Proprietary & Confidential1

NFC: Advancing the Ecosystem

June 2012

Proprietary & Confidential2

Our Background

• Strategic advisory & execution in mobility since 2001

We provide:

1. Assertive mobile and innovation strategies

2. Software partner ecosystem outreach

3. We manage B2D (Business to Developer) relationships to accelerate your

technology innovation

• Connecting over 1500 software partners to date with the worlds leading corporations

• Offices in China and the USA

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Network of Software Partners

Offline & Automated Products

Mobility Strategy

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B2D Agency – Innovation in Technology

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Promote to our network of qualified software partners

60+Countries

4000+Software Houses

~12Developers/

ISV

~50KDevelopers

1,500Development Houses connected with OEM’s, Enterprises and Brands globally

60Countries actively serving Global Fortune 1,000 companies

10,000Successful applications for your benchmarking and competitive analysis

Leverage relevant Features

With appropriate technologies

29%AMERICAS

36%EMEA

35%APAC

On the right devices

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Significance of China: Population Comparison

Administrative Regions of China, labeled as countries with

Equivalent Populations

Source: Strangemaps, China; M. Rosenberg (about.com) on population size China

Total population of China

1.3+ billion (mid 2011)

Proprietary & Confidential6

China in numbers

1.3BILLIONSPOPULATION

485MILLIONSWITH ACCESS TO INTERNET

963MILLIONS

MOBILE SUBSCRIBERS

655MILLIONS

URBAN (50%)

135MILLIONS

MORE ININTERNET CAFÉ

44.5xGROWTH

IN GDP SINCE 1985AIM TO SURPASS

USG DP - 2020

534kMILLIONAIRES

115BILLIONAIRES

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Significance of China: GDP Comparison

Source: The Economist, Country Equivalent Interactive China Map, Wikipedia on GDP total in China, IMF on EU and US PPP capita GDP.

Less than 50

50 < 120

120-200

200-400

400+

GDP 2010

in $ billion

Total GDP of China

2010: 5879 $ billion

2012: 7740 $ bn est.

Per capita 2011: $5,184

(nominal)

$8,394 (PPP)

US per capita 2011:

$48,387 (PPP)

EU per capita 2011:

$31,607 (PPP)

Proprietary & Confidential8

Estimated NFC payments in China

China Market Forecasts

• Increase driven by the nation’s huge number of cell phone subscribers, 900 million in 2011.

• Presently, more NFC handset add-ons have been shipped than actual NFC-enabled mobile handsets.

• Shipment of bridging technologies is expected to grow to 6.5 million in 2014

• Shipment of full NFC phones in 2014 is predicted to rise to 7 million.

US$ 8 Billion

2014

900m or 11,25 % in 2011

ABI Research, Mobile Payments in China

Proprietary & Confidential9

Overview of NFC in ChinaN

FC in

Ch

ina

Situation • 960 (!) million mobile subscribers -• Turnover to NFC phones takes time

• Consumers change mobiles every 40 months, • Smartphones every 29 month.

• Chinese consumer acceptance still uncertain, because security is a concern. • NFC business driven by telco & banking industry, both having large government involvement.• In sync with global standards• Contactless POS terminals are being deployed, creating a network of physical merchants• SIMpass has captured the market and is driving the momentum with their hybrid solutions.• Consensus around SWP as leading option for Secure Element.

Key Stakeholders

• China Mobile, China Unicom, China Telecom (3 MNOs serving over 960 m subscribers)• China Unionpay• UICC based technology governed by MIIT whilst other technologies governed by PBOC

Challenges • PBoC & MIIT• Consumer adoption (e.g. security issues)• Proprietary security technology & standards

Source: MobiThinking for subscriber numbers: On phone replacement: Ericsson Survey 2012.

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China NFC Ecosystem

RegulatorsMNOs

Others Industry Players

• Issue SIM cards for NFC systems

• Provide support,

• Back-end services

• Partner with Financial Institutions to sell NFC to consumer.

• Do NOT subsidize or sell handsets.

• CIITA(China Information Industry Trade Association),

• Ministry of Industry and Information Technology (MIIT)

• People’s Bank of China (PBoC), governing the m-payments industry.

• NFI must obtain License from PBoC before engaging in payment & settlement services

• Based on the infrastructureand rules given by the otherstakeholders, technicalequipment manufacturersand suppliers, consumerapp, security or paymentservice developers

Financial Institutions

• 2.4 billion bank cards;

• serving 400+ financial institutions

• Loinking 1.2m ATM’s of 14 banks.

• The Bank of China, the Agricultural Bank, Construction Bank and the Industrial and Commercial Bank of China are the top 4 banks

• Combined individual accounts of over 600 million (>58% marketshare in 2011).

CIITA

MIIT

PBo

C

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Key Technological Drivers

PBoC• Payment Cards to be converted to Smart Cards

• 3.3M POS terminals updated to support contactless payment

13.56MHz selected as national contactless

payment standard, CIITA: 05/2011

Consumer Adoption driven byAvailability

Security

• Solid Base of POS Terminals for NFC • OEMs leaning towards Unionpay for final NFC technology decision • It comes down to the merchants

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Unionpay versus VISA

UNIONPAY 400 banks

% of Global

CARDS

(2011)

PROFIT

(2011)

ATMs

(2011)

Revenue $ not available

Net Profit: $3.65 Billion

Revenue $9.2 Billion

Net Profit: $ 1.6 Billion

72,000 (2009)

in 90+ countries1.93 million in 200 countries

VISA 15,200 banks

28.6 %

Source: http://pymnts.com/news on Unionpay and VISA cards usage; websites VISA; Unionpay, www.paymentlawadvisor.com

29.2 %

China UnionPay is at the center of a NFC standardization initiative in China. The technology they roll-out into the mass-market will probably be used by the majority of ecosystem players (result from interviews conducted). They have the leading position in China, as the sole domestic inter-bank bankcard processor, operating the sole domestic bankcard acceptance in China due to local regulation.

1.94 billion cards issued 1.9 billion cards issuedOther Source: 2.4 bn cards

Proprietary & Confidential13

China Unionpay NFC Projects

Key Player China Unionpay

Project Banking Phones with Micro-SD

Micro-SD mobile payment Micros-SD payments and mobile point of sale terminals

Micro-SD and Mobile Point Of Sale Terminals with Banks

Activity NFC-enabled Jiang Yu banking phones for Public transport, restaurants & convenience stores

First trials of Micro-SD payment

Confirmed plans to deploy microSD cards. Mobile POS essential in a region where agriculture is the main industry.

Refitting and equipping POS

Location Chongqing Different regions in China Sichuan Across China

Launch 09/2011 Est. 2011 Est. 2011 2011

Users 9,000 100,000 500,000 300,000-400,000 equipped, 700,000 retrofitted

NFCDevice Type

• MicroSD• HTC

• MicroSD• NFC handsets

• MicroSD (GoTrust SWP)• In HTC Incredible w/ NFC

• Micro-SD

Partners • Chongqing Rural Commercial Bank• HTC• Datang• TCL

• China Construction Bank• Smaller Regional Banks• HTC• Datang• TCL

• GoTrust SWP • China Construction Bank• Datang, HTC , TCl, K-Touch, 2 otherhandset m.• Wuhan Tianyu Information Industryand Go-Trust/Eastcompeace + 6 otherfor Micro-SD

Source: Exicon

• CUP is focusing on 13.56 MHz with Micro SD cards• Strong relationship with HTC and DATANG whilst growing ties with TCL and GoTrust

• User numbers continue to grow significantly

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3 Major Network Operations & User Amounts

Source: International Telecommunications Union.

CHINA MOBILE 628 M

USERS

(8/2011)

REVENUE

(1-6/2011)

ARPU

(1-6/2011)

US

ER

S B

Y A

UG

2011 158M Using 2G

JA

N –

JU

N 2

011

158M Using 2G

Revenue $391 Billion

Net Profit: $413 Million

Revenue $159 Billion

Net Profit: $96 Million

JA

N –

JU

N 2

011

$10.9 $7.3

CHINA UNICOM 186 M CHINA TELECOM 113 M

40.31M Using 3G 28.76M Using 3G

158M Using 2G158M Using 2G

25.61M Using 3G

87M Using 2G

Revenue $188 Billion

Net Profit: $39 Billion

$8.2

APRU = Average Revenue per user

Proprietary & Confidential15

Operator NFC ProjectsKey Player China Mobile China Unicom China Telecom

Project Date

SIMpass launch RF-SIM launch NFC Trial Shanghai Expo Beijing SIMpass Ticketing for transit

1st trial Ticketing

CT SIMpass project

Activity

Buses, taxis, parking facilities & restaurants

Ticketing & payment (entertainment), w/ 5,000 merchants

Ticketing, w/ 100 merchants, incl convenience stores, restaurants & movie theatres

15,000 POS terminals in Expo 2010 & city, incl. SMs, restaurants, CVS & cinemas

2,000 payment & ticketing locations, incl gas stations, restaurants, SMs & cinemas

Ticketing (transit)

Dual-interface SIMs, enabling fare pymt, ticketing

Payment, student ID, transport, w/ 11,000 merchants

LocationHangzhou Shanghai, Beijing &

OtherXiamen Shanghai Beijing Shanghai Chongqing Nanjing & Jiansu

Launch Date

3/2010 11/2009 7/2006 2011 05/2010, 01/2011 (com.)

01/2009 12/2008 12/2009

# of Users>50,000 >2M RF-SIM orders 100 5,000 + merchants 1,000 (initial) 5,000 phones

shipped10,000 700,000 SIMpass

shipped

NFCDevice Type

SIMpass RF-SIM Nokia 3220,Nokia 6131

RF-SIM SIMpass HedyShanghaiFudan

Changhong DG28 & F4, SIMpass

SIM-pass

Project Partners

Hangzhou CitizenCardHangzhou City 360°Card (local transit payment app)

China MobileExpo 2010 Organizers

E-Tong Card(transit farecollection)

Bank of China Bank of Communications (UnionPay-PBOC 2.0 contactless)

Beijing Municipal Admin.,Communications Card (BMAP card)

Shanghai Transportation Authority

Congqing, Yucheng Transportation

Nanjing CityNajing ZhongshanInstituteYangzhouTechnologyInstitute

Other Partners

Watchdata, Nationz Technologies, Eastcompeace

Fudan Microelectronics (chips)Hedy (largest local phone manufacturer)Changhong (Consumer Electronics Company)Watchdata

Watchdata, Lakala, Yifutong, Enpay, YeopayCommercial Partners:Nokia, Philips

Status• Pulled out of RF-SIM Cards @ 2.4 GHz due to technical and

cost reasons, use SIMpass & SIM-based NFC • Signed GSMA LOI

Limited success with RF-SIM, Focus on two solutions SIMpass & Sim-based NFCSigned GSMA LOI

SIMpass focusPlanning Disney andMicrosoft Lab NFC trials

Source: Exicon research & Smart Insights, NFC gains momentum in China 2011

Proprietary & Confidential16

Summary

NFC in China

• NFC is expected to reach the tipping point by end 2012.

• 4m+ POS terminals with contactless interface supporting 13.56 MHz

• Larger scale contactless mobile payment commercial rollout, led by the

MNOs.

• Anticipating VERY LARGE scale NFC roll-out over the coming years, lead by

MNOs and CUP.

• Key industry players waiting for network of merchants

• Market views China Unionpay as “leader” in this category.

Proprietary & Confidential17

CEO / EXICON

Stefan Rust

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