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ACI Worldwide software powers electronic transactions for financial institutions, processors and retailers around the world - all the time, without fail. Learn more: http://www.aciworldwide.com

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Disruptors in Payments

Richard SandersDisruptors in PaymentsSeptember 2013Confidential12AgendaThe Current MarketplaceThe Disruptors in the Payments IndustryBig dataSocial networksThe internet of thingsMobileCommerce platformsThe cloud(G)localBusiness modelsOther disruptorsSummary and ConclusionsConfidentialMeets the challenge of change2The Current Marketplace3Trending to the new reality

Source: CitiThe Disruptors in the Payments Industry5The Disruptive Forces on the Payments Industry

Almost all disruptive innovations do one of two things (or both)They provide a new benefit They solve an existing problemThe Disruptors in the Payments Industry Big Data78What is Big Data?Evolved from Big Science which described the rapid cycle of changes that occurred in scientific disciplines during and after WW2. Term first used in the late 1990s to describe massive information volumes which increase as more digital records created every day e.g. 3,000+ photos uploaded to Facebook every second (300 million a day)Google 5 exabytes of information (1,000,000,000,000,000,000 bytes) created by the entire world between the dawn of civilization and 2003. That same amount is now created every two days.Organizations are drowning in data which will increase through unlimited bandwidth and storage, with device ubiquity and cheap chips.ConfidentialMeets the challenge of changeList the names and roles, if known, of the customer attendees8What is Big Data?9The power of Big Data is it provides a more personalised approachLeveraging structured and unstructured data to increase cross-selling opportunitiesCreating the customer segment of one , reducing marketing spend but increasing customer engagementCreating the insight that informs the decision that delivers a customer experience

ConfidentialMeets the challenge of changeList the names and roles, if known, of the customer attendees910Big Data is Important Because Those Who Make Sense of It Will Win in Competitive MarketsTechnology players e.g. Amazon, Apple, Google and FacebookSee leverage of data as the productKnow how to sift data and make sense of it which is why banks fear them. Understand your social activities, financial transactions, lifestyle etc as a competitive weapon and have partners to offer real-time deals/alertsThe banks biggest weaknesses are:Their heritage and organizational structure as they separate data functions from product functions by holding data separately in silo divisions. This does not allow them to leverage data and weakens their ability to use it to deepen relationships and compete. This is the big opportunity for new entrants.

ConfidentialMeets the challenge of changeList the names and roles, if known, of the customer attendees1011Big Data is Important Because Those Who Make Sense of It Will Win in Competitive MarketsOne bank CEO recently stated Our peers I can handle. Theyre in the same boat.If Google opens a bank, with their data were in trouble.And Eran Fiegenbaum, the director of security for Google Apps, has already made it clear that Google is a bank for your data.Conclusion: medium disruptive threat

ConfidentialMeets the challenge of changeList the names and roles, if known, of the customer attendees11The Disruptors in the Payments Industry Social Networks12The New Entrant Disruptors

Big Numbers

Social Media the new reality

Social Network Myths Banks Believe Myth banks need to stop believing: Its for young people only which stems from the stereotype that new, hip, cool technology is for those who adapt the fastest. It's not:Its for people who want to communicate on-lineIt's for those who enjoy that technology improves their livesFacebook and Twitter have more users over the age of 25 than underMost social media users are wealthy, educated, in employment and mature - the banks target audience for CRM.Social media as a medium for financial transactions is still treated with caution due to reasons like information security/hacking etc and lack of awareness created among customers. Conclusion: medium disruptive threat

ConfidentialMeets the challenge of changeThe Disruptors in the Payments Industry The Internet of Things17

What is the Internet of ThingsConnectivity for anyone from any time and any place with anything!A wireless network, usually self-configuring between objects like household appliances -Wikipedia. By embedding short-range mobile transceivers into gadgets and everyday items new forms of communication between people and things, and between things themselves will emerge. The term "Internet of Things" has come to describe a number of technologies and research disciplines that enable the internet to reach out into the real world of physical objects.

ConfidentialMeets the challenge of changeAn interesting conclusion18The challenge of the Internet of ThingsTechnological architecture and standardization in most areas are still fragmented curtailing interoperability.Connections between the real and virtual worldsManaging and fostering rapid innovation is a challenge for governments Privacy and securityAbsence of governance, naming, identity, interfacesHow to convincing users that the IoT technology will protect their data and privacy when tracking Potential solutionsEducation and informationLegislation limiting the scope of the Internet of ThingsConclusion: currently low disruptive threat

ConfidentialMeets the challenge of changeAbsence of governance is the first main challenge

One major barrier for the widespread adoption of the Internet of Things technology is the absence of governance. Without an impartial governing authority it will be impossible to have a truly global Internet of Things, accepted by states, companies, trade organizations and the common people. Today there is not a unique universal numbering scheme as just described: PCglobal and the Ubiquitous Networking Lab propose two different, non-compatible ways of identifying objects, and there is the risk to have them competing in the coming future over the global market. There is also the need of keeping governance as generic as possible, as having one authority per application field will certainly lead to overlap, confusion and competition between standards. Objects can have different identities in different contexts so having multiple authorities would create a kind of multi-homing, which can lead to disastrous results.19The Disruptors in the Payments Industry Mobile20

Mobile Payments and eCommerce will Comprise an Increasingly Larger % of Payments VolumesOvum believe mobile is top of most Banks investment prioritiesWhy?Phone is a more powerful device than the PCKnows who you areKnows when you are in/near storeKnows your purchase/search historyDelivers instant gratification5x more phones than PCsIn store sales are still 19x greater than eCommerceSOURCE: Yankee Group, Dec 2010; Press search; McKinsey Global Payments Map2010Global PaymentFlows : $516TeCommerceFlows: $1,700B

Mobile PaymentFlows: $10B

2015Global PaymentFlows: $780TeCommerceFlows: $3,420BMobile PaymentFlows: $545BCAGR: +122%CAGR: +9%Total Flows:CAGR: 15%ConfidentialMeets the challenge of changeTraditional Paradigms for Payments are converging in Mobile

Source: VisaMobiles Impact on the Customer Experience

24The Disruptive Influences MobileMobile is transformationalMoving people from having to go somewhere to do something to having connectivity in their pocket/purses 24x7.Gives 7 billion people the ability to communicate wirelessly, globally and socially one-to-one, person-to-person, peer-to-peer.Most affluent consumers change their mobiles every 18 monthsProvides a transactional infrastructure that was non-existent just a few years ago. Africa has seen the most rapid transformation through mobile, with e.g. M-PESA in Kenya Allows geo-locating to locate anyone, anywhere, anytime and say at the point of retailing: heres the deal. U.S. bank BBVA Compass - Banks that fail to invest in mobile risk being swept away by a wave of disruptive innovation

ConfidentialMeets the challenge of changeList the names and roles, if known, of the customer attendees24The Disruptive Influences Mobile25Why?Phone is a more powerful device than the PCKnows who you areKnows when you are in/near storeKnows your purchase/search historyDelivers instant gratification5x more phones than PCsIn store sales are still 19x greater than eCommerceConfidentialMeets the challenge of changeList the names and roles, if known, of the customer attendees25The Disruptors in the Payments Industry Commerce Platforms 26The New entrant Disruptors

The Disruptive Forces AmazonAmazon Have launched the Amazon Coin, tied to the US$ that can be used to buy apps for the Kindle, and cannot be exchanged for other currencies.Are aggressively offering loans to small businesses, but the proceeds can only be used to purchase items from its sites.Is focused on its own businesses and unlikely to disrupt the payments landscape in the short term.Conclusion: low disruptive threat

ConfidentialMeets the challenge of changeThe Disruptive Forces Google StrengthsAn experienced disruptor! Heavily promoting its wallet, which it is offering for free Launched a credit card in the U.S. and U.K. (with MasterCard) Offering loans for purchasing AdWords Dangerous because it gives valuable things away for free. For the Currently focused on advertising, not payments.Weaknesses Marketers targeting smartphone and tablet users Drop in shares price blamed, in part on mobile marketing. The average cost per click dropped as mobile marketing took budgets away from traditional desktop advertising.

ConfidentialMeets the challenge of changeThe Disruptive Forces Google BGC - The challenge is for Google to reignite revenue growth as their existing businesses start to mature and slow down.Google, like the rest of th

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