My phone is still smarter than yours

Actionable intelligence that drives Revenue & Profit in the eChannel…

© 2010. All rights reserved www.ecomadvisors.com

Paul McAdam

April 27, 2010

Presented at

NACHA PAYMENTS 2010

My Phone is Still Smarter than Yours

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

© 2010. All rights reserved Page 2

85% of U.S. adults own a mobile phone, as do 75% of teenagers

45%

63%

71%75%65%

73%77%

85%

2004 2006 2008 2009

% of Adults and Teens Who Own Cell Phones

Teens (age 12 - 17)

Adults18%

34%

43%48%

59%64%

58%

73%76%

79%82% 83%

12 13 14 15 16 17

% of Teen Cell Phones Owners (by Age, 2004 & 2009)

2004 2009

AgeSource: Pew Internet & American Life Project



The era of mobile financial services started 3 years ago

iPhone introduced June 29, 2007

Over 51 million iPhones sold to date

App store launched in July 2008. Over 187,000 apps currently available

Already 2 billion+ apps downloaded…

1.4

11.6

20.7 17.5

2007 2008 2009 2Q 2010

Apple iPhone Unit Sales(millions)

Source: Apple website, 10-K’s & 10-Q’s

On pace to

sell 35+

million in

2010



Research objectives and methodology

NACHA and eCom Advisors partnered with FIS to:

Repeat eCom Advisors consumer research fielded in March 2009

Track the pace of consumer use of mobile devices to access online

banking, pay bills and make online purchases

Deep dive on the impact of Internet-enabled smartphones on mobile

financial services adoption and the customer experience

Research methodology

54 question, online survey

1,236 completed surveys

March 23 – 26, 2010

Sample obtained from Survey Sampling

International



100%

71%66%

55%

42%

Own and Usea Mobile Phone

ActiveOnline Bankingvia Computer

ActiveOnline Bill Payvia Computer

Own an Internet-capable Mobile

Phone

Own a Smartphone

The survey focused on consumers who own and use a mobile phone

―Active‖ defined as use

within the past 30 days



The survey sample was relatively balanced by gender, age and income …

Female49%

Male51%

Gen Y (1976-1992)

34%

Gen X(1960-1975)

30%

Baby Boomer

(1946-1959)23%

Mature (1930-1945)

13%

Under $25,000

24%

$25,000 -$49,999

33%

$50,000 -$74,999

21%

$75,000 -$99,999

10%

$100,000 -$124,999

6%

$125,000 -$149,999

3%

$150,000 or more3%



… In addition to mobile carriers

Other12%

AllTel2%

AT&T28%

Cellular One1%

Cricket1%Quest

0%

Sprint Nextel11%

T-Mobile10%U.S. Cellular

2%

Verizon31%

Virgin Mobile2%



Detailed classification of the types of mobile phones owned by survey respondents

iPhone, Motorola Droid, Google Nexus,

BlackBerry Storm

BlackBerry Curve, BlackBerry 8800 Series,

Samsung Gravity, Palm Treo

Motorola Surf, Samsung Impression, LG

Dare, LG Xenon

Newest Touchscreen Smartphones Touchscreen Smartphones

Older or More-basic PhonesSmartphone (Non-touchscreen w/

QWERTY Keyboard)

Motorola RAZR, Verizon Escapade,

Nokia 2680 Slide, Nokia 1680 Classic



Newest Touchscreen Smartphones

Touchscreen Smartphone

Smartphone (non-

touchscreen/QWERTY …

Older phones

2%

20%

32%

61%

4%

21%

19%

25%

93%

59%

49%

14%

Internet usage compared to cell phone type

I don't have Internet access I have Internet access and DON'T use it I have Internet access and use it

Those that use mobile web predominantly have newer technology



4%

15%15%

44%

Older phonesSmartphones (non-touchscreen /

QWERTY keyboard)

Touchscreensmartphones

Newesttouchscreensmartphones

I use the Internet on my computer less now because I use the Internet on my mobile phone

(% that agree)

The newer the technology, the more consumers rely on their mobile phones instead of their computers to access the Internet



42% of the sample owned a smartphone, including 67% of Gen Y consumers

Newest touchscreen smartphones

Touchscreen smartphones

Smartphone (non-

touchscreen/QWERTY keyboard

Older phones

34%

59%

79% 81%16%

10%

5% 3%

33%

23%

12% 11%18%8% 4% 5%

Gen Y Gen X Baby Boomer Mature

Types of mobile phones owned by

survey respondents

Types of phones owned by generation

10%

10%

22%

58%



Among owners of Internet-capable phones, 27% use them to access online banking

22%

27%

2009 2010

% of consumers with Internet-

capable mobile phones who used

them to access online banking

within the past 30 daysOnly once,

28%

Once every 2 weeks,

25%

Once a week, 21%

2 - 4 times per week,

19%

Daily, 7%

Frequency of mobile online banking use

within the past 30 days(2010 data)

47% at least

weekly



But only 60% of active mobile banking users are satisfied with the experience

28%

32%

27%

13%

Overall satisfaction when their bank account was accessed via their

mobile phone

Very Satisfied Satisfied Neutral Dissatisfied

= 60% satisfied (7 or higher)

Very Satisfied

AVERAGE SATISFACTION

0

1

2

3

4

5

6

7

8

9

10

Satisfied

Dissatisfied

Neutral



10%

39%44%30%

30%

30%35%

28%

I don't knowSMS / Text message

Mobile banking app

Mobile Internet browser

Customer satisfaction with mobile banking

Satisfied Very Satisfied

Most use the mobile browser to access online banking, but satisfaction with that method lags

11%

25%

34%

54%

I don't knowSMS / Text message

Mobile banking app

Mobile Internet browser

Methods used to access online banking*

* Note: Respondents allowed to select all methods that applied

within the past 30 days

40%

58%

69%

79%



20%27%

34%37%

28%23%

32%27%

Older phonesSmartphones (non-touchscreen

/ QWERTY keyboard)



Customer satisfaction with mobile banking, by phone type


86% of active mobile banking users are smartphone owners

43%

16%

27%

14%48%50%

66%64%

Phone ownership of active mobile

banking users

Newest

touchscreen

smartphones

Touchscreen

smartphones

Older

phones

Smartphone

(non-touchscreen

QWERTY

keyboard)



20%

40%28%

20%

27%

31%

Baby BoomerGen XGen Y

Customer satisfaction with mobile banking, by generation


88% of active mobile banking users are Gen Y and X

Gen Y, 63%

Gen X, 25%

Baby Boomer,

8%

Mature, 4%

40%

67%

59%

Active mobile banking users,

by generation



63% of mobile banking users have owned their device for less than 1 year

Less than 6 months,

34%

6 months - 1 year, 29%

1 - 2 years,23%

More than 2 years,

14%

Mobile banking adopters -- length of time owned their current mobile device



“Inertia / don’t see the need” and “costs too much” are key factors that hinder mobile adoption

1%

2%

4%

7%

12%

14%

14%

16%

18%

35%

My FI charges a fee for mobile banking

I’ve tried it in the past, but was dissatisfied

My FI does not offer mobile banking

My mobile phone screen is too small

It costs too much to use the data plan on my mobile phone

I don’t think it is secure

There is no value to banking with my mobile phone

There is no charge to use my computer

I just haven't bothered to try mobile banking yet

I would rather access my accounts online with my computer

Why you did not access your bank account with your mobile phone

Inertia or don’t see

the need

Costs too much

Security

Technical issues



10% of mobile phone owners are receiving banking alerts on their mobile phones

23%

23%

28%

30%

31%

33%

33%

34%

47%

51%

Credit card balance approaching limit

Irregular credit card activity

Changes to your online banking profile

Irregular debit card activity

Payment due(mortgage,credit card, …

Transaction alert for debit, ATM, or …

Direct Deposit posted

Account has insufficient funds

Available balance

Low balance alert

Types of alerts currently received on mobile phone

Account

balance

Payments

Security /

Fraud



“Inertia / don’t see the need” are the primary factors hindering mobile alerts adoption

1%

3%

4%

6%

7%

7%

8%

21%

39%

I’ve tried them before, but was dissatisfied

My FI charges a fee for mobile banking alerts

My mobile phone screen is too small

Alerts are not secure

I don’t have text messaging capability on my mobile phone

My FI does not offer mobile banking alerts

The text messaging capability on my mobile phone costs too much

I just haven't bothered to try mobile banking alerts

I don’t see any value or don’t have any need to receive alerts

Reasons why respondents do not use mobile alerts

Inertia or don’t see

the need

Costs too much

Security

Technical issues



11%

20%

2009 2010

All of my bills, 14%

Almost all of my bills,

19%

Half of my bills, 18%

A small portion of my bills,

19%

At least one of my bills,

31%

Among owners of phones with Internet access, 20% have used them to pay bills

% of consumers with Internet-

capable mobile phones who used

them to pay bills online within the

past 30 days

Portion of bills paid using mobile bill pay

within the past 30 days(2010 data)

50% at least

half of bills



62% of respondents prefer to pay bills at merchant websites

49%

13%

31%

7%

When paying bills with mobile phone, website used most often

I went directly to each biller's website to pay my bills

I did a combination of the above, with more at biller website

I went to my financial institution's bill payment website to

I did a combination of the above, with more at my financial



The more sophisticated the mobile phone technology, the more likely consumers are to use mobile banking and bill pay

13%

22%

16%

40%

9%

27%

30%

65%

Older phones

Smartphones (non-touchsreen / QWERTY keyboard



Mobile online banking

Mobile bill pay

Consumers that accessed online banking and bill payment using

mobile phones within the past 30 days, by type of phone owned

* Note: Among consumers who own Internet–capable mobile phones.



The younger the consumer, the more likely they are to use mobile banking and bill pay

10%

20%

27%

11%

21%

39%

Mature

Baby Boomer

Gen X

Gen Y

Mobile online banking

Mobile bill pay

Consumers that accessed online banking and bill payment using

mobile phones within the past 30 days, by generation*

* Note: Among consumers who own Internet–capable mobile phones.

Only 4% of adopters in the mature segment.

Sample size too small to report.



Mobile banking adopters use branch and telephone channels significantly less

21%

20%

43%

12%

14%

18%

Spoke with a representative at the bank's customer service center by

phone

Used the automated telephone system to check account balance, see if check cleared, transfer money, etc.

Went inside a bank branch to transfer money, make deposits, cash a check,

withdraw money, etc.

Active mobile banking consumers

Consumers that are not active mobile banking

Consumers that conducted these interactions within the past 30 days



Those with the newest Smartphone's are more likely to make purchases via their mobile phones

App Audio/song Game Ringtone Online store purchase

Picture/image Food Movie ticket Video/movie

3% 4% 3%7%

2% 4% 4%1% 2%

11% 11%8%

14%

2%

11%5%

3%5%

8% 5%

5%

25%

7%

9%

8%

5%3%

52%

38%

34%

28%

27%

21%

20%

20% 18%

Items purchased on respondents mobile phone compared with phone type

Older or more basic phones


Smartphone (non-touch screen w/QWERTY keyboard)

Newest touchscreen Smartphones



Consumers with newer mobile devices are more likely to pay for apps they like and….

Gen Y

Gen X

Baby Boomer

Mature

35%

45%

55%

62%

19%

23%

30%

21%

47%

32%

15%

17%

Willingness to pay for apps and generation

Disagree Neutral Agree

…the younger the consumer the more willing they are to purchase apps they like

Newest touchscreen Smartphones


Smartphone (non-touch w/QWERTY keyboard)

Older more basic phones

17%

40%

37%

55%

11%

16%

25%

26%

72%

44%

38%

19%

Willingness to pay for apps compared with phone type

Disagree Neutral Agree



Consumers use different mix of payment methods for purchases made from mobile phones

N/A

57%

48%

39%

15%

7% 5%

29%

35%

16%

7%4%

13%

28%

Credit card Debit card PayPal Gift card Electronic check

App store account

Mobile phone account

Payment methods used for mobile and computer purchases online

Computer Mobile28 pct.

point gap13 pct.

point gap

Note: Respondents were allowed to select multiple payment types

Purchases made

with App store and

mobile phone

account contribute to

fewer card and

PayPal purchases

made with mobile

phone

23 pct.

point gap



Mobile is accelerating the migration of banking and payments to eChannels

Latest ―touch screen smart phones‖ and mobile web browsers are an

―enabling technology‖ for banking, payments and shopping

iPhone web interface and connectivity makes mobile web (mobile browser +

Apps + SMS) nearly equivalent to functionality of wired web – but with full

portability

We’re in midst of an inflection point in U.S. banking delivery channels,

much like the introduction of ATMs and the widespread availability of

broadband in homes…

— ATMs extended the bank beyond the branch and ―banker’s hours‖

— Web banking and broadband connectivity extended the bank into the

consumer’s home, in batch

— Mobile web/app/sms and fast mobile wireless connectivity extends the

bank onto the consumer’s person, in real-time



Survivors

Students &

Gen Y

Upwardly Mobile

Gen X & Y

Borrowing Families

Mature Bank

Loyalists

Self Directed Mass Affluent

Saving Families

Mobile functionality must be aligned with the next generation of DDA packages

Prepaid Debit Account

~ 10% of population

Young, Tech Savvy

Account

~ 25% of population

Retirement Income

Account

~ 10% of population

Tech Savvy, Emerging

Affluent Account

~ 15% of population

Mass Market, Loyalty

Account

~ 40% of population

Age

Inc

om

e / W

ea

lth



The table stakes requirements to compete in mobile will evolve very quickly

Transactions

mPayments

Information

mBanking

Engagement

mCommerce

Mobile P2P transfers

ATM withdrawals

Inter-bank funds transfers

Mobile wallet

NFC transactions

Home deposit capture

Top ups

Text receipts for mobile

payments

Notifications

Alerts

Check balances

Push SMS

Mini-statement

ATM & branch finder

ATM receipts

Intra-bank funds transfer

Bill pay

Loyalty programs with

affiliate merchants

Time dependant offers

Location-based

marketing

Couponing

Generate awareness and

adoption. Cost savings

Enhanced customer loyalty

and payments revenue

―Always with me‖ for better

control of personal

finances

2010 – 2011 2011 - 2012 2013 +



Contact information

eCom Advisors provides executive consulting services to banks, billers, vendors and investors in

financial services technology and online banking, billing and payments. Our consultants possess

175+ years of direct operating experience, and are considered leading experts in the industry. We

help executives make their most crucial ecommerce management decisions.

Paul McAdameComAdvisors

One Westbrook Corporate Center, Suite 300

Westchester, IL 60154

[email protected]

708.449.7743(office)

630.865.3135 (cell)

Atlanta office

Columbus office

Boston officeChicago office

3340 Peachtree Rd. NE

Atlanta, GA 30326

404.848.7709

5650 Blazer Parkway

Dublin, Ohio 43017

614.734.8372

95 Washington St.

Canton, MA 02021

781.784.1663

1 Westbrook Corp. Cntr.

Westchester, IL 60154630.865.3135


Economy & Finance

My phone is still smarter than yours