7/18/2010

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M‐Payments, M‐CommerceGary Schwartz, Impact Mobile & Chair, MEF Americas

1. Chris Cox, First Data Corporation2. Stephanie Swain, Best Buy3. Sandeep Bhanote, Global Bay Mobile Technologies4. Talbott Roche, Blackhawk Networks

15%14%15%

20%

Campaign Effectiveness Brand Metric DeltasMobile vs. Online

November 2007-December 2009Mobile NormsOnline Norms

VS. MobileOnline

9% 9%10%

12%

2% 3%

6%

3%2% 2%

0%

5%

10%

Unaided Awareness Aided Awareness Ad Awareness Message Association

Brand Favorability Purchase IntentDelta:

Exposed - Control

72%69%

80%80%

100%

Weekly Usage of Mobile FeaturesDecember 2009

All Mobile UsersRegular Phone UsersSmartphone Users

VS. ShopperYou

21%16% 13%

8%10% 9%5% 4%

56%

36% 37%

18%

0%

20%

40%

60%

Texting Internet Games Applications Video

Vertical Horizontal(cross‐channel)(in‐channel)

VS.

Shrink ReThink(function)(form)

VS.

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m‐Media m‐Mouse(activate)(publish)

new message:new message:

2LMJCXFC7C

VS.

Consumer Shopper(marketing)(branding)

VS.

Thoughtful $ Impulse $

VS.

Beyond Early NFC Payment Trials

Chris Cox, VP Mobile Product DevelopmentFirst Data Corporationp

Early NFC mobile payments trials demonstrated possibilities…

BART Mobile Trial CBS 5 News wmvBART Mobile Trial_CBS 5 News.wmv

…but a complex ecosystem has inhibited large commercial roll‐out…

Mobile TSM

Financial Institution

Credit / Debit Network

• Credit / debit accountholders• NFC payment application• Mobile wallet selection• Payment account issuance capability• Card data for mobile provisioning

• NFC payment app specs• NFC payment app certification• POS acceptance rules

FI and Prepaid Issuing

Services / Processor

• Payment account issuance capability• Card data for mobile provisioning• Payment transaction processing

Mobile TSM

• Integration to account issuing entity• OTA application and data provisioning• Technology integration and hosting• Secure data center for financial data• Operation of cross-entity ecosystem• Cross-entity relationship management

Merchant Acquirer

Mobile Network Operator

Chip, SIM, and Handset

Manufacturers

Marketer • Offer management engine• Merchant and CPG relationships• Media relationships

• NFC chipsets (embedded ,USIM, microSD)• NFC-enabled handsets• Chip pre-personalization

• Wireless subscribers• NFC-enabled handset distribution• Access to secure element on handset• Mobile wallet selection• Some enabling technology components

• Payment transaction acquiring from the POS

• Merchant relationships• Potential influence on POS

infrastructure decisions

Merchant• Customers / mobile payment users• POS infrastructure for NFC payment acceptance• Prepaid accountholders

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… consumers & merchants need more than just card replacement.

NT VA

LUE

TRADITIONAL LEATHER WALLET

MOBILE WALLET

CONS

UMER

AND

MERC

HAN

TIME

• Paper-based merchant offers and coupons (i.e., clipping coupons)

• Physical collection of loyalty cards, fobs

• Purchases that earn rewards dis-intermediated from redemptions

• Broadcast marketing

• Issuer-based rewards

TODAY

• Virtual loyalty cards, coupons and offers

• Sophisticated target marketing leverages location, presence and buying habits

• Instant POS rewards

• Merchant –based rewards

TOMORROW

Yet progress continues.

Financial Institution

Mobile Network Operator

• US – Mobile network operators are highly active in payments strategy/planning• Canada – Now EMV compliant. EnStream consortium (Rogers, TELUS, Bell Canada) formed• Asia – Japan (all MNOs), Korea (SK, KT), Singapore (NETS)• EMEA – EMV compliant market. UK (Orange), Pay Buy Mobile via GSMA

• Bank of America, Wells Fargo, USAA – Highly active and experimental in mobile payment pilots • Citi – “Tap and Pay” pilot in India; paused on P2P pilot with Obopay. Minority interest in ViVO (TSM assets)• US Bank – Announced microSD test. Active in mWallet, mobile P2P/bill pay, shopping concierge• Barclaycard – Driving dual-interface EMV issuance toward #20M by ‘11. RBS, HSBC & Lloyds TSB >#30M

Credit / Debit

Networks

HandsetManufacturer

TechnologyProviders

• Apple – recently filed patents hinting at intent to launch NFC payments and value-added services• Google – Highly active in mobile payments/commerce. Hired Paypal exec to lead Google Commerce• Nokia – all smartphones will be NFC-enabled starting in 2011; estimating #40M handsets• RIM, HTC, Samsung – all have or are testing NFC. Several have hired strategy/planning leads for NFC

• POS – Square, Verifone – lots of niche innovation – anticipate that established OEMs will figure out this space• Paypal – Highly focused on mobile commerce• Smart Card Manufacturers (e.g. Gemalto, G&D) – focused on dual EMV card issuance, mPayments• SK C&C – globalizing mCommerce assets proven in Korea

• Visa – working with Device Fidelity (contactless microSD), launching mobile apps, online shopping• Visa/MC working to continue status quo via contactless spec formation – still a work-in-progress• Discover – chasing alternative payment opportunities in US• AmEx – Bought RevMoney. Will be a fast follower once business model and market is figured out

Consumers are already using smart phones for commerce…

The iPhone 4 debuted in US, France, Germany and the UK later on June 23rd…

…and sold 1.7M+ in three days; 77% were upgrades

…that’s ~400 devices per minute…

>100M active users currently access Facebook through their mobile devicesPeople using Facebook Mobile Apps are 2X more active on FB200+ MNOs in 60 countries working to deploy/promote FB mobile products

Sales generated through iPhone app & m-commerce site have exceeded $400M so far this year 50% of sales were fixed-priced productsOn Black Friday ‘09 mobile online payments through PayPal were up nearly 650 percent year-over-year

…as part of a broader shift to a mobile lifestyle.

Sweeping shift of content, access, and interaction from PCs to mobile devices force convergence of eCommerce and mCommerce strategies

As mobile wallets with embedded preferences grow:Functionality, efficiency, security, rewards and services become integrated – collectively, Value Added Services

Location-based, real-time capabilities make product selection a matter of who’s there, when, with what’s cool

Advertisers and sellers shift to narrowcast marketing offers and efforts

Mobile is key: Always on; Always with you; 2-way; 1-to-1; real-time

Value Added Services Example: eGift SocialSM Facebook Application

On Facebook, Jill decides to send a gift to her friend, Tina. She accesses her applications, and selects “Gift Sender”.

Jill enters Tina’s email address then goes to “Café”, selects “send a coffee” and chooses a mocha latte.

She can then complete the transaction by entering her payment information.

1 2

Tina receives email from Jill on her phone or PC.

Tina keeps the Account Number on her phone for easy access, which is entered at the POS.

3 4Friends are logging on Facebookfinding news of the Gift sent and received

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Value Added Services Example: Mobile Vouchers

SMS Barcodes Contactless CouponsPDF/QR Tags

Coupon Evolution Best User Experience

Manual Entry Image Readers Contactless Readers

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Value Added Services Example: Prepaid Mobile Manager

Storefront

SMS Management

Alerts

Concept• SMS, WAP and downloadable application

• Consumer manages account securely from mobile and/or Web

Functionality• Account/Card Management: Ability for users to load prepaid

One access point for a merchant to interact with consumers.

Gift Card Management

eGifting

SMS Marketing

Couponing

P2P GiftingFacebook

WAP Merchandising

Mobile Registration

• Account/Card Management: Ability for users to load prepaid accounts, check balances, view transaction history, manage tender types and update profiles

• SMS Management: Check balances, transaction history and reload via SMS

• Gifting: Send small gifts $5 to $10 or full‐value gifts via mobile and Facebook connections

• Loyalty/Coupons: Send coupons/offers based on purchase history and customer preferences, behavior

• SMS Marketing: Manage SMS marketing campaigns using intuitive Web interface, short‐code promos

• SMS Alerts: Product alerts based on price or availability

• Registration: Real‐time user verification for open loop prepaid accounts

• And more..

Mobile Payments: A Contactless Test

Stephanie SwainSenior Director, Growth Initiatives, Best Buyy

Sticker microSD Card 2D barcode NFC

Technology

2009/2010 Late 2010 2010 2011/2012

• First contactless form factor

• Small tests throughout the world

• Allow single account to be personalized

• Technology still being tested

• Allows multiple accounts to be personalized

• 1D and 2D barcodes tested in closed loop environments

• Uniquely generated for transactions

• Handset mfg dependent

• Nokia delivering in all 2011 smartphones

Best Buy Conducted the Largest Contactless Sticker Test in U.S.

Best Buy RewardZone MasterCard Contactless Form FactorTested in Partnership with HSBC (Card Issuer) and MasterCard

Can be Used Anywhere PayPass is Accepted

Objective• Test cardholder willingness to adopt contactless form factors• Drive Best Buy credit utilization – “top of wallet” mentality• Increase spend frequency and amount

Pilot Overview

Target• 50,000 RewardZone MasterCard holders• Cross Section of Premier, Best, Good & Inactive Customers• Open to Buy > $300

Timing

• PULL Invitation Email -- 11/16/09 (Opt-in 11/16/09-11/30/09)• PULL Tags Mailed – 12/08/09• PUSH Phase I Tags Mailed -- 01/15/10• PUSH Phase II Tags Mailed – 02/15/10

Customer segmentsTest

HoldoutPULL PUSH I Email

PUSH I No Email PUSH II

BBY Premier Silver 5,330 19,062 2,000 1,990 8,366BBY Best Customer 4 938 5 277 999 0 3 312

Pilot Overview

BBY Best Customer 4,938 5,277 999 0 3,312BBY Good Customer 9,385 5,887 1,001 0 4,513

Marginal/Inactive/MOB < 6 months 197 13,746 1,000 0 10,372

1,000 cardholders opted-in via Pull strategy & received stickers

~ 49,000 stickers were mailed to Push population

19,850 43,972 5,000 1,990 26,563

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Push Email

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

% H

TML

Mes

sage

s O

pene

d

Percent HTML Messages Opened

Higher Than Average Email Open Rates

0%1%2%3%4%5%6%7%8%9%

01,0002,0003,0004,0005,0006,0007,0008,0009,000

10,000

BBY Premier Silver Best Buy Best Customer Good Customer Marginal / Inactive / MOB<6

Opt-In R

ate

Customer Segments

# Em

ail

#Email and Opt-In rates for Pull Strategy

0%Pull Invitation Blast

(11/16/09)Pull Invitation

Reminder1 Blast (11/23/09)

Pull Invitation Reminder2 Blast

(11/28/09)

Pull Invitation Usage1 Blast

(12/23/09)

Push Introduction Blast (01/16/10)

Mobil Tag Usage2 Blast (02/04/10)

Mobile Tag Usage3 Blast (03/04/10)

Welcome Package Tap N Go Microsite

Overall Results

43% of incremental spend was contributed by Pull population

Accounts are highly engaged and spent $430 more than holdout

Average PayPass ticket size was $33

• Opt-Ins driving Sales Lift

• Premier Silver Sales Lift Fueling Pilot Profitability

• Good Customer increased engagement driving spend lift

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Out of Store Spend Highly Lucrative as Part of Card P&L

Success Consistent Across the Board

The New Wave of Mobile POS

Sandeep Bhanote, CEOGlobal Bay Mobile Technologies Inc.y g

Changing ExpectationsConsumer “smartphones” areConsumer smartphones are

proliferating with over 51m iPhonessold and 60k Android phones sold daily

Changing Expectations

Use this technology on a daily basis AND expect to interact with YOUR brand

cons

umer

Also happens to be the 15‐year old who uses this technology. They expect it as tools in the storest

ore

Bring it into the enterprise and expect to use this for everything

exec

utiv

e

“Bob pays for Jim’s dinner”

• Simple Transactions• No integration, inventory, etc.

Peer

-to-P

eer

Bob likes mobile payment

“Bob goes to store to buy product, but does not like to wait in line”

• Sophisticated Transactions• Integrated to infrastructureS

tore

“Bob buys shoes from his phone”

• Goes to App store to download app• Pays with credit card

mC

omm

erce

Store

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• Consumers know how to use it in their lives

• Retailers want to take advantage of this opportunity

Inflection Point?

Is NOW the time?

It’s Happening

• At least 10 major brands rolling this out this year

• Holiday season will be unlike any other

• Tsunami is coming, are you ready to catch the wave?

What Is The Benefit?

Retailer Challenge Lost sales due to store walkouts or poor up-sell

Registers take up valuable selling space

MOBILE IMPACT

Eliminate 1 missed sale per store per day

Eliminate 1 Registerper store

ASSUMPTIONS

Average Sale = $50# stores = 250

Store Open = 360 days per year

Sq. ft. gained per store = 14# stores = 500

Sales / Sq. ft. = $329

ESTIMATED FINANCIAL IMPACT

$4,500,000(annual rev. increase)

$1,900,000(annual rev. increase)

mPOS and It’s Moving Parts

Technology SUCCESSBusiness Operations

mPOS and It’s Moving Parts

BUSINESS OPERATIONS

Operations Planning User Adoption

Store Format

mPOS and It’s Moving Parts

Device

TECHNOLOGY

POS Enablement

In-Store Infrastructure

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What Makes A Good Payment App

ProductSearch

POS StoreLocator

Customer Profile

Promotion

Social NetworkingVideo

• Mobile payment is here, being deployed and must be a part of your strategy

• The “people” are ready for this next wave

• Incredible revenue and customer service benefits

Summary

• Incredible revenue and customer service benefits

• Your management team is going to be asking for it

Mobile Gifting: the commerce of social networksTalbott Roche, SVP,Blackhawk Network

Communication is Shifting to MobileCommunication is Shifting to Mobile– One in four households has

now gone mobile‐only– At current rates, the last

landline in America will be disconnected sometime in 2025

– Worldwide, there are 4.6 billion cell phone subscriptions and is expected to hit five billion this year—75% of the world population

Source: The Economist and eMarketer

–25

–20

–15

–10

–5

0

Net

herla

nds

OEC

D UK

Landlines (% decrease, 2005–2007)

US

US adults who own a mobile phone vs. who have a mobile phone

and NO landlineJanuary 2010 (% of respondents in each group)

GenerationOwn a Mobile Phone

Mobile Phone Only

Millennial (18‐29) 94% 41%

Gen X (30‐45) 90% 24%

Boomer (46‐64) 62% 5%

Silent (65+) 62% 5%

Total 86% 21%

Source: Pew Research Center

Mobile Devices Usage is GrowingMobile Devices Usage is Growing– Social Networks, online shopping and

gaming are top mobile activities

– In 2010, mobile shopping doubled and 35% of web‐enabled shoppers had participated in some degree of shopping

– In 2015, shoppers expected to spend $120B on their phones (worldwide); equates to 8% of the e‐commerce market

Source: ABI Research, PriceGrabber.com, eMarketer 3 2009

0 5 10 15 20 25 30 35 40

Entertainment

Gaming

Banking

SocialNetw orking

OnlineShopping

Mobile Content and Activities US Web Enabled Mobile Phone Owners

Social and Mobile are Linked– 2/3 of the world’s Internet population

visits social networking or blogging sites

– 10% of Internet time on social networks

– About 30% of Facebook traffic comes from mobile

– Week ending March 13, Facebook for the first time had more traffic than Google on a weekly basis

Source: Global Faces and Networked Places., SF Mercury News March 2010, smartblog 9/09

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Gifting is The Commerce of Social and Mobile E i t

Gifting is The Commerce of Social and Mobile E i tEnvironmentsEnvironments

Mobile and Gifting: a Natural Fit

> Mobile commerce brings new dimension to shopping and gifting

>Gift cards enhanced gift giving

>Mobile further enhances convenience in terms of time and geography

>Greater personalization and functionality

>Accommodates impulse purchases, micro gifting and group gifting.

Buy a Gift – Select Retailer, Choose Amount/Design, and Add a Photo from iPhone Camera or Stored Images Add Personalized Message, Choose Delivery Method, Enter Payment, and Confirm

Mobile: Deepen Consumer RelationshipsMobile: Deepen Consumer Relationships

– Provide additional convenience & value to your shopper

– Leverage existing consumer behavior

– Engage consumers in deeper brand relationships

Source: ABI Research, PriceGrabber.com, Smartphone Shopping Survey, April 2010, Pew Research

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Questions & InsightsGary Schwartz, Impact Mobile & Chair, MEF Americas

1. Chris Cox, First Data Corporation2. Stephanie Swain, Best Buy3. Sandeep Bhanote, Global Bay Mobile Technologies4. Talbott Roche, Blackhawk Networks