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April 2012

Mobile Payments Ecosystem Overview

Accenture has a complete set of capabilities to cover the mobile landscape for our clients

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Managed services applications/platform

Mobile consulting

Vertical expertise, Deep client relationships

CHT Financial Services

Products Resources Health & Public Service

Business Technology

Mobile Systems Integration

Accenture Mobility Operated Services (AMOS)

Applications – build and test Accenture Embedded Mobility Services (AEMS)

Network

Support and service for mobile applications

• End-to-end solution provider • Strong vertical industry practices specializing in cutting-edge

areas • Leader in the Communications industry • Cost-effective managed service platform (AMOS)

2

Examples: Payez Mobile (France)

Capture Barcode

NFC phone touched

Program start Read barcode Identify payment details Get Users paymentPIN Show payment confirmation

Program end

Mobile phone capturing Barcode Mobile application processing details

Mobile phone as passive NFC device

Mobile phone as active NFC device

Program start Read NFC ID Log user activity Bill service

Program end

Backend application identifying registered user

Program start Read NFC ID Log user activity Bill service

Program end

Mobile application capturing

Example: Oyster card

NFC phone initiates

Mobile proximity payments

Examples: Starbucks (USA)

Consumer-to-business mobile payments, at POS (physical or virtual) will become a major transaction segment

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The Cloud for Mobile Payments

4 Copyright © 2011 Accenture All Rights Reserved.

1

10

100

1,000

10,000

100,000

1960 1970 1980 1990 2000 2010 2020

Mainframe

Minicomputer

PC

Cellular and Internet

Mobile Cloud

1B+ Subscriptions

10M+ Units

100M+ Units

? Connected Devices

Num

ber o

f Dev

ices

Wor

ldw

ide

(M

illio

ns in

Log

sca

le)

Source: BusinessWeek, eTForecast, ITU, ITU-ITC, Winston (1998) pp.236

ABI Research believes that the emergence of the Mobile Cloud/ Web, is a disruptive trend in the mobile industry. Mobile Cloud eventually will overtake native and downloadable applications as the primary type of mobile application. Source: ABI Research - Mobile Cloud Computing, July 2009

Mobile Barcodes will facilitate an active dialogue between the Merchant and Consumer

5 Copyright © 2011 Accenture All Rights Reserved.

*Source: “Mobile Barcode Trend Report,” ScanLife, September 2010

UPC Scans: Top 10 Product Categories Scanned*

Health and Beauty, 21,2%

Grocery, 14,4%

Books, 12,6% Kitchen,

9,2%

DVD, 6.4% Electronics, 6.2%

Toys, 4.9%

Music, 3,7%

Home Improvement,

3,6%

Video Games, 3,6%

Office Product, 3,3%

Sports, 2,2%

Other, 8.6%

Barcode QR Code

Datamatrix

Mobile Barcode Trends*

• Mobile barcode scanning is up 700% in 2010 • There were more barcode scans performed in a

single month starting in July 2010 than in all of 2009

• 1D (UPC) and 2D (QR) codes are being scanned equally

• Linking to a website is the most popular action delivered by a 2D barcode scan, with 85% of scans

• Health and beauty products were the most popular items among 1D (UPC) scans, with 21%. They were followed by groceries (14.4%), books (12.6%) and kitchen items (9.2%)

• Over 45 countries have scanned barcodes • Android was the most popular smartphone

platform, with 45% of barcode users. This is attributable to the pre-loaded barcode scanners on some devices and support from carriers like Verizon

Mobile NFC – Secure Element (SE) Implementations

Card schemas in principle support all choices, but preferred option is still unclear: SIM-based approach expected to be adopted mainly in case of cooperating Mobile Operators,

actively issuing NFC SIM cards and investing in co-marketing activites Micro-SD with RF onboard is the preferred short-term option by Visa, however:

Is not working in handsets with metallic covers or battery (not transparent to RF) Visa is testing handsets to provide a list of “certified” phones to issuers

Micro-SD without RF onboard is considered as the preferred long-term option by Visa Europe NFC stickers considered interesting by Mastercard and being trialed by NA issuers (Citi) and is

attractive due to higher ‘branding’ and marketing potential and ease of implementation (but limited functionality)

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NFC Services include payments, advertising, access control, information, sharing, and ticketing and transport…. “Mobile Transactions”

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Payment (Coupons and

Loyalty)

Promotions, Advertising

Access Control & Security

Other Ticketing & Transport

Sharing

Information, Navigation,

and Tracking

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Juniper predicts that approximately 570 mill NFC-enabled phones will be shipped. Two-thirds will be used for NFC payments by 2014.

Juniper defines a mobile payment as “payment for goods or services with a mobile device such as a phone, PDA, or other such device.”

By 2014, 17% of all mobile subscribers will have an NFC-enabled phones (In Japan, approximately 15% of all mobile users use FeliCa functionality)

Initial usage of NFC-enabled phones for payments will be low at around 26 mill phones, but will ramp up over 17x within 4 years with a forecast of 430 million by 2014

Note: Juniper does note that there are additional interim users who will use non-mobile technologies such as stickers for payments as well. The total number of users using these interim technologies such as stickers will be 70 million by 2013. The number will decrease thereafter as mobile phones with NFC chips become more prevalent.

NFC-Enabled Mobile Phones used for Payments (in millions) 2009 2010 2011 2012 2013 2014

Americas 0.0 1.6 5.9 24.0 64.3 115.4 Europe 0.0 1.0 4.5 21.2 65.9 126.0 Asia 18.3 22.6 35.4 65.3 98.4 144.3 Total 18.37 25.5 46.7 116.3 249.7 431.2

NFC Mobile Phones Shipped (in millions) 2009 2010 2011 2012 2013 2014

Americas 0 3 18 54 102 141 Europe 0.03 1.4 11.8 44.8 110.2 151.3 Asia 6.62 11.8 34.6 85.8 148.2 208.3 Total 6.7 16.2 69.6 210.2 412.4 573.7

0

100

200

300

400

500

600

2009 2010 2011 2012 2013 2014

Asia

Europe

Americas

Global Number of Mobile Phones Shipped with NFC

Source: Juniper Research

0

50

100

150

200

250

300

350

400

450

2009 2010 2011 2012 2013 2014

Asia

Europe

Americas

Global Number of NFC-enabled Mobile Phones Used for NFC Payments

(in Millions)

Source: Juniper Research

Source: Juniper Research

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0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2007 2008 2009 2010 2011 2012

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,000

2007 2008 2009 2010 2011 2012

Mobile Payments Market Sizing and Trend Analysis We analyzed both global indicators to develop the market size as well as to understand the opportunities.

High adoption is evident in markets where the mobile device serves both as a banking and a communications solution

Market anticipated to grow to 4+ billion transactions per year, with pre-paid top-ups (prepaying for mobile minutes) driving growth

CAGR = 105% (2007 – 2012)

In millions Number of Mobile Payment Transactions by Region

Latin America Eastern Europe, Middle East, Africa Asia Pacific and Japan North America Western Europe

Glo

bal M

arke

t

125 380 851

1,607

2,817

4,496 Number of Global Mobile Payment Transactions (by Type)

In Millions

Other Bill Payment Money Transfer Ticketing Merchandise Pre-Paid Top-Ups

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Accenture : Technology Forwards Research – February 2011 •The most common commercial application of mobile phones is checking bank account balances. • Nearly 20% of “tech forward” consumers in the global survey sample report having made purchases in a store using their mobile phone within the past six months, comparable to the share of these consumers who have made purchases by check.

9

Hotspots of activity, volume and growth are becoming apparent in consumer payments

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Mobile Remote

Mobile/contactless Proximity

Consumer to Machine

Person to Person

Device to Business

Consumer to Business B.

Internet

A.

D.

E.

F.

Payment Channel

Consumer Transaction Type Payments Hotspots Revenue Opportunities

Increased transaction volumes New transaction fees New products and services

Hot spots

C. Examples A. MPESA B. Paypal C. MoBank D. UK contactless rollout E. “Gold-to-Go” F. Smart metering (EDF)

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Successful next generation payments solutions will be those which are of equally high interest to both senders and recipients

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11 Level of fulfilment of receiver needs

Leve

l of f

ulfil

men

t of s

ende

r nee

ds

L M H

L M

H

Integrated contactless mobile device

Virtual account based payments Biometric

payments

Contactless cards

EFT Payroll and insurance cards

E-invoicing; Desktop software generated files

Integrated bill payments

Cash Cheque

Online banking

ILLUSTRATIVE Next generation payments

= business driven

= technology driven

= established

11

The Exploding Market for Mobile Payments Is a Complex Ecosystem

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Handset Manufacturers

Consumers

m-Commerce Service

Consumer reaction among smartphone users:

Retailers

Combining loyalty cards with mobile stored value services and mobile offers and vouchers; redemption at POS

Leading global handset manufactures are building out assets and services around mobile wallet / commerce; New patent filings; aggressive hiring

Mobile operators are uniting to offer differing flavors of mobile commerce applications and support OS specific apps as well

Mobile Network Provider

Visa is testing a mobile technology that transforms many smart phones with a microSD slot into a Visa payment device

Use your phone at checkout to make Payment;

Pure-play start-ups and evolving payment systems gain traction in emerging marketing

Starbucks

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Innovation • Mobile Loyalty, Mobile Payment

• Starbucks nationwide plus Starbucks Stores in over 1,000 Target stores across the U.S., now are capable of mobile payments at the point-of-sale.

• Customers with a BlackBerry® Curve, Tour or Storm smartphone, Apple® iPhone®, or iPod touch® and the Starbucks Card Mobile app can now experience the fastest way to pay at participating Starbucks locations.

• To experience mobile payment at participating Starbucks locations, customers just need to download the free Starbucks Card Mobile app on their supported mobile device. Customers can then swipe their mobile device at the register to pay for their purchase.

• The app produces a 2-D barcode that users hold over a countertop scanner to make purchases. In addition, the app allows customers to manage their card account, reload their card balance directly from their smartphone with any major credit card, check their My Starbucks Rewards status, or find nearby Starbucks stores, including those that accept mobile payments.

Description

Remote Mobile

Payments

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Osaifu Keitai (Felica) case

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• Wireless communications technology developed by Sony • Short-range (<10 cm) • 13,56 MHz, 212 kbps transfer rate

• Mass deployment of Felica cards started in 2000 (subway and train transportation, Tokio area)

• Felica deployments also in Hong Kong, Taiwan and Singapore

Felica technology and contactless cards

• In 2003 NTT Docomo allied with Sony forming Felica Networks • NTT Docomo vision: handsets to substitute cards, vouchers, ID

and loyalty cards, bringing added value through mobility • “Osaifu-Keitai” (wallet phone) with Felica chip launched in 2004

• Mobile Felica technology also licensed to KDDI and Vodafone (today SoftBank)

Felica Mobile

• NTT Docomo had a pivotal role (investor) together with Sony (technology provider)

• Operator-driven approach, however the payment platform is open and multiple schemas are available

• Prepaid: EDY, Pasmo, Suica, etc. • Credit: Dcmx, JCB, Visa, Mastercard

The Felica Mobile ecosystem in Japan NTT Docomo investments and participations • Felica Networks (TSM): 37% • Bitwallet EDY (prepaid wallets): 15% • Sumitomo Mitsui Card (e-credit cards,

issuing and acquiring): 34% • FamilyMart (convenience stores): 3%

Osaifu-Keitai

Mobile Payments

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Jibun Bank Highlights

Mobile Banking services

“A joint venture between telco and bank creating a Mobile Bank”

“Mobile phone penetration levels in the bank's active customer base are near 100 percent”

Takeo Tohara, president and CEO

Jibun Bank Corporation has established a Mobile Bank through a joint venture between KDDI (Telco) and the Bank of Tokyo- Mitsubishi UFJ, Ltd.

Mission: become customers’ most familiar bank, by providing high-quality financial and payment services and operating only on the mobile channel

Unique Jibun Bank products: – Quick account opening – Jibun Bank Passbook – Mobile phone number bank transfers – Jibun Bank payment service – Charging electronic money – E-mail notification service – Jibun Bank loans

Mobile Banking

Jibun Bank

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Bankinter

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“Mobile money transfer easy like sending an SMS”

Bankinter

Mobile Banking services

Highlights

■ Hal-Cash is a service offered by Bankinter to send money instantaneously (no charges, no CA needed by the receiver) from mobile phone, telephone-banking, and internet, to the mobile phone of anyone you want

■ The cash withdrawal can be made from any of the ATM’s of the 12 banks associated to HAL, in any place in Spain, Ecuador or Morocco (extension planned also in USA and Poland)

Steps to carry out a transaction with Hal-Cash by mobile-banking are:

- The sender applies through his mobile banking: beneficiary’s mobile number, amount to send, secret code

- An SMS is sent to the beneficiary with the amount sent and code to enter in the ATM

- The beneficiary carries out the transaction in an ATM by typing his mobile number and the secret code

Mobile banking screens

Hal-Cash geo extension

Remote Mobile

Payments

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European Mobile Money Schemas

SUCCESSFUL SERVICES • Parking • Transportation and ticketing • Online gambling and gaming • Vending machines

UNSUCCESSFUL SERVICES • Retail mobile payments, including NFC • Mobile authorization for online

shopping • Domestic money transfer (P2P)

RECURRING ISSUES 1

Lack of economy of

scale 3 Lack of

inter-operability 4 Merchants’ acceptance 2

Unadequate investments /

cash flow

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North American vs European Approach

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USA: “ISIS” schema o Driven by Verizon, AT&T wireless and T-

Mobile

o AMEX, Visa, MasterCard, Discover

o Full Mobile NFC ecosystem

o First pilots planned Q2-2012

Germany: mpass@POS o Driven by Vodafone D2,Telefonica O2 and DT

o Large scale pilot with NFC stickers planned

Q2-2012

o Rely on SVA/wallets refilled through DD (Direct

Debit)

o Operators looking for a wallet processor /

Trusted Party with Issuing license

18

Handset Manufacturers Augmenting their business with payments

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The Cash on the table in North America

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Micropayments: Micropayments are transactions under $5 and represented $1.7 trillion dollars of consumer spending in the US in 2008. The rates charged to merchants for facilitating credit card transactions for micropayments have traditionally been too high, making it unprofitable for merchants to accept credit cards. In recent years, payment companies have recognized the unmet need, and developed payment solutions for micro-transactions. However, these solutions have primarily been focused on monetizing digital content in the online channel, leaving micropayments in the brick and mortar channel a largely untapped opportunity. Mobile payments can capture this market if rates are low enough and use cheaper and more flexible internet-based payment processing infrastructure developed by companies like Revolution Money (acquired by American Express in Q1 2010). “Emerging Payments – The Changing Landscape” Federal Reserve Bank of Boston. April 2008

As mobile payments grow the electronicification of cash will accelerate

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Mobile payments will grow significantly over the next years, with SMS payment solutions accounting for the highest volume of mobile transactions

NFC is projected to be the fastest growing m-Payment technology

Source: Market Insight: Mobile Payment, Gartner 2010

Number of global m-Payment transaction volume (Forecast by Technology 2007-2014, in million)

Total m-Payment transaction value (Regional Forecast 2007-2014, in USD M)

m-Payment market trends

m-Payment users will increase globally from 70.2 M in 2009 to 339.8 M in 2014

Asia, Eastern Europe and the Middle East and Africa (MEA) currently lead the world in mobile payment adoption. Combined, they will account for 81% of the global transaction volume and 69% of the value in 2014

2,201

3,572

1,270

679

440

266

167

366

191

+64%

2014

11.943

7.324

607

2013

7.800

4.967

2012

4.854

3.226

2011

2.873

1.998

2010

1.635

2009

837

2008

384

2007

128

SMS NFC USSD WAP/Web

020,00040,00060,00080,000100,000

2014

2013

2012

2011

2010

2009

2008

2007

Asia/ Pacif EMEA Western EuropeNorth America Latin America

WAP: Wireless Application Protocol ; USSD: Unstructured Supplementary Service Data; NFC: Near Field Communication; SMS: Short Message Service

Source: Market Insight: Mobile Payment, Gartner 2010

A new ecosystem between merchants and consumers that will potentially disintermediate traditional payment providers

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Consumers Mobile Network Operators

Retailers Handset Manufacturers Mobile Commerce

Sells goods & services

Key:

Merchant Merchant Acquirer

Payment Scheme

Payment Issuer

Channel Enabler – Mobile

VAS Provider

Network Services Customer

Offers electronic payments services to Merchants

Rules and markets the payment circuit

Issues payment instrument to its customers

Enables mobile payment VAS (e.g. OTA, Secure element, Mobile Payment app)

Offers network connectivity to his customers (voice, data)

Purchases goods & services

Bank Traditional e-Payment players

Bank All Telco's Traditional e-Payment players

Telco Partner Bank Traditional e-Payment

players

Telco Operator Traditional e-Payment players

Telco Operator All banks Traditional e-Payment players

Bank MVNO

Bank-centric

Partnership

Telco operator-centric

Telco Payment Institution

Typical revenue sharing in e-payment process

There are several models that TD should investigate. The economics of these new ecosystems are still developing

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Ecosystem: possible business models

1

2

3

5

Possible Business Models

4

BANK TELCO 23

Examples

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