The Future of Mobile Payment Christopher Boone

President & CEO, Cimbal Inc. E: chris@cimbal.com

T: (650) 743-2732

September 24, 2013

Who is This Guy? Christopher Boone President & CEO, Cimbal, Inc. •  20 years global experience in corp/

product development, inv banking, ecommerce and P&L management

•  Senior roles: JP Morgan, Excite@Home, AppCentral, Visuvi, Price Waterhouse

•  BS Pre-Med/Physics, Notre Dame; JP Morgan Executive Finance Program (Harvard, Wharton, Columbia, NYU)

•  Lead inventor on 12 patents in mobile payment, financial processing, virtualization, network security

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Mobile Payment 101

Let’s make sure we are all on the same page...

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Mobile Acceptance is NOT Mobile Payment

Acceptance Payment

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Mobile Commerce is Not the Same as Mobile Payment

• Mobile payment means using the mobile device as the payment token instead of a plastic card, check, or cash

•  Easy way to remember: if you can do the same thing on a computer browser, its mobile commerce

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Why payment?

Why mobile?

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Transaction Markets Represent the “Law of Large Numbers”

US Market figures. Source: Fed Survey 2010. 7

Transaction Markets Represent the “Law of Large Numbers”

US Market figures. Source: Fed Survey 2012. 8

$36.9

$3.8 $1.5

$USD Trillions ACH

Credit Cards

Debit Cards

0

200

400

600

800

1000

1200

2006 2007 2008 2009 2010 2011 2012

($) B

illio

ns

U.S. Annual Credit and Charge Card Payment Volumes

Visa MasterCard American Express Discover*

Mobile is the Lifestyle Device of Choice, Globally

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iPhone: Fastest Consumer Growth in History

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iPod Changed Music iPhone Revolutionized Telecom

iPad Growth 3x iPhone Changing PCs

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Global Smartphone + Tablet Installed Base Exceeded PC Installed Base in Q2 ‘13

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Mobile + Tablets = 24% of Online Shopping Black Friday 2012 (vs 6% 2010)

iOS 4x > than Android

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59% CAGR

Android ‘Phone’ Adoption Ramped @ 6x iPhone!

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Android has a Major Fragmentation Problem

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Right Now It’s a Two-Horse Race: iOS and Android. Everyone Else is Toast.

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iOS is Where the Money Is Cross-Platform Revenue Comparison: iOS vs. Android

12%

•  88% of total mCommerce volume

•  iOS users spent 18% more on average

•  Android was 24% in

2010

iOS Spend c2012

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ü  Multi-Trillion dollar payment market…

ü  85% of the world has a mobile device…

ü  Explosive mobile adoption trends…

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Something Doesn’t Add Up

So what’s taking mobile payment so long?

Payment Innovation Lags Technology by 15 Years!

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In History of Mobile Payment, Many Have Tried but No One Got it Right

Ø No benefit to consumer Ø Require additional hardware Ø No targeted promotion Ø Disjointed user experience Ø Single channel limitation Ø Limited to one payment tender Ø E-receipts limited to summary

information

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EMV Global Penetration Today… 2015 US Mandate Closing Fast

Source: Richard Detura, Managing Director, Citigroup Global Consumer Fraud Risk Management

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The Most Vital Key to Any New Payment Success

Merchant Adoption

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Crucial to Any New Payment Technology Merchant Adoption

Which makes MCX all the more interesting!

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What do Merchants Want?

1.  Sales – increase sales revenue 2.  Loyalty - repeat sales, loyalty to brand 3.  Data – verified customer information 4.  Security – fraud reduction

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Technologies •  NFC •  RFID •  Barcode •  Bluetooth 4.0 •  Watermarks •  Status quo

VS

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The Good •  “Tap and go” simplicity •  No network connection required

The Bad •  Awful consumer experience to set up •  Expensive to deploy •  One financial instrument only •  Requires NFC enabled handset

approved by telcos •  Inflexible in long term

The Ugly

•  Denounced by Mike Cook, Treasurer Wal-Mart “Godfather of payments”

•  Closed ecosystem •  $0 billion today •  <1% addressable handset market

To NFC or Not to NFC That is the Question

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The Good •  Multiple apps, global standards •  Empower consumer with choice •  100% addressable smartphone/tablet

market •  MCX rumored to use barcodes

The Bad

•  Requires network connection (WiFi or carrier)

•  Ugly •  Multiple formats (DataMatrix, QR,

PDF417, Aztec, etc.) •  Consumer confusion

The Ugly •  QR is not truly open source •  If code is on phone, security can be

questionable

Barcode: Interim Solution or Long-Term Winner?

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Wallet to be Re-Imagined •  Over 600 Million credit cards

in use in USA •  Average American carries 4

credit cards PLUS

ü Check cards ü Loyalty cards ü Coupons ü Cash

•  Average credit card borrowing rate is 18% vs. 2.8% 10-Year US Treasure note yield*

Source: *Credit Card #s per Federal Reserve Bank of Boston, Credit Card interest rate per Indexcreditcards, 10-year Treasury yield are 01/31 averages, per Dept. of Treasury 28

“Asset-Light Generation” Wallet

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The Economics of Mobile Payment

•  Card-Not-Present rate ü Card organization “contactless

protocol” ü  Potential for new interchange class ü Google Wallet subsidizing difference

between CNP and CP rates; ISIS will not.

•  Value-add ü  Targeted offers – GPS (where you

are) + personal information (who you are, what you buy)

ü Digital coupons online to offline ü Data

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Winning Mobile Payment Solution Will Include

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Authentication: Leverage the Capabilities of the Device

ATM/Kiosk Access via Mobile Device – No Card, No Spoofing!

•  Enhanced KYC •  Mobile device + PIN code •  Multi-factor authentication •  Cost effective •  Reduce risk •  Easily integrated into ATM/

kiosk & mobile app •  “Wow!” factor •  Less steps for best

customer experience

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Takeaways 1.  Market: Payments represent a multi-trillion market opportunity 2.  Device: Mobile is the device of choice, globally, double digit CAGR 3.  Technology: iOS vs Android and that’s it 4.  Key to a successful, new payment solution is one thing:

MERCHANT ADOPTION

The winning solution will be: ü  Convenient to use, simple to set up ü  “Open,” allowing any financial instrument (credit/debit cards,

bank accts, stored value, etc.) ü  Add value to consumers, merchants and banks ü  Cloud based, not client based ü  Multi-modal (in-store, online, proximity/P2P, other mediums)

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Who is Going to Win?

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Thank You

Questions? Contact me Christopher Boone President and CEO Cimbal, Inc. T: (650) 743-2732 E: chris@cimbal.com

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Appendix Sources

– Mary Meeker, KPCB, Mobile & Internet Trends

– Henry Blogett, Business Insider, The Future of Mobile

– Morgan Stanley Equity Research – Fed Reserve, various studies – Creditcards.com – GigaOm

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