welcome to the mag! - driving positive change in payments ... · – the economics of payments are...

Emerging Technologies In Payments

Welcome to the MAG!

Wednesday, February 12, 2014

Technology Got You Down?

John MacAllister

(Dorado Industries)

Got a Headache Yet?

Feel Better Now?

Technology Driver Model –Demand Side

QkR

Address Unique Vertical Market

Needs

PCI Avoidance

5

Zoosh!

Eliminate Check Out Lines and POS

http://www.viableware.com/index.htm

https://www.thelevelup.com/

https://www.plink.com/

https://www.modopayments.com/index.php

Technology Driver Model – Supply Side

Fill A Need

Lots of Young People

Too Much Money

Who doesn’t believe that today’s payments

system needs to be tweaked?

Lots of hotshot entrepreneurs. Can’t these guys just get a

job?

One third of payments conference attendees are VC and PE touts.

2014: Control of the Customer Relationship Trumps Everything

Address Unique Vertical Market

Needs

PCI Avoidance

Eliminate Check Out Lines and POS

Win The Customer

Relationship Battle!

Technology Outlook

Merge to the Middle: E-commerce and physical commerce providers will invade each other’s space.

Mobile clutter: Dongles, sheaths, tablet stands, and tags will contribute to accelerated adoption of the mobile form factor.

Beacon roll-out: Others will join current incumbents to offer robust communications between consumers and merchants.

Bitcoin: Or a reasonable facsimile.

Payments and Loyalty Hardware

Mobile Wallets

Mobile Payments

Merchant Dashboard

Mobile Authentication

Merchant Acquiring

Experience

Payments Networks

Retailer Cash Handling

M-commerce and Loyalty

Loyalty and Payments Network

Technology Showcase

Win The Customer

Relationship Battle!

10

Moving From Business Plan to Business

39 merchants representing 70 brands have invested

11

Representative Sample of Brands

110,000 locations

> $1.2T in Payments

5M Employees >450M Weekly Engagements

12

BROAD PAYMENT CHOICES Multiple options at launch with expanded offerings fast following

Centralization of best offers, digitization of loyalty and receipts

PERSONALIZED BENEFITS

110,000+ locations, all sectors and purchase occasions of retail

WIDE ACCEPTANCE

Cloud-based platform & tokenized customer data

CREDIBLE SECURITY

MCX’s value proposition addresses customers’ four key needs

13

Announcement: Major Expansion in QSR

6,500+ Locations

$2.5B in Revenues

40,000+ Employees

14

Announcement: Exciting New Technology Partnership

Payment Capabilities

Core Wallet Platform

Value-Added Services

Retailer’s Own Mobile Wallet

Chris Gardner, Paydiant, Inc.

February 12, 2014 – 8:35am

• There will be no “One Wallet App to Rule The All”

• The mobile “wallet” is a MARKETING platform – not a payments platform

• Most mobile payments providers separate retailers from their customers (and their data)

• Data (and thus marketing) will become the economic underpinnings of the payments ecosystem

• Payment credentials belong in the cloud, not spread across millions of phones and retailers

What we believe

17

“Meta” Wallets

Branded/White-label Retail Wallets

Few, if any of these will get traction…

But, these will proliferate… Retailer-friendly “meta” wallets too.

MCX, eventually banks

• Data

– The wallet is a MARKETING platform and no one should be willing to concede it

– The economics of payments are shifting to a data-based economy

• Brand

– Payment is the culmination of the in-store experience

– Check-in >> Offers >> Shop >> Loyalty >> Check-out (payment) >> Receipts

• Customer

– Loyalty is core to retailers mobile efforts

– Mobile turns anonymous users into KNOWN users

• Fees

– Interchange

– Liability

Why so many wallets?

18

• Part 1 – Ads, Offers and Loyalty

– Marketing, not payment fees will drive the economics of the mobile

– Lets retailers profit from their own data

– Most meta-wallets are after the data, ads and offers opportunity

• Part 2 – Tender Steering

– The issuer of the “wallet” can encourage the use of friendly tender types

– The Durbin Amendment and dramatically lower debit fees makes this even more compelling

– NEWS FLASH: Will the recent Durbin “reversal” kill ACH…again?

The Mobile Wallet Economy

19

Fuel • Locator • Pay-at-pump • Pay-in-store • Fuel perks • Loyalty

Dining • Reservations • Pay-at-table • Loyalty • Payment

Quick Service • Ordering • Delivery • Loyalty • Coupons • Payment

Payment is the least interesting part of the equation!

20

Retail • mCommerce • Messaging • Loyalty • Coupons • Payment

• Sharing our card credentials with hundreds of merchants is insecure, costly and obsolete

– Besides, merchants have had it with PCI

• Account credentials should not be on the phone

• Reusable, high-value tokens should not be on the phone

• Mobile provides an opportunity to do much better — and we should

– Fully tokenized

– Cloud-based

– Multi-factor authenticated

– Software-only

A word about mobile payment security

21

• Business Model Challenges

– Too many mouths to feed in NFC ecosystem

– Data sharing agreements…YUCK!

• Hardware based approaches are expensive!

– NFC/EMV requires new POS hardware AND new phones.

– Some QR code models require handheld scanners

• Software models require integration with POS

– Very fragmented space

– Frequently ancient POS systems

• Analysis paralysis

– Retailers waiting to see “who’s going to win”

– Large players and hundreds of startups knocking on the door

Where is the friction?

22

• It is your customer, your brand, your data and your app

– The mobile wallet MUST be part of your existing mobile efforts

• Mobile is Marketing, so don’t wait

– Get moving now, even on a small scale

• It’s not just payments

– Users will not come if it is only payments

– Swipe still works!

• Avoid a hardware-centric approach

– Too expensive and too long to wait

• Be safe…leverage the cloud

What’s the path forward?

23

• The mobile DEVICE is the new wallet and like today, there will be options

• Retailers will aggressively take control of their own mobile wallets to:

– Protect their data

– Extend their mobile marketing efforts

– Preserve brand equity

– Get better economics

• Account credentials belong in the cloud, not on the phone

– Sharing card numbers with retailers is obsolete and insecure

Closing Thoughts

24

My Mobile “Wallet”

• Your brand, your customers, your mobile wallet

– Mobile payments, loyalty, offers and cash access at ATMs

• ~$40M in venture funding

– 3rd payments company for founding team

• Many key partnerships

– Retail: MCX, Subway, Harris Teeter, Orange Leaf

– Financial: Barclaycard, Capital One, Bank of America, Vantiv, Pulse

– Technology: FIS, Diebold

• 20+ point-of-sale platform integrations and counting

• Track record of innovation

– Mobile Payments patent issued Feb. 2013

– Mobile ATM Cash Access patent issued Jan. 2014

Paydiant Summary

25

Chris Gardner

Paydiant, Inc.

[email protected]

@ccgardner

26

Thanks!

mailto:[email protected]

Networks Panel (replaced PayPal)

Amy Parasons (Discover)

Karen Czack (AMEX)

Eduardo Perez (Visa)

Dan Kramer (Shazam)

Networking Break 9:40 a.m. – 10:10 a.m.

Upcoming MAG Webinars

March Alternative Routing

May Payroll & Prepaid eCards June Mobile – What’s the Latest News?

July Legal Update

AnyWhereMobile Reducing Interchange by 50%

Jeff Chen – Vice President Business Development

Wednesday, February 12th, 2014 10:10 am EST

Proprietary and Confidential

Who is MShift? 15 Years of Mobile Banking and Innovation

AnyWhereMobile Closed Beta We want to get merchants excited about the AnyWhereMobile Closed Beta.

… will reduce debit interchange rates by 50%. … integrates with merchant loyalty and reward programs. … is a new payment network built on modern mobile infrastructure. … is not affiliated with legacy networks and associations.

Mobile Solutions for Financial Institutions For 15 years, MShift has been building consumer facing mobile solutions for banks and credit unions. Our customers stretch across the entire US, including Hawaii and Alaska.


Mobile Payments

MOBILE END TO END

Proprietary and Confidential Proprietary and Confidential

Mobile Payments

What Do Merchants Really Need?

2. Integration with Your Reward and Loyalty Programs

1. Reduced Interchange Fees


Mobile Payments

… but what’s at the Core?

Mobile at POS!

Coupons!

Security!

Rewards!

Loyalty!

Big Data!

Hmm… sounds great…

What Mobile Payment Solutions Are Being Offered Today?


Mobile Payments

H i g h C o s t s S e c u r i t y I s s u e s

POS Network Issuing FI Processor Processor

Mobile Payments as a Wrapper Architecture for Today’s Payment Networks…

D

u

a

l

A

u

t

h

L o w C o s t

Issuing FI

Network

POS

Mobile

… can be re-imagined!


Mobile Payments

Security: Static Card Numbers are Dangerous

Payment Tokenization

Device

Network & “Cloud” Database

POS

Wrapper AnyWhereMobile

POS Transaction

Security

Network Security

Feature Set

Payment Tokenization Payment Tokenization

Static card numbers identify the payment vehicle and can be easily compromised through countless channels.

No card numbers needed throughout the entire payment ecosystem. Phone, location, and PIN data required for all transactions.


Mobile Payments

Cost: Network and Middleman Fees are Expensive

POS Network Issuing FI Processor Processor

Wrapper Architecture High Cost

AnyWhereMobile Architecture

Issuing FI

Network

POS

Mobile

Low Cost


Mobile Payments

Debit Interchange Pricing Schedule

Durbin Regulated: $0.12 / tx

Non-Regulated: $0.21 / tx


Mobile Payments Deadlock Big Banks, Consumers, and Merchants

Question: Why has adoption of mobile payments been so slow in the US?

Stakeholder Mobile Payments

Business Objective

Mega Banks Payment Networks

Maintain status quo Preserve interchange revenue streams

Merchants Reduced transaction cost

Consumers Best rewards / offers programs

Answer: Misaligned business objectives!


A New Era of Issuance The Emerging Role of Local Banks and Credit Unions

Good News! There’s a fourth stakeholder with the infrastructure to replace the mega banks.

Stakeholder Mobile Payments

Business Objective

Mega Banks Payment Networks

Maintain status quo Preserve interchange revenue streams

Community Banks Credit Unions

Abandon high cost plastic Offer competitive transaction processing

Merchants Reduced transaction cost

Consumers Best rewards / offers programs

Let’s build this partnership! Fun Fact: There are over 14,000 FIs in the US!


A New Era of Issuance The Emerging Role of Local Banks and Credit Unions

Debit Card Margins are Shrinking for Local Banks and Credit Unions

Plastic is Expensive

- Lack economies of scale - High fraud costs

- Thin profit margins

Durbin

- Exemption not effective - Price pressure driving

down revenue

A New Infrastructure is Needed

o Leverage mobile technology to reduce fraud o Maintain net margin per debit transaction o 50% reduction in interchange fees o Merchant controlled rewards, offers, and coupons


National Outlook Market Opportunity of AnyWhereMobile

Total Debit Interchange – 2011 Q4 Analysis of debit card transactions across Regulated and Non-Regulated Issuers.

Data taken from: Board of Governors of the Federal Reserve System 2011 Interchange Fee Revenue, Covered Issuer Costs, and Covered Issuer and Merchant Fraud Losses Related to Debit Card Transactions. March 5, 2013.

Durbin-Regulated Non-Regulated

- 131 largest financial institutions - Over $10 billion in Assets

- 14,000 regional and community focused banks and credit unions

7.81 (64%)

4.33 (36%) Durbin-Regulated Non-Regulated

$1.84 (50%) $1.83 (50%)

Durbin-Regulated Non-Regulated


Mobile Payments

Demo


Mobile Payments

AnyWhereMobile API Deployment

ABC FI

123 Retail

ABC FI

123 Retail

123 Retail

Order Summary Gadget: Gizmo: Whatsit Total: Payment Options

$43.00 $12.00 $11.00 $66.00

123 Gift Card AWM (ABC FI) VISA MasterCard

In App Mobile Payment

Work Flow 1. 123 Retail & ABC

FI Apps are installed.

2. AWM API is used at checkout to detect AWM enabled Apps.

3. AWM payment option is presented as a tender choice.

Work Flow 1. 123 Retail & ABC

FI Apps are installed.

2. AWM API is used at checkout to detect AWM enabled Apps.

3. Customer scans QR code at register.

In Store Mobile Payment

ABC FI

123 Retail

ABC FI

123 Retail

123 Retail

Scan the AWM QR Code at the Register


Fill Out the Survey to Win an iPad!

Thanks for Listening!

The Cash Room of the Future

Lee Jurgens (Ralph Lauren)

Keith Romano (Tellermate)

• Invented weight-based currency counting technology

• In business for over 30 years

• Leader in the industry

• Tellermate systems process over $2B daily in over 20 currencies across 30 countries

About Tellermate

CURRENT STATE OF CASH

Currency in Circulation

Currency Trivia

1. 2.

?

The UnBanked?

8.0% 21.4% 22.2% 22.5% 28.2% 20.1% 17.4%

Of all US Households African American Non-Citizens Unemployed Low Income (under $15k) Unmarried Female Family Hispanics

Of the unbanked households half do so by choice.

HOW PEOPLE ARE USING CASH?

How people buy stuff

Source: Federal Reserve Bank Boston (2010)

Transactions by Payment Type

THE COST OF HANDLING CASH

What are the Touch Points?

Banks

CIT

Cash Office Point of Sale/

Service

Corporate HQ

Cash Data

• Count Change Safe

• Reconcile Previous Day Takings

• Prepare Start banks

• Prepare Deposit

• Prepare Change/Supplies Order

• LP Audits


Cash Office

1-6 hours per day


Point of Sale/ Service

• Verify Start Banks

• Skims

• Closeout

15-40 minutes per shift per POS


Corporate HQ

• Reconcile POS to Deposit

• Reconcile Deposit to Vault

Multiple FTE’s

How to Gain Efficiencies

Banks

CIT

Cash Office Point of Sale/

Service

Corporate HQ

Cash Data

WHAT’S HOT? & WHAT’S NOT

• Labor Optimization

• Reducing Cash Shrink

• Increasing Accuracy

• Actionable Information

Drivers

• Enterprise View

• Increased accuracy

• Strong traceability

Connectivity & Deposit Tracking

Cash Recycler (POS)

• Secure • Bill Validation • Strong information • Great Promise • Speed? • Reliability? • ROI?

Cash Recycler (Back Office)

• Operator Accountability

• Highly Accurate

• Strong information

• Low labor requirement

• Reliability?

• ROI?

Smart Safes

• POS or Back Office

• Bill Validation

• Connected

• Accountability

• Reliable (newer generation)

• Fast

• Accurate

• Reliable (no moving parts)

• Counts Bills and Coins

• Portable

• Can be Connected

Weight based cash counting

What’s Not Hot

Unsafe Safes Coin Sorters&

Counters Friction

Counters

ONE MORE THING…..

• Intelligent Cash Drawer

• Calculates a balance every time the drawer is closed.

Introducing T-ice

You will never have to count your cash drawer again!

• Coin Ordering

• Electronic Pick-Up Scheduling

• Provisional Credit

The Cash Room of the Future

THANK YOU

Keith Romano Tellermate [email protected]

How Merchants are taking Advantage of the Mobile Wallet to Engage the

Mobile-Centric Consumer

Brian Corbett, Director of Strategic Partnerships, Isis

February 12, 2014

262 Stores UT, ID, WYO, NV, AZ, CO, WA, MT, OR, NE

Confidential and Proprietary. Do Not Copy or Distribute.

18% of

Consumers

Choose

Retail

Fueling

Locations

because of

Loyalty

Cards

-2014 NACS Consumer Fuels Report


Maverik Adventure Club Rewards

Loyalty card linked to ACH debit

• Instant 6¢ Fuel Discount. Every gallon, every day.

• Competitive Price Match. 6¢ Fuel Discount or Price Match –

whichever saves you more!

• 2X Trail Points. Points used to Win Stuff, Buy Stuff, or

Give Stuff.

Standalone loyalty card

• Instant 2¢ Fuel Discount. Every gallon, every day.

• Trail Points. Points used to Win Stuff, Buy Stuff, or

Give Stuff.


Maverik’s Adventure Club

Rewards is a success because it:

encourages use of a preferred

tender type

diverts interchange cost savings

back to consumers

develops affinity for the Maverik

brand instead of another brand

Over 42K Black Card members

Over 161K Chrome Card members Over 50K Black Card members

Over 300K Chrome Card members


Maverik has partnered with Isis to expand its presence beyond plastic

As their consumer

become more reliant on

their mobile devices…

… the Isis platform can

allow their users to access

their loyalty cards, with an

always present device,

using 2D barcodes or NFC.

Confidential and Proprietary. Do Not Copy or Distribute. 78

Company Overview

Isis is a joint venture created by AT&T, T-Mobile and Verizon. Our goal is to build a nationwide mobile commerce platform and that will transform the way consumers shop, pay & save.

Our partners are 200 million customers strong.


Isis National Launch: November 2013


Enhanced Consumer Experience

• New version of the Isis Mobile Wallet • 20,000 carrier stores

• 56 smartphones • 4 major US issuers • Issuer and merchant offers • Thousands of merchant locations

Contactless indicator is property of EMVCo, LLC.


Jamba Juice 1 Million Free Smoothie Offer

• Close to 700 locations today • Venus Williams TV appearances and media

tour to support launch • Media, digital & social push with fitness

magazines, celebrity online sites, local store events and television talk shows

27% week over week growth

Weekly free smoothie redemptions (not cumulative)


Isis Guiding Principles

Choice. Consumers choose how they pay.

Privacy. We don’t collect what the consumer purchases.

Security. Safer than a physical wallet.


A Few Thoughts On Security

NFC Wallets are EMV Contactless ready; why should users settle for Chip & PIN?

EMV is a security methodology

NFC Mobile Wallets are EMV capable:

but, will people stop swiping? Chip & PIN is one option for EMV

Smart Card Alliance white paper: EMV and NFC: Complementary Technologies that Deliver Secure

Payments and Value-Added Functionality Publication Date: October 2012

THANK YOU

"Isis, Isis Mobile Wallet and the associated logos are trademarks of JVL Ventures, LLC. [Contactless marks are property of EMVCo, LLC.] Third party marks are property of their respective owners. (c) 2014 JVL Ventures, LLC. All rights reserved."

Upcoming Agenda

1:15 p.m. Panel: Innovation at the PoS 2:15 p.m. Why Dynamic Innovation is

Right Now!

2:45 p.m. Networking Break

Networking Lunch 12:00 p.m. – 1:00 p.m.

Innovation at POS

Steven Statler – Qualcomm Retail Solutions

George Wallner – LoopPay, Inc.

Mimi Hart – MagTek (Moderator)

Wednesday February 12, from 1:15 pm to 2:15 pm EST

Mimi Hart MagTek, Inc. - President & CEO

Steven Statler Sr. Director, Solutions Management, Qualcomm Retail Solutions

George Wallner LoopPay, Inc. - Co-founder – Heading up Technology Innovation

Share your business card for a chance to win a Qualcomm Toq Smart watch

Winner selected at the start of the Innovation at the Point of Sale session

The Qualcomm® Toq™ smartwatch for Android, the revolutionary smartwatch with a Qualcomm® Mirasol™ color touchscreen display that looks different because it is different. Unlike other smartwatches, Toq leverages the light around it so your screen is visible even in bright sunlight.

Innovation at POS

Consumer Experience

Utility

Efficiency

Security Mobility

Ubiquity

HOLISTIC PAYMENT SECURITY

Protecting the whole transaction, not just cardholder data.

To that end we need the be able to Authenticate (validate as genuine)

The payment instrument (a physical token: a card, currency, fob, phone, etc.) The account data carried on the payment instrument The payment terminal (the POS device) The payment authorization host (and any intermediaries) The payment maker (knowledge or biometric data) The payment details (amount, timing, conditions, payee, etc.)

Payment Instrument

Payment Account

Data

Payment Terminal

Payment Authorization

Host

Payment Maker

Payment Details

Endpoint Authentication

Prevent

Detect

Alert

Deprive

Dissuade

Evolve

Fraud Philosophy

Genuine

Inclusive

Consensus

Built

Voluntary

Non-Punitive

Non-Profit

Industry Standards

“Dynamic payment card data technology has potential to eliminate

the need for PCI DSS.”

September 2009 - PwC

Consumer First Mentality Cooperation Authentication Technology Determination

Innovation at the Point of Sale

Steven Statler, Qualcomm

• Delivered first widely deployed app store

• Enabler for wireless e-Reader market

• Powered mobile banking for large FI’s

• Supplier of wallet technologies

Innovators in Service Delivery

• Financial stability

2013

o Revenue $25B

o $5B in annual R&D spend

o Cash and marketable securities $22B

o Operating income of $6.8B

o Market capitalization of over $120B

Global Leader in Wireless Technology

The Gimbal™ Context Aware Platform

Proximity Geofence Interest Sensing Communicate

Context SDK | Web-based Console | Privacy Tools | Rest API

Mobile Payments – The Easy Way

George Wallner, LoopPay

LoopPay.com

Feb 12, 1:30 PM

• Is Mobile Payments worth upgrading the POS?

– The slow roll-out of NFC is a strong indication

• Every retail check-out has a Magstripe Reader

• A vast MSR infrastructure in place and paid for.

Est. 100,000,000 MS readers world wide

• The magstripe reader is a sensitive magnetic

receiver: Allows contactless payments

POS Infrastructure today

• The MSR head will pick up magnetic pulses with F2F encoding and standard magstripe format.

• Distance: 2 to 3 inches

• No hardware or software change to POS

• Substantial security can be added!

How it works ?

Decoder Circuit

Driver and SE

Inductor Head

Magstripe Reader

POS Terminal Loop Transmitter

• Magnetic Pulses Transmitted

• Data formatted as Track 1 and Track 2

• Card Data stored in Secure Hardware

• Head picks up Pulses

• Data is Decoded as Normal Swipe

• Decoding Logic Rejects Errors

Card Command

LOOP Magnetic Transmission

Security

• Magnetic stripe CARD data is static:

Copying -- Counterfeit and Replay

• Magstripe Data from Smart-Phone

– Can be dynamic and Secure

– Can support dynamic CVV (dCVV) like NFC

– Remains compatible with existing retail systems

• Fast-Track to a more secure POS

Modes of Operation

• Static Mode: Magstripe data static, as on card

• Partial Tokenization: Dynamic CVV

• EMV Emulation: Essentially PayWave via the magstripe reader.

• Security Mode: On a per BIN basis

Original Track 2 Data

SS 1

PAN 15

FS 1

EXP 4

SVC 3

PVV 5

CVV 3

5

2

ES 1

Transmitted Track 2 Data with Dynamic CVV

SS 1

PAN 15

FS 1

EXP 4

SVC 3

PVV 5

dCVV 3

SEQ No 5

FLAG 2

ES 1

Adding Security to Magstripe Data

dCVV Algorithm KEY From Issuer

SEQ No.

Form Factors

Integrated into Handsets

Fob Charge Case: Loop + Battery Coming Dec 2014

Accessories

Loop’s Advantages for Merchants ① Mobile Payment

via existing retail

infrastructure

③ Add Security:

dCVV or EMV emulation

⑤ Simple and Fast Card Loading: Card holder reader

or OTA loading

④ Wide range of cards: Payment, Retail, Pre-paid

② NFC Like Experience

without the need

to upgrade

Mimi Hart

MagTek, Inc. - President & CEO

Steven Statler

Sr. Director, Solutions Management, Qualcomm Retail Solutions

George Wallner

LoopPay, Inc. - Co-founder – Heading up Technology Innovation

Why Dynamic Authentication is Right Now!

Wade Edwards

(Mobile Authentication Corporation)

Discussion Points

• Time to Change the Game

• What is Dynamic Authentication (DA)?

• Existing Fraud Tools

• How does DA help Merchants with Current Fraud Concerns?

• Why Now?

113

113

Time to Change the Game

21st Century Solution to 21st Century Fraud! – Let’s face it, consumers know that the bad guys are out there hard at

work and “stuff” is happening. The payments industry should provide consumers with a tool that gets them involved in fighting off fraud attacks.*

* http://www.dailyfinance.com/on/hacking-wave-identity-theft-credit-card-fraud-no-fear/?ncid=edlinkusdail00000001&icid=maing-grid7%7Chtmlws-main-bb%7Cdl29%7Csec1_lnk3%26pLid%3D432988

– We underestimate consumer’s desire to participate in the security payment process and protect their own funds and identity.

– Since consumers originate payment transactions, let’s introduce a tool that includes them in the Verification! 1

14

What is Dynamic Authentication?

Active Account Management • Authenticates the Person initiating the

payment.

• Creates Payment Awareness - the immediate awareness of any activity to personal funds.

• Gives the account owner full control of account management for any payments activity.

• Helps all stakeholders fight fraud real-time.

• Integrates with any platform or combination of fraud tools.

115

115

How does Dynamic Authentication work?

• Two step process – All cardholders are enrolled using the same type of validation

process and systems that validate your identity for a banking relationship.

116

– When a qualified cardholder initiates a payment transaction in any vertical, they are sent a One-Time Password on their mobile phone to verify themselves.

What can you not live without ?

Consumer Adoption

Mobile technology consultant Tomi Ahonen analyzed a study commissioned by Nokia and in a 16 hour day:

• Mobile users can't leave their phone alone for six (6) minutes and check it up to 150 times a day.

• People make, receive or avoid 22 phone calls every day and send or receive messages 23 times a day.

• Check the clock 18 times.

• Setting the alarm, playing games, changing songs, taking pictures and plugging and unplugging phone all added to phone views.

• A person just using a phone with basic functions will rack up dozens of uses a day.

• Getting hooked on a mobile phone is similar to other addictions, such as compulsive buying.

http://www.dailymail.co.uk/news/article-2276752/Mobile-users-leave-phone-minutes-check-150-times-day.html

117

117

Existing Fraud Tools

• Provide No Authentication!

• They are “post approved transaction” focused! – Negative Files

– PIN / Signature

– Neural networks

– MC & Visa online solutions

– Encryption/Tokenization

– Chip Technology w/Magnetic Stripe

– CSI Systems

• Fraud Migration

118

Results from Fraud Study Information from the LexisNexis 2012 Cost of Fraud Report

Merchant Concerns:

• Merchants are paying nearly ten times fraud losses due to unauthorized transactions and fees/interest associated with chargebacks. Factoring in the additional cost of lost/stolen merchandise, U.S. retail merchants are suffering a total industry-wide fraud loss of $191 billion.

• One in five merchants experienced an increase in unauthorized transactions associated with identity fraud. Forty percent (40%) of large e-commerce retailers saw an upsurge.

• Friendly fraud accounts for more than one-third of the total fraud for online-accepting merchants.

• Retail merchants seek more education & improved industry standards to battle the cost of fraud.

• Emphasizing and improving automated fraud detection capabilities is a top priority for 55% of the merchants surveyed.

Recommendations: • Solution needs to be simple for all and the implementation and educational components. • Changing consumer payment methods requires a dynamic fraud management strategy.

119

Benefits of Dynamic Authentication

• Shrinks fraud losses – Immediate denial if no OTP or wrong OTP

• Shrinks fraud for all stakeholders - consumers, merchants and financial institutions

• Shrinks friendly fraud transactions

• Shrinks chargebacks

• Significantly lower costs to integrate

• Significantly lower costs to process

• No major infrastructure overhaul

• Allows all Regional and National Networks to participate

• Requires no changes in routing tables

• Causes no delays to settlement

• Consumer education is easy

• Deters fraudster from entering your locations 120

Why Dynamic Authentication - Right Now!

• Stops fraud on the front end of the process, not after it’s in the payment system

• Works in all of the payments verticals

• Consumers are ready

• Merchants are definitely ready

• Major Banks already use this

• Blends into mobile consumer habits

• Complements the growth of mobile payments – the emerging purchasing channel

121

Mobile Authentication Corporation (MAC)

Wade Edwards

SVP Strategic Initiatives

[email protected]

www.mobileauthcorp.com

122

http://www.mobileauthcorp.com/

Upcoming Agenda

3:25 p.m. Big Data…What your credit card processing company should be telling you about your customers

4:00 p.m. Are We There Yet?

4:30 p.m. Mobile Is The Magic Wand

Networking Break 2:45 p.m. – 3:25 p.m.

Are We There Yet?

Kenneth Douglas

(SEQR USA, Inc.)

What did they do wrong? • GPS Devices

• Movie Rentals

• Cameras / Video

• Music

• Clocks and Alarm Clocks

• Calculators

• Coupons / Offers

Consumed by the Smartphone GPS Devices

Movie Rentals

Camera / Video

Music

Clock and Alarm Clock

Calculator

Coupons / Offers

Music and Media • Yesterday

– Records – Vinyl • 45 and 33’s Records • 8 Track, Reel to Reel • Cassette Tape to CD to MP3

• Today – Pandora and YouTube – iPod and iTunes – Social Media

• Facebook, Twitter, Instagram, Foursquare, LinkedIn

Coupons and Offers • Yesterday

– S&H Green Stamps – Daily Newspapers – Coupon Books – Junk Mail Coupons – Daily Deals

• Groupon and LivingSocial • Digital Coupons and Offers

• Today – Geo-Fencing

• Longitude and Latitude (GPS) • Targeted Digital Data / Information

– Beaconing Technology • LEB (Low Energy Bluetooth) • GPS for inside

– Qualcomm, Estimote, Apple iBeacon

Point of Sale - POS • Cash Box • Cash Register

– NCR (National Cash Register)

• Credit Card Terminal & PIN Pad – VeriFone, HyperCom, Ingenico

• Dial-up Modem • LAN/WAN – EtherNet

• Integrated POS Systems – MICROS, NCR, IBM, Radiant, Aloha

• Front Office and Back Office • Inventory Mgmt, Pricing, Catalog, SKU • Proprietary Technology – H/W and S/W

• SaaS and POS 2.0 – Revel Systems, Square, Vend, Clover

• In the Cloud (aka Internet) • H/W Independent – Internet Connection • Table, Handheld Devices and Smartphones

1994

1995

2000 70 m consumers

connected to Internet world

wide

2002 BlackBerry 5810 & Palm One Treo 580

released

1997 1999

1998

1991 World wide web

goes public

2003

2004

2005 2008

1996 The ‘first’ smartphone

(Nokia 9000 communicator)

e-Commerce Web Master Shopping Carts Payment Gateways CNP (Card Not Present)

m-Commerce Mobile App Developers In-App Purchases Geo-Fence Location Based Real-Time Offers/Coupons

e-Commerce to m-Commerce

2007

2001

2012 2010

45% of adult US population use a

smartphone

2011 100 m US

smartphones

2013 1 bn smartphone

users, 6 bn mobile devices worldwide

2014

Changing Consumer Behavior • Habits and Behavior • 90/10 Rule

– Technology = 10% – Sociology = 90%

• Consumers Daily Routines – Everyday Spend Categories

• C-Stores and Petroleum • Grocery • QSR and Sit Down Dining • Pharmacy • Transportation • Parking

• Born 1960 vs. 1990 – PC vs. Tablet/Smartphone – Car Phone vs. Smartphone – Print Media vs. Social Media – Walkman vs. iPod – Pager vs. Facebook, Twitter and Instagram – Cash/Check vs. Credit/Debit and Stored Value

What is the One thing if you leave it, you will go back for?

Solving for the “Last Foot” Improve Merchant-Customer Interaction and Loyalty Prioritize Lower Cost of Tender Almost as Convenient as a Card Swipe • Still Evolving – No Standards Yet… • Retail/Card Present Environment

– Customer Facing POS PIN Pad • VeriFone and Ingenico • Intelligent Devices • Consumer Perceived Convenience

• Last Chance to Change the Consumers Behavior – Mr. Douglas, how would you like to pay today?

• Cash, Credit or Mobile

Logical that the phone will be used for payments

Are We There Yet? Technology is Ready? Hype and VCs Money $ is Flowing Pined Up Demand – 2+ Years

– Merchants and Consumers

• Is mCommerce a Solution Looking for a Problem? – Is something broken with the way payments work today? – Will mCommerce be less expensive? – What investment do I need to make in h/w and s/w? – Where do I get started and with what partner(s)?

• Consumer Behavior Change is KEY – Progress Not Perfection – How do you eat an Elephant? One Pilot at a time….

• At the End of the Day – We are ALL Consumers so ASK yourself the following Question: – What will make ME change my behavior?

The Discovery of Water was not made by a Fish…..

Doesn’t it just seem Logical that the phone

will be used for payments?

Mobile Is The Magic Wand

Adam Frisch

(Buy It Mobility Networks)

The mobile opportunity is real

• 56% of Americans own a smart phone - double digit growth rate expected to continue through 2016 as market matures

• Average amount of traffic per smartphone grew at 50% in 2013, this trend will continue as smartphone usage becomes ingrained in our everyday activities

A look at smartphone users at the grocery store today: • 47% make grocery lists • 45% access grocery coupons • 39% look up recipes • 30% compare prices • 18% product research • Only 22% say they do not use their smartphone while grocery shopping Today’s smartphone users (age 18-34) and dining: • 70% look up restaurant locations and get directions • 35% have placed takeout/delivery orders • 25% find nutrition information • 43% would use a smartphone payment option if available

Sources: Pew Research Center’s Internet and American Life Project Tracking Survey, May 2013. Placed Insights, December 2013. Loyalty360.org, October 28, 2013.

But, adoption of mobile payments is lagging behind expectations

Source: eMarketer October 2012, July 2013.

0

10

20

30

40

50

60

70

2011 2012 2013 2014 2015 2016

October 2012 Forecast

July 2013 Forecast

Why???

US Proximity Mobile Payments Forecasts ($ Billions)

Why isn’t mobile happening?

• Technology is not ubiquitous…yet • Certain phones only work in some places via specific technology that

may or may not work • Communication between POS equipment and phones is choppy at best • NFC, barcode, QR, beacon, iBeacon, Mobeam, etc.

• Consumers

• Don’t see real value or need to use it • Most are confused about where it works and where it doesn’t

• Merchants

• Also don’t see a compelling value proposition • Most are also confused by the technology

This is all VERY encouraging to us!!!

Recent headlines should help and hurt mobile adoption

• Target • 110m consumer credit/debit cards, names,

addresses, phone numbers hacked • Will cost FIs $30m+ to reissue cards and

related customer service

• Neiman Marcus • 1.1m credit/debit cards exposed over a 4

month period (Jul-Oct 2013) through malicious software installed in POS

• Michael’s

• Arts & Crafts chain of 1,000 US store investigating security breach involving customers’ credit card info

• FBI warned retailers last week to prepare for more

cyber attacks in the future

• There is no personally identifiable information (e.g., banking info) stored on our servers, on the phone, or on the POS

• If a phone with a payment app is lost, it could not

be used to make a transaction without the owner’s private PIN

• Each authorization barcode is only good for a specific purchase at a specific location at a specific time – if someone were to copy the code, they could not use it in the future

• Processor/guarantor monitors purchases to check against fraudulent or unusual purchase patterns

Recent Publicity on Payments Security Security Advantages of Mobile Payments

Key Trends in mobile • Merchants Being Told “You Have to do Mobile” …but why?

• Non-compelling value proposition for merchants and consumers • Mobile for the sake of mobile?

• Merchants Wondering How to Launch a Mobile Strategy

• Inadequate in-house resources • Unsure about how the mobile technology landscape is developing, will a winner emerge? • Not sure how to tie mobile with a better consumer experience

• Emerging payments are still “emerging”

• Bitcoin, ACH, loyalty points, etc. • Merchants want to lower processing costs and these may prove worthwhile • Consumers know that mobile payments are an option, but still do not make them

• Gap between consumer awareness and adoption

• 41% of consumers are aware that their smartphone can be used as a payment device, while on 16% have used smartphone as a payment device

• Consumers can be incentivized to make mobile payments, and once they do so, they are much more likely to become converts

• Consumers are concerned about the security, privacy, convenience and value of using their phones to make payments

Source: Accenture Consumer Mobile Payments Survey, 2013

What Merchants Want

• Have a sound business case – i.e., lower costs and increase revenue • Avoid cost increases (CNP interchange rates) • Drive new consumers, increase loyalty, frequency, cross-sell, up-sell • Tie consumer benefits to the behaviors that add value to merchants

• “Test the waters” without risking it all

• Ensure low integration cost and effort • Align mobile with existing financial, operational, x-channel procedures • Take a staggered approach, and evolve over time

• Control the consumer-brand experience

• Keep merchant brand front-and-center • Augment consumer data/loyalty with mobile, without giving up control

• Appear to be “tech savvy” and have a “cool factor”

• Want to be seen as keeping up with the times • Be able to relate to a broader consumer demographic mix

STRICTLY CONFIDENTIAL © 2014 Buy It Mobility Networks Inc. 141

What We Have Learned About Mobile Offerings from Merchants

Merchant App

Loyalty Payments Offers

• General Observations on Mobile Apps • Only a few merchants “solved” mobile • Most are confused, under-resourced, making

decisions “by committee”, and risk-averse

• Loyalty • Critical for knowing the consumer • Should be part of an app launch

• Offers/Promotions

• Critical for driving interest and usage • Should be part of an app launch

• Payments

• Most accept credit cards only • Pre-paid model to reduce transactions fees • Should be part of an app launch

We believe merchants need to offer all three when the app is being downloaded because the consumer is in the “info giving” mode

A look at the Mobile Payments Marketplace

Generic Mobile Wallet • Higher transaction costs • Other brands come between the merchant and their consumers

• Questionable consumer experience improvement

Merchant-Branded Mobile App. • Merchant brand stays “front and center”

• Lower transaction costs • Better consumer experience

Merchant/ Brand

Consumer

Merchant/ Brand Consumer

What Consumers Want

Value Convenience Security Fun

• Personalized Offers

• Coupons • Loyalty

programs

• Reservations • Pre-Order • Avoid lines • Maps &

Directions • Paper-free

receipts • History

• Merchant Brand Equity

• No personal or financial information store on phone/POS

• Entertainment • Exclusive

Content • Cool-factor

1STRICTLY CONFIDENTIAL 145 © 2014 Buy It Mobility Networks Inc.

$ Merchant $” Solutions

• Branded Tender • Quicker Check-out • Pre-ordering • Reservations • Express Pick-Up • Loyalty/Rewards • Personalized Offers • Store locater • Order history/receipts

Consumer Pain Points

• Long Ordering Lines • Serving Wait Time • Cost / Price • Finding Location • Poor Customer Service • Non-target/generic

communications • Secure Payment

Tangible Results

• More Revs • Faster Thru-Put • Lower Costs • Higher Profits • Increased Customer

Acquisition, Frequency and Retention

• Happier Customers

Tying Solutions to a low cost tender

Who is BIM?

Edgar Bronfman Jr.* Lawrence J. Blanford Arthur Martinez James McTaggart Robert Nardelli Thomas Neff Stephen Sadove

James Kelly Adam Frisch Michael Reidenbach Paul Voulas Aydin Kadaster

CEO

President

CIO

CTO, Head of Product

COO

Former President & COO of Global Payments, Inc. Founder FusionLoop; Former Analyst at UBS and Morgan Stanley Former EVP & Worldwide CIO of Global Payments, Inc. Former CIO Novell, Asia-Pacific; Serial Entrepreneur Former Principal at Marakon & Manager at Google; Angel Investor

Board of Directors, Investors, Advisors (Selected)

GP, Accretive LLC; Chair, Endeavor; Former CEO of Warner Music Group and Seagram Former President & CEO of TC Global, Inc. (Green Mountain Coffee Roasters, Inc.) Former Chair/CEO, Sears; on boards of AIG, IAC/Interactive, Fifth & Pacific, HSN Retired Founding Partner of Marakon; experience on public and private boards Former Chairman & CEO of Home Depot and Chrysler Chairman of Spencer Stuart, on boards of ACE Limited and several private companies Chairman of NRF, Former Chairman and CEO of Saks Fifth Avenue

BIM draws upon the collaboration of seasoned executives with credentials in technology, payment processing, retail, advertising, financial services, and entertainment

Management

Learn More About BIM:

Visit: www.bimnetworks.com Watch: https://vimeo.com/57114443

Email: [email protected] Call: (646) 926-4265

http://www.bimnetworks.com

https://vimeo.com/57114443

mailto:[email protected]

5:30p.m. – 6:30 p.m. Social & Networking Sponsored by

6:30 p.m. – 7:30 p.m. Dinner

7:30 p.m. – 9:30 p.m. The Brandy Brothers Sponsored by

Evening Agenda

welcome to the mag! - driving positive change in payments ... · – the economics of payments are...

Documents