mobile payments overview - merchant advisory group • what is a mobile payment? • mobile commerce...
TRANSCRIPT
Mobile Payments Overview Technology and Competitive Landscape
Dee O’Malley Senior Director, Financial Services Best Buy Co.
July 10, 2013
Upcoming MAG Educational Opportunities
• WEBINAR: Legal Update featuring Barrie Van Brackle August 14, 2013- 12:00pm-1:00pm CT Registration will be opening soon online at www.merchantadvisorygroup.org
• WEBINAR: Quarterly EMV Update September 2013 More information coming soon!
• Mark Your Calendars! Annual Conference-Celebrating 5 Years in the Big Easy October 7-9, 2013 Astor Crowne Plaza New Orleans New Orleans, LA
Registration Opens online in Mid-July
Contents
• What is a Mobile Payment?
• Mobile Commerce & Payment Trends
• Mobile Shopping Ecosystem
• Proximity Payment Technologies
• Payment Standards
• Mobile Wallet and Payment Data Risks
• Mobile Payment Transaction Flows
• Wallet Landscape
Mobile Purchases From a Retail
Website
Mobile Proximity Payments
at the POS
Mobile Proximity -Closed Loop
Payments
Mobile as the Point of Sale
The Mobile Payment Platform
Direct Carrier Billing
Mobile Web The Mobile Wallet The Mobile “Store Gift Card”
Every Smartphone is a Cash Register
The Everything Else Mobile Payment
Put it On My Bill
Purchasing Goods From a Website Utilizing an Internet Browser From a Smartphone
Paying for Things at a Store with a Mobile Device using NFC, 2D Bar Code or Other “Tap and Go” Technology
Usually a proprietary platform for a merchant to build a mobile payment application that can only be used at their locations. This has only been built for gift cards to date.
Merchants Using a Mobile Device to process a credit card payment. Very different from a mobile wallet
A catch-all category for mobile payment products allowing consumers to make purchases or send money to merchants or other consumers. Can be NFC, 2D, text message or other technology
Consumers buy ringtones, games or other digital content and place the charge on their cell phone bill
What is a Mobile Payment? • There are five types of mobile payments, each with different implications to merchant
systems, technologies, transaction processes, customer experiences and costs
• A mobile payment is a component of a larger mobile commerce experience
• Solutions such as those announced by MCX are a “mobile proximity payment” while
purchases on m.DOT and t.DOT are considered a dotcom transaction due to the process
by which payment credentials are applied to the checkout
m.Merchant
Mobile Commerce & Payments a growing part of the merchant-consumer interaction
• PayPal’s Black Friday (U.S.) mobile payment volume (mobile web) increased 196% as of 11am PT on Cyber Monday 2012. - Forbes Magazine
• Actual 2012 mobile payment volume was up 193% on Black Friday compared to 2011. Forbes
• U.S. mobile commerce transaction values surpassed $225B in 2012. - Forrester
• By 2015 mobile payments will account for more than $1T of the global economy. – Yankee Group
• Globally, transactions paid for with mobile technology are forecast to increase nearly fourfold to more than $1.3 trillion annually by 2017 – Juniper Research
• Mobile payments will overcome card volumes within 10 years – World Payment Report
While the estimates and timing vary, the adoption of mobile payments is imminent and an enormous marketplace opportunity
Mobile Proximity Payments are growing fast
POS Total Payments Volume by Payment Method, 2011–2017
While relative size is small, mobile proximity payments as a means of tender cannot be ignored
Mobile Shopping Ecosystem • Payments are a core function for
mobile wallets, but value-added services create the strongest proposition for consumers and providers
• Mobile wallet providers (center of graphic) are trying to control and influence the mobile customer experience, including offers, incentives and value-added services
• Most initial mobile wallet offerings are being developed by payments industry outsiders
• Retailers are critical partners for mobile wallet adoption
• Issuers and merchants are likely to face challenges from the rise of new and innovative mobile wallets
The risk of customer and vendor disintermediation is high
Proximity Payment Technologies
NFC RFID 2D BARCODE
• A short range, high frequency,
standards based wireless
communications technology
• Utilizes smart phone’s secure
element (SE) and limit number
of wallets on SE
• Enables exchange of data in
close proximity (2-4 inches)
• Consumer taps or waves
mobile device at POS device
• Utilized by the Google and
ISIS Wallets
• Utilizes radio waves to transfer
data from an electronic tag
(RFID) tag
• Can be read up to several
meters away
• Usually a sticker or embedded
in a credit card and holds
limited wallet data
• A RFID reader transmits an
encoded signal to read the tag,
tag responds with info
• Longer transmission range
makes less secure
• A two dimensional bar code that
can contain payment and
customer identification
information
• Not hardware based and can
store multiple wallets and
credentials
• A mobile device will display a
barcode and is scanned by a
POS device at checkout
• Used in the Starbucks app
today
• Made more secure when
integrated with a cloud that
stores payments and id
credentials
The most successful mobile payment applications are utilizing 2D barcode today
Standards
• A widely accepted set of standards exist for the acceptance of physical credit, debit and
cash card transactions
• These same standards do not exist for mobile payments. Each wallet shares a protocol
for payments but not for offers, coupons and other messaging
• Many entities are trying to establish mobile payment standards, MCX is creating a
merchant standard to limit retail technology investments, costs and complexity
MCX: Merchant driven rules, needs and
requirements leveraging their knowledge of
how their customer prefers to shop
OTHERS: business terms, operating
rules, security, change schedule, data
rules, data, value dilution, and business
terms
Due to the lack of a mobile wallet standard, the total capital required to implement an ISIS or Google or PayPal, is well beyond the reach of most merchants.
Potential DATA RISKs with Wallet Providers
POST-STORE PRE- STORE IN-STORE
CUSTOMER MARKETING DATA
Wallet providers delivering marketing
services to collect browsing, shopping,
product lookup, response, redemption and
preference data
The intention is to market consumers with
data that would otherwise have only been
available at a specific merchant.
Data at risk includes: Product preferences,
buying history, payment instrument
preferences across products, merchants and
geographies
END GAME
Unless proactive, widespread change occurs
in the business models of wallet providers,
merchants are at risk of being
disintermediated from our customers and our
suppliers participating in these wallets.
Customer data is at risk of being sold to our
competitors, providers and payment brands.
CUSTOMER TRANSACTION DATA
Based upon features of a wallet (geo-locators,
product lookup, browsing history, electronic
receipts), wallet providers have the potential to
disintermediate merchants to target market and
drive marketing revenues
Data at risk includes: Product purchase , sku,
brand, basket, overall buying history, payment
instrument preferences across products,
merchants and geographies
It is paramount that merchants maintain control of their customer data to maximize the broadest range of digital customer experiences
Mobile payment transaction flow CREDIT CARD PURCHASE WITH PLASTIC
Networks compete for issuers by driving up the interchange costs borne by merchants
Mobile adds cost and complexity to every transaction
Current and new marketplace mobile wallet providers (Google, ISIS, PayPal) are generating income via new fees and costs within the payment ecosystem. Merchants are currently funding these business models
MOBILE CREDIT CARD PURCHASE
Many Wallets, little consistency
Piloting with select merchants
Piloting in Austin and Salt Lake City
In select markets
Market entrants lack incentive to create a balanced customer experience
and payment model due to focus on perpetuating their own one sided
business objectives
MCX appears the only mobile payment alternative that is merchant and consumer centric and is driving a payments paradigm shift
• The mobile payments
marketplace is incredibly
diverse and fragmented
• Due to a lack of standards
across wallets it is cost
prohibitive to participate in
all
• Data ownership / usage and
transaction cost risk will
continue to limit merchant
adoption
Pay with MasterCard
MCX Google ISIS Square PayPal Level UP V.me Paypass
Allows merchant to protect customer data and
use for marketing and servicing
Minimizes long term transactions fees and
establishes rules for transaction processing
Drives cross merchant investment, support and
marketing
Maintain merchant ancillary revenue and avoid
disintermediation
Allows merchant customization of the consumer
experience
NFC vs 2D comparison 2D BARCODE WITH CLOUD
NFC
Description • Payment credentials and other supporting application data is
secured in the ‘cloud’ or server
• When a transaction is initiated, the data in the cloud is provided to
the Merchant POS via a 2D barcode for completing that
transaction
• Generally, no data is stored on the phone
• User authentication required prior to payments or loyalty data
made available to POS
• A set of technical standards for smartphones and similar
devices to establish secure communication with each other
by touching them together or bringing them into close
proximity
• Applications include contactless transactions, data
exchange, and requires an ICC (Integrated Circuit Chip)
similar to that included in SmartCards, ID cards and
transportation cards
Handset agnostic • Supports a broad range of devices on the market
• No hardware dependencies (eg SIM or ICC Chip)
• Requires a SWP enabled SIM chip or ICC Module
• Many handsets will include NFC in the next 18 months
Able to support both .com
(Card Not Present) and POS
(Card Present) transactions
• Support a broad array of customer commerce touch points
including eCommerce and POS
• Provides architecture flexibility to support changes over time in
order to meet new workflows and interactions
• Only supports POS transactions
Security • Supports multiple security modalities, infrastructure and
deployment fundamentals which are universally considered
sufficient for payment transactions
• Security is based on well known chip and secure
communication with a PKI security framework overlay
• Secure but inflexible
Hardware requirements • It is believed that Cloud based services will not require a
complete hardware overhaul
• NFC requires a device that is NFC-compliant including chip
and communication hardware support
• Hardware at the Point of Sale would need to be retrofitted or
replaced
Primary method of information
exchange
• Payment information is exchange d either through a barcode
scan or via phone capture (taking a picture) with transmission
through a dynamically generated QR or bar-code
• The ‘Cloud’ model can support both the phone capture of a QR
code generated by the POS or a QR code generated by the phone
and then captured by a 2-D scanner (hand-held)
• NFC leverages the contactless card technology enables
devices to share payment information at a distance less
than 4 centimeters
Phone Operating System
support
• Supports iOS (Apple), Android (Samsung, HTC etc), Windows
(Microsoft) and any phone which can either render (show) or
capture a QR code
• Only phones which have been certified and built to support
NFC
• Only Android and Windows OS support to date
In-aisle check out and other
modalities for customer
interaction
• Provides the portability to support in-aisle and other acceptance
devices without any hardware upgrade or implementation
• Requires secure contactless hardware development, testing
and support
MOBILE WALLET LANDSCAPE - as of March 11, 2013
Overview Carrier consortium , created a mobile wallet and
marketing platform. Close partnership with
handset providers
Web and mobile payments platform company leveraging
mobile payments to drive an overall mobile customer
experience
Web and mobile advertising giant leveraging
mobile payments to drive ad revenue –
unsuccessful NFC test, now to offer barcode
Payment
Technology
NFC - Payment credentials stored on the secure
element
Payment credentials stored on the secure element or Web
Transaction - Payment credentials the cloud
Payment credentials stored in the cloud
Devices Only carrier approved handsets ALL Android phones
Hardware
Requirements
POS hardware upgrades for NFC
POS hardware upgrades/integration for mobile/web based
payments
POS hardware upgrades for NFC and/or 2D
barcode
Customer
Experience
Rich customer experience with store locator,
coupons, etc.
End to end customer experience is shopping based not
payments based. Integration of Red Laser and Where?
functionality to drive broader acceptance
Initially focused on couponing and offers and
evolving the end-to-end mobile experience with
a vision to drive payments costs down over
time – avail in store/online
Merchant
Tender Cost
Control
ISIS leverages traditional payment networks
(MasterCard and Visa) and are not incentivized to
change cost paradigm. Current business model
adds costs to every ISIS transaction and account
PayPal is it’s own network and supports traditional and peer
to peer payments. Business model is to drive down
transaction costs and generate additional revenue through
data, analytics and marketing
Google leverages traditional payment networks
(V, MC, AMEX, Discover) and are not
incentivized to change cost paradigm – use the
card present rates. They will generate ad
revenues through data analytics and
advertising
Offers &
Coupons
Customer opt-in for merchant marketing . ISIS
marketing platform will push and manage offers
PayPal analytics and web tracking capabilities to allow for
1:1 targeted offers for merchants
Merchants to pay for mobile marketing efforts
Launch Dates Fall pilot in Austin/Salt Lake 2012 Pilot Q1 2012 – mall test 12/12 Pilot Q4 2011
Current Retail
Partners
Many local merchants who have NFC enabled
terminals as well as larger merchants: Rite Aid,
Macys, Jamba Juice, Sports Authority, AT&T,
TMobile, Verizon mobile stores, Chevron, Whole
Foods, Foot Locker, Petco
Abercrombie & Fitch, Advance Auto Parts, Aéropostale,
AEOutfitters, Barnes & Noble, Foot Locker, Guitar Center,
Jamba Juice, JC P, Jos. A. Bank Clothiers, Nine West,
Office Depot, Rooms To Go, Tiger Direct and Toys “R” Us,
etc.
American Eagle, Urban Outfitters, Toys-R-Us,
Radio Shack, Macy’s, Container Store, Duane
Reade, Sprint, Subway, etc.
Current
Payment
Partners
CapOne, Chase, C-SAM, Barclays, AMEX CapOne, Chase, Discover, VISA, MC, AMEX VISA, MC, Discover, AMEX
Overview Square is a POS and payments
platform allowing for an integrated
customer experience with the
customer picture being rendered
with the payment credentials at the
merchant’s POS
LevelUp is a payment network. With
a zero interchange business model
Visa’s wallet, V.me, is currently
solely an on-line/m payment
solution. Credit/debit cards are
loaded into a V.me account and are
accessed by entering an email
address and password
Master Card has recently re-
launched PayPass: an online /m
payment solution for credit/debit
cards accessed via a one click MC
payment button
Payment Technology Square register and Square card
case app
A credit card is scanned and loaded
into the Level Up app. A token
barcode is created and scanned at
POS
Only online currently, when deployed
at POS will be NFC or customer
keyed email/phone number and
password/PIN
Only online currently, when deployed
at POS will be NFC or customer
keyed email/phone number and
password/PIN
Devices Android and iOS Android and iOS Online only – future: NFC phones Online only – future: NFC phones
Hardware
Requirements
Square Register is an iPad specific
App and POS device. An Iphone
with a dongle also can be used.
Significant POS integration required
Potential POS upgrades for 2D
barcode scanners
POS hardware upgrades/integration
for mobile/web based payments
POS hardware upgrades/integration
for mobile/web based payments
Customer Experience Within the Square app, a customer
searches for a merchant and views
product price detail. Payment
information is retained and the app
triggers a customer photo at POS for
verification by the sales associate
Within the LevelUp app , a consumer
takes a photo of their cards and the
data is loaded to a cloud. The
phone is used to scan the 2D
barcode at POS to initiate the
payment
Customer sets up a v.me account
and enters their credit/debit card
information and creates a password.
Upon online checkout using a v.me
pay button, the customer access
their card of choice by entering email
address and password during the
checkout process
Customer sets up a MC account and
enters their credit/debit card
information and creates a password.
Upon online checkout using paypass
pay button, the customer access
their card of choice by entering email
address and password during the
checkout process
Merchant Tender Cost
Control
Square leverages traditional
payment networks (V, MC, AMEX,
Discover) and are not incentivized to
change cost paradigm. Have
created a standard blended rate
model (2.75% ), Large merchants
can negotiate terms
LevelUp is testing charging zero
interchange in exchange for a
percentage of promotional dollars
used during a purchase – i.e. 35% of
$2 off a $10 purchase
Current card rates apply Current card rates apply
Offers & Coupons Integrated into the solution through
the app
Offers are integrated into the app
and %/$ off are listed by merchant
Customer opts in for marketing
offers. Merchants pay for offers.
Customer opts in for marketing
offers. Merchants pay for offers.
Launch Dates In market In market – concentrated in metros Pilot Q4 2012 – in market 2013 Pilot Q4 2012
Current Retail Partners Thousands of small U.S.
businesses – through the dongle
program. Strategic partnership with
Starbucks
Claim to have 2,500+ small, regional
merchants – mostly restaurants
50+ banks are part of the v.me
network as well as a handful of
merchants – 1-800 Flowers and a
few strictly .com merchants
Unknown
Current Payment
Partners
VISA, MC, Discover, AMEX VISA, MC, Discover, AMEX
VISA, MC, Discover, AMEX
VISA, MC, Discover, AMEX
Square LevelUp MasterPass V.me
MOBILE WALLET LANDSCAPE as of March 11, 2013
1
The Potential Impact of Mobile Payments
Mobile Payment is simply a point-of-sale
payment made through a mobile device, such
as a cellular/smart phone or
a personal digital assistant (PDA)
Threats:
Increased Interchange fees due to more participants in a transaction
Insertion of a third party between retailer and their customer
Opportunities:
Different parties have diverging reasons to use the added benefits and convenience of mobile
payments to capture transaction volume
Traditional networks want to preserve transaction volume
New entrants primarily after consumer information for marketing revenue
Retailers desire lower cost and retain relationship with the customer
2
Mobile Payments Landscape
Delivers Value to the Retailer
De
live
rs V
alu
e to
th
e C
on
su
me
r
LOW HIGH
LO
W
HIG
H
Customer Speed and ease of use
More control over checkout experience
Security
Enhance the in-store shopping experience
The Home Depot Obtain lower transaction cost
Establish a platform for communication with certain
customers
Bolster Data Acquisition
Align in-store shopping experience with online/mobile
The Home Depot Mobile Payments Objectives