Total

B USD

Felica Market Size

both Prepaid(plastic) andeMoney (mobile)!

Ministry of InternalAffaires, 2009

C Media, 2006

Prepaid(plastic)

eMoney(mobile)

eMoney (mobile)Prepaid(plastic)

Yano Institute, 2008

Felica Market in Japan


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Service type Vendor Issued

(MM)

(in mobile,

MM)#shop (M)

Monthly

transaction(MM)

Charging touch point (pre-

paid) Negative points note

Edy Pre-paid

Bitwallet

(Rakuten

Group)

48.4 8.0 132.0 22.5

Credit card, Bank, POS, Charger,

Point exchange

5000 websites accept Edy for

payment. Rakuten obtained over

50% of Bitwallet shares in Nov.

2009.

Suica Pre-paid JREast 27.5 1.5 63.2

42.9

Creditcard, Bank, POS, Ticket

vending machine, Point exchange,

USB Reader/Writer with JRE credit

card, Auto top up with JRE credit

Mobile Suica requires 10USD for

annual service fee.

ICOCA Pre-paid JRWest 4.7 unavailable 49.2 0.9Charger, Ticket vending machine

PASMO Pre-paid Pasmo 13.5 unavailable 50.0Charger, Auto top up with credit card No mobile service is provided so far. Convertible with Suica.

nanaco Pre-paid Seven I 7.9 0.9 23.5 26.0POS, Seven BK ATM, Charger, IY

Card (credit card)

Charging/accept point is limited in Seven

group shops and cards.

Transaction number is the largest

among eMoney.

WAON Pre-paid Aeon 10.0 n.a. 29.0 25.3Aeon BK ATM, POS, Charger, Auto

top up from Aeon bank account

Available at McDonald's

iD CreditDocomo,

SMVC..10.0 6.4 390* n.a.

- Currently other carriers don't implementiD in their handsets. One handset can

have 2 card numbers of iD.

*Shows # of available terminalinstead of # of shop.

PiTaPa CreditRailway companies in

Western Japan1.1 unavailable 18.0 0.9

- No mobile service is provided so far.

QUICPay Credit JCB, Toyota 4.6 n.a. n.a. n.a.- AU pre-loads this into some handsets.

One handset can have only 1 card

VISATOUCH

/SmartPlusCredit MUFJ Nicos 0.8 n.a. 12.8 n.a.

- One handset can have 5 card numbers.

Total 128.5 16.8 377.7 118.5

Suica (Kanto area), Icoca (Kansai area),

and other e-money issued by train

companies are becoming interoperable

interoperatable.

eMoney Usage in Japan

Successful YesComplex - Definitely


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Other Merchants

Transportation companies

Pre-paid(cost reduction)

-Edy (SONY, Rakuten). Transaction fee atpayment. Not profitable. Rakuten got 50% ofBitwallet (Edy issuer) shares in Nov. 2009.Rakuten also bought eBank in Feb. 2009.

-Suica (JR East), PASMO and ICOCA (Bus,Subway).Reduce maintenance cost of autoticket gate and ticket itself. Now JRE isleveraging it to payments (plastic & mobile).

-Nanako and Waon (merchants). Fast cashingand reward points to loyal customers

Post-paid(not widely accepted)

NTT Docomo launched iD on Docomohandsets. Fee at transaction. They became anissuer of credit card and network provider forother credit card companies.

JCB provides its electronic credit, called QuickPay. Available on all 3 carriers.

VISA and MUFJ also provide its scheme calledSmart Plus and its convertible with VISA Touch.

JR group JR compatible

Pitapa is Post-paid

Pre-paid

Post-Paid

Pay pass is still trial in Japan

Felica Types in Japan


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Overseas Lessons So Far

Carriers offer successful services so far no banks have beensuccessful

Regulators have been both active (Philippines) and nearly invisible(Kenya)

Texting based services rule the day..so far This is self-selecting as Smartphones have not yet proliferated in

underbanked countries.

Except Japan Low ATM penetration combined with high mobile penetration

Except Japan Domestic remittances is the best use case so far.

Except Japan


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At Citi


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ATM

Primary Bank Relationship

Primary Bank Relationship

DebitCard

Money

Transfer

B

illPay

Reg

ularSavings

Aut

odepositPayroll

Mobile

Internet

ATM, Mobile and Internet channels allow Citibank to maintainstickiness with customers through their primary bank relationship

The fivepillars of

Retail

Payments andDeposits aresupported by

the 3 key

technologychannels


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First major U.S. bank to offer adownloadable banking app

For Cards-only customers,Cards opened access Oct 2008

through Firethorn app

Bank and Cards apps availableto AT&T and Sprint customersas well as to Verizon, T-Mobile

and Alltel BlackBerry users

View account info, maketransfers, pay bills, find branch/

ATM, connect to CustomerService

DownloadableCiti Mobile (Original)

(aka Thick Client)Bank launched April 2007

DownloadableCiti Mobile iPhone app

Bank launched February 2009;Cards-only access coming 4Q09

Mobile Browser(aka Thin Client or

Citi Mobile for smart phones)Bank launched June 2009;

Cards-only access coming 4Q09,behind joint front door with Bank

Text Banking(aka SMS for Short-Message Service, or

MyCiti On Demand)Cards launched March, 2009;Bank support coming 1H10

Adapted the original Citi Mobilefor use as a native app on iPhone;

support for Cards-only users isbeing added 4Q09 behind a joint

front door with Bank

Available on iTunes and on theApp Store

View bank/cards account info,make transfers, pay bills, find

branch/ATM automatically, one-touch to reach Customer Service

Built on Citibank Online and AOtechnology, but optimized for mobile

browsers

No downloads, installation, updatesor enrollmentsign on with CBOL or

AO User ID and Password

View more account info (bank /cards / brokerage), transfer funds,add payees, pay bills, self-service

options, find branch/ATM andconnect to Customer Service

Cards customers can requestbalances, recent activity, locations

Bank accounts coming 1H10, on sameshort code of MYCITI (692484)

Phase 2 (2H10):Actionable Alerts (e.g.. Minimum

payment of $10.00 is due 2/7/09 on loan574. Reply PAY to make payment.)

Building on our 2007 head start, this year is seeing an unprecedented push forward

43Citibank Online Business: Citi Mobile Citi Internal Copyright 2009Citi rou Inc.

Citi Mobile Current Banking Suite


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SMS versus Application

Be Honest which do you prefer ?


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Citi Mobile Whats Next

Location Based Services (LBS) Near-Field Communication (NFC) Peer to Peer Payments (P2P)

3 Strategic Initiatives:1 2 3

Obopay: A Silicon Valley P2P service that

allows clients and customers to send and

receive money using their mobile phones. Citi

made a strategic equity investment in thecompany in 2007 (3.1% equity stake) and

partnered with Obopay to bring Citi-Obopay

ventures to market in the US.

Tap &Pay : Worlds largest NFC trail inBangalore, India. Goal is to validate customer

acceptance of technology, pioneer definition of

and business model for contactless payment

ecosystems, and capitalize on resulting brand-

shift

Citi wants to be a leader in being Ubiquitousfor our customers and clients financial needs


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46

Tradeoffs

Customers require Easy toUse Services Customers demand

convenience from their banks

The average bank customer isNOT an 18 year old heavymobile user, but a 38 year oldlight mobile user

Money transfer products areunder attack from externalfraudsters

Mobile is an unknowndimension to a banks security

teams

Banks can not afford negativeheadlines in regards to mobilepayments.

Easy & Secure


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Mobile Risk Management

New Risk most banks dont have true mobile expertise, but it isgrowing

Old rules dont always work Citibank required a 6 digit alphanumeric PIN as compared to

Obopays 4 digit PIN.

Go Ahead Try Alphanumeric on your non-QWERTY phoneInfoSec View Business View


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Weekly project call had over 50 participants from INSIDE of Citibank To ensure compliance, the team included

ARR Audit Risk Review Compliance

Two groups legal and internal policy Information Security

Two groups Business and IT Financial Accounting Legal 2-3 lawyers every week Financial Risk Operations Marketing of many kindsAnd more

Weekly Mobile Money Project Meetings


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LBS Fraud Prevention

Imagine that you have a payment service, such as a benefit card thatcan only operate when you are near it.

500 FeetRadius

2 MilesAway

LBS BasedFraud Prevention

Rules

The systemsees aTransactionout of your

GeographicRange

You get a Text

requestingAuthorization


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Amazing.but True

A carrier in Mozambique issued tokens for airtime that becameaccepted as Currency because their national currency was devaluing soquickly.

There are other examples of airtime as currency

Nokia says Nokia should get a percentage of every transaction carriedon one of its devices.

The MPESA service failed in Afghanistan due to illiteracy No one could read the text messages

A mobile payment service in Latin America claimed 1 million users 1 million registrations led to less than 30,000 users

citi mobile update march 2010

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