Cash/Plastic is Trash: Mobile Payments is Future April 22

What’s happening…

Banks using Host Card Emulation to launch mobile payments solutions

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Examples of banks that are using or have announced plans of using HCE for mobile payments

Host Card Emulation (HCE) is the term describing on-device technology that permits a phone to perform card emulation on an Near Field Communication (NFC)-enabled device without relying on access to a secure element. This new technology gained celebrity status when Google announced support for HCE in the KitKat OS.

Biometrics Set to play a bigger role in the Future of Payments authentication

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Chinese e-commerce giant Alibaba is developing facial recognition technology that enables mobile shoppers to replace their passwords with selfies. (March 2015)

Royal Bank of Canada is working with Toronto-based technology developer Bionym to test a wristband called Nymi. The Nymi band uses the wearer’s unique heartbeat to verify that he or she is the real card holder. (November 2014)

Apple Watch announced & Apple Pay’s Acceptance continues to Grow in US

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Apple Pay: In just three months since launch, the contactless payment application, which uses near field communications (NFC) technology, is available in more than 700,000 locations in the US. The company has also expanded the number of banks it is working with to more than 2,500

Apple Watch: Tim Cook (CEO, Apple) announced that Apple Watch would be available for purchase from April 2015. Apple Pay can be used via Apple Watch, which will allow Apple users with older iPhones (5, 5C and 5S) to also use the payment service. (March 2015)

Google, Samsung Pursued Acquisitions to counter Apple Pay threat

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Samsung agreed a deal to buy mobile wallet outfit LoopPay, giving it a new weapon in its ongoing battle with Apple for the mobile payments market. (Feb 2015). LoopPay's patented technology turns existing magnetic stripe readers into contactless receivers.

Google also announced acquisition of technology from mobile payments solution Softcard (a joint venture between 3 leading US telecom operators). (Feb 2015). This is Google’s attempt to revive its flagging mobile wallet service by getting its app pre-installed on handsets sold by America's biggest telcos.

Microsoft Preparing its own mobile payments service

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Microsoft is working on a tap-to-pay system with Host Emulation support, allowing the mobile to work without a “Secure Element” provided by carriers. This means Microsoft can work directly with VISA, Mastercard and American Express to bring its own NFC payments service into the market. It will work with all contactless card readers, similar to Apple Pay and Google Wallet. (March 2015)

Facebook Embeds Money Transfer functionality in Messenger

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Facebook announced a new feature for Messenger that lets users send and receive money to one another. The feature will roll out to Facebook users in the U.S. across desktop, Android and iOS over the next few months. (March 2015)

Telecom operators Continue to strive for relevance in this space

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Vodafone customers will soon be able to add bank cards to their Vodafone Wallet and use smartphones to pay for goods and services at contactless terminals. Following new agreements with Visa and Carta Worldwide, bank card payments via Vodafone Wallet will be enabled in European markets from Q2 2015 onwards. (March 2015)

Some of New Zealand's biggest banks and telcos have joined forces to launch Semble, a SIM-based NFC mobile payments service. (April 2015) Telcos Vodafone, 2degrees, Telecom had teamed up with bank-owned payments network Paymark on the joint venture nearly three years ago

Wearables & Payments Likely to go hand-in-Hand → Apple Watch, LG, Xiaomi

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LG’s Urbane LTE is one of the first smartwatches beyond the Apple Watch to include NFC-based mobile payments (Feb 2015)

Huami, the manufacturer of Xiaomi's smart fitness tracker Mi Band, has entered into a partnership with Alibaba's payment affiliate Alipay to develop smart wristbands that incorporate mobile payment (April 2015)

Why so much of rush…

Massive increase in smartphone use in recent years

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56%Annual Growth (CAGR)for in-person mobile payment over next 5 years

US Mobile Payments Will Reach $142 Billion By

2019

80% of all transactions will flow through the retailers directly within 10 years

Users say…

More than half in the US have tried mobile payments

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Cash

Check

Credit Card

Debit Card

Some form of mobile payment

91%

58%

75%

83%

54%

What types of payment do you use?

Convenience will be the defining factor in the near term

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Other

Security

Rewards, discounts, or promotions

Convenience

7%

37%

41%

76%

What motivates you to use mobile payment instead of other forms

PayPal most used in US, 7% have already tried Apple Pay

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Square Cash

Other

Venmo

Softcard

Dwolla

Apple Pay

Starbucks

Google Wallet

PayPal

3%

3%

3%

4%

5%

7%

21%

28%

94%

Which of the following mobile payments apps do you currently use?

Opinions divided around the ideal future experience

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App for each retailer that pushes offers, inte-grates rewards and coupons and allows me to

pay

App that is integrated with by banking app

Independent app that can be used at any retailer and integrates rewards and coupons

30%

32%

38%

Thinking about the future of mobile payment, which of these options would you prefer?

Demystifying the hype…

Flavors of Mobile Payment

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Highly fragmented ecosystem

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Burning questions about mobile payments strategies

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• Security• Convenience• Value added benefits to replace existing payment methods

What do my customers want?

• Protection of existing brand equity along with transactional and interchange revenue• Additional revenue from loyalty and consumer intelligence

What is at stake for banks?

• Reduce the existing transaction charges• Minimize the cost of upgrading to new POS systems• Protect reputation and build trust - avoid any security mishaps (such as

Home Depot, Target)

What are the retailers’ perspectives?

• Independent applications such as LoopPay, LevelUp (QR codes)• MNO backed solutions like Softcard (NFC)• OEMs’ offerings – Apple Pay, Google Wallet (NFC)• Independent retailer offerings (e.g. Starbucks) and collaborative retailer solutions (MCX/

Current C) (QR codes)

What are the current offerings in the market?

• Banks in the US are currently offering support to Apple Pay – a couple of the leading banks are also supporting Softcard

What are banks currently doing?

• QR code based technologies are easier to integrate into existing POS systems but are perceived less secure

• Less than 3% of merchants that accept credit cards are equipped to handle NFC based systems. However they will soon be forced to upgrade to EMV (by 2015) and they could choose to add NFC . And with trend setters such as Apple supporting NFC, it has a greater chance to succeed

What offerings are likely to succeed?

Core Technology

Cloud-based HCE vs Secure elements

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Android Implementation

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Apple Implementation

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Praveen Bohra https://in.linkedin.com/pub/praveen-bohra/1/4a4/350