Will contactless change the
global payments landscape?


Aneace Haddad
Chairman & Founder
Welcome Real-time

London June 2...
The main contactless promise:
       “No more lines”
“No more lines.”
Does contactless deliver this promise?

Yes, if the shoppers in front of you also
         have contactle...
1 out of 12



25 million contactless cards will be issued in the US in 2007,
             versus 300 million magstripe ca...
Only JPMorgan Chase




“Of the largest banks, only JPMorgan Chase has
begun a significant rollout, although it has only
 ...
Contactless
230 million

                  forecasts
                  for 2007
                 37 million
              ...
Percent of spend in 2010



                           1.6%



  US contactless payments forecast (Jupiter)
“A major obstacle is
persuading more merchants
  to accept contactless.”
      Card Technology, June 2007
1 out of 133
“There are 6 million places where you can use your credit
 card, 45,000 (contactless locations) doesn’t excit...
“Until you have a better
merchant coverage, there’s
   clearly a problem .”
      Leigh Malnati, American Express
“[We] haven’t moved aggressively to contactless
 because there is little consumer demand – been
      more of an issuer/as...
“The contactless cards are not yet
affecting the parking lots. Get more
     cards out in the market!”




               ...
“Waving a card in front of a
reader takes about as much time
    as swiping one through.”


                     Manager, ...
“Visa launches No Signature Required
program to boost card usage for small
 purchases with traditional magnetic
          ...
Is this ad for contactless or
traditional magstripe cards?
“Because money shouldn’t
     slow you down”
THE IRONY:

 Contactless can deliver unique
features that are irresistible to
 merchants … not just “Speed”.
 (But the tec...
Which brand offers irresistible
  features to merchants?




An opportunity to differentiate.
How might contactless become
  irresistible to merchants?
Bank-managed data could help retailers identify their
best custo...
How might contactless become
  irresistible to merchants?
Introduce payment information value-added services to
reduce pri...
Promotional marketing is huge
      ($342 billion in the US alone!)
France
Germany
Italy
Spain
Pakistan
Thailand
China
Co-op package mailing,
                              1 insert: €350




Newspaper ad, half page:
 €9,000 - €12,000

      ...
Make it possible for merchants to use
data hidden inside the card’s chip to
deliver targeted messages at the POS,
at very ...
Ex: Frequent Shopper Messages

Merchants can avoid giving high value promotions to all customers. They can
deliver increas...
Ex: Competitive Shopper Messages

   Merchants can avoid losing customers to the competition. They can recognize
 occasion...
Ex: Game Programs
   Merchants can avoid the cost and trouble of complicated loyalty programs.
Instead, they can build con...
What happens when merchants
prefer one brand over others?

          A simple, merchant funded promotion helped a
        ...
Payment brands see increased transaction
   volume when they support targeted
         merchant promotions
               ...
An opportunity to differentiate




And an opportunity to address major pains which
cannot easily be addressed with magstr...
The problem must be solved at
Payment schemes will find it more and more
    the payment network level
difficult to attrac...
The problem and regulators will continue
     Merchants must be solved at
  the payment the interchange model if
       ch...
The problem must be solved at
    the payment network level
 Important scheme initiatives (contactless,
 mobile, EMV …) ca...
Thank you

   Aneace Haddad
Chairman, Welcome Real-time
 a.haddad@welcome-rt.com
 http://aneace.blogspot.com
   www.welcom...
Haddad Contactless London
Haddad Contactless London
Haddad Contactless London
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Haddad Contactless London

  1. 1. Will contactless change the global payments landscape? Aneace Haddad Chairman & Founder Welcome Real-time London June 2007 Copyright 2007 © Welcome Real-time All rights reserved. Material in this presentation can be copied on condition that “Source : Welcome Real-time” is included in a clearly visible fashion next to the copied material.
  2. 2. The main contactless promise: “No more lines”
  3. 3. “No more lines.” Does contactless deliver this promise? Yes, if the shoppers in front of you also have contactless cards.
  4. 4. 1 out of 12 25 million contactless cards will be issued in the US in 2007, versus 300 million magstripe cards.
  5. 5. Only JPMorgan Chase “Of the largest banks, only JPMorgan Chase has begun a significant rollout, although it has only put contactless chips on part of its portfolio.” Card Technology, June 2007
  6. 6. Contactless 230 million forecasts for 2007 37 million 25 million Jupiter Report Jupiter Report Card Technology (2004) (2006) (June 2007)
  7. 7. Percent of spend in 2010 1.6% US contactless payments forecast (Jupiter)
  8. 8. “A major obstacle is persuading more merchants to accept contactless.” Card Technology, June 2007
  9. 9. 1 out of 133 “There are 6 million places where you can use your credit card, 45,000 (contactless locations) doesn’t excite me.” John Suchanec, Bank of America
  10. 10. “Until you have a better merchant coverage, there’s clearly a problem .” Leigh Malnati, American Express
  11. 11. “[We] haven’t moved aggressively to contactless because there is little consumer demand – been more of an issuer/association push.” David Tryder Dunkin’ Donuts May 2007
  12. 12. “The contactless cards are not yet affecting the parking lots. Get more cards out in the market!” Manager, Sheetz, Inc. Source: American Banker
  13. 13. “Waving a card in front of a reader takes about as much time as swiping one through.” Manager, Sheetz, Inc. Source: American Banker
  14. 14. “Visa launches No Signature Required program to boost card usage for small purchases with traditional magnetic stripe cards.” April 11, 2006
  15. 15. Is this ad for contactless or traditional magstripe cards?
  16. 16. “Because money shouldn’t slow you down”
  17. 17. THE IRONY: Contactless can deliver unique features that are irresistible to merchants … not just “Speed”. (But the technology needs to be used to its fullest.)
  18. 18. Which brand offers irresistible features to merchants? An opportunity to differentiate.
  19. 19. How might contactless become irresistible to merchants? Bank-managed data could help retailers identify their best customers and prospects. [help] entice customers to visit the retailer - either for the first time or for repeat patronage. [banks can charge] direct fees or indirect/bundled pricing e.g., in the form of higher interchange. DiamondCluster, Dec 2005 [Couple] EMV technology and loyalty best practices … (customer analytics … merchant-funded rewards …) Mercator Advisory Group, Nov 2006
  20. 20. How might contactless become irresistible to merchants? Introduce payment information value-added services to reduce pricing pressure from merchants and convince them of the real value of bank-sponsored retail payment networks. An EMV-compliant card would store cardholders' shopping patterns on the chip. – For example, how many times the cardholder has used a card at a specific retailer or whether the person has shopped at that retailer. The retailer will have a platform to deliver tailored promotions at the POS. The promotion or message can be delivered via a POS receipt. Gartner, May 2007
  21. 21. Promotional marketing is huge ($342 billion in the US alone!)
  22. 22. France
  23. 23. Germany
  24. 24. Italy
  25. 25. Spain
  26. 26. Pakistan
  27. 27. Thailand
  28. 28. China
  29. 29. Co-op package mailing, 1 insert: €350 Newspaper ad, half page: €9,000 - €12,000 Local coupon book, 1 page: €350
  30. 30. Make it possible for merchants to use data hidden inside the card’s chip to deliver targeted messages at the POS, at very low cost. Your cards will become much more valuable to merchants.
  31. 31. Ex: Frequent Shopper Messages Merchants can avoid giving high value promotions to all customers. They can deliver increasingly valuable coupons encouraging the customer to come back again soon. Customers are pleasantly surprised to get the offer. Coupon at 1st visit Coupon at 2nd visit Coupon at 3rd visit Dining & ----------------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- ----------------------------- Fast Food Coupon Coupon Coupon Coupon Coupon Coupon BUY 1 VALUE MEAL BUY 1 VALUE MEAL BUY 1 VALUE MEAL BUY 1 VALUE MEAL BUY 1 VALUE MEAL BUY 1 VALUE MEAL GET A FREE GET A FREE GET A SECOND GET A FREE GET A FREE GET A SECOND p DESERT HAPPY MEAL VALUE MEAL 2006 VALUE MEAL FREE DESERT Expires Jan. MEAL HAPPY 31, 2006 Expires Jan. 31, FREE p p Expires Jan. 31, 2006 Cosmetics After 100£ After 200£ After 300£ After 400£ ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- COUPON COUPON COUPON COUPON COUPON COUPON COUPON COUPON CHOOSE A SILVER CHOOSE A GOLD CHOOSE A PLATINUM CHOOSE A DIAMOND CHOOSE A SILVER CHOOSE A GOLD CHOOSE A PLATINUM CHOOSE A DIAMOND CATEGORY GIFT CATEGORY GIFT CATEGORY GIFT CATEGORY GIFT CATEGORY GIFT CATEGORY GIFT CATEGORY GIFT CATEGORY GIFT Expires Jan. 31, 2006 Expires Apr. 30, 2006 Expires Aug. 31, 2006 Expires Dec. 31, 2006 Expires Jan. 31, 2006 Expires Apr. 30, 2006 Expires Aug. 31, 2006 Expires Dec. 31, 2006
  32. 32. Ex: Competitive Shopper Messages Merchants can avoid losing customers to the competition. They can recognize occasional customers probably shopping elsewhere, and offer an incentive on the next purchase, to encourage customers to shop more frequently. Dining & ----------------------------- ----------------------------- Coupon Coupon Fast Food ---------------------------- ---------------------------- BUY 1 VALUE MEAL BUY 1 VALUE MEAL Coupon Coupon GET A SECOND GET A SECOND TRY OUR NEW EZ TRY OUR NEW EZ VALUE MEAL FREE VALUE MEAL FREE CAR WASH AND CAR WASH AND Petrol ENJOY A COFFEE ENJOY A COFFEE Not valid with any other special Not valid with any other special WHILE YOU WAIT Expires Jan. 31, 2006 WHILE YOU WAIT Expires Jan. 31, 2006 CAR WASH+COFFEE CAR WASH+COFFEE SPECIAL $2.00 SPECIAL $2.00 ---------------------------- ---------------------------- Coupon Coupon Expires Nov. 15, 2005 Expires Nov. 15, 2005 Cosmetics LIMITED TIME OFFER LIMITED TIME OFFER CHOOSE ANY CHOOSE ANY SILVER GIFT SET SILVER GIFT SET ONLY £2.00 ONLY £2.00 AT YOUR NEXT VISIT AT YOUR NEXT VISIT Expires Nov. 15, 2005 Expires Nov. 15, 2005
  33. 33. Ex: Game Programs Merchants can avoid the cost and trouble of complicated loyalty programs. Instead, they can build continuity through games based on cumulative spending or number of visits. Coupon at 1st visit Coupon at 2nd visit Coupon at 3rd visit Coupon at 4th visit ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- Coupon Coupon Dining & Fast Food MCSURPRISE! M---R---S-- MC--RPR-S-- MC--RPRISE- MCSURPRISE! M---R---S-- MC--RPR-S-- MC--RPRISE- Congratulations! Present Pay with your card at Pay with your card at Pay with your card at Congratulations! Present Pay with your card at Pay with your card at Pay with your card at this ticket to any clerk and McDonald’s. When all the McDonald’s. When all the McDonald’s. When all the this ticket to any clerk and McDonald’s. When all the McDonald’s. When all the McDonald’s. When all the get your McSurprise! letters above are filled, letters above are filled, letters above are filled, get your McSurprise! letters above are filled, letters above are filled, letters above are filled, win your McSurprise! win your McSurprise! win your McSurprise! win your McSurprise! win your McSurprise! win your McSurprise! Not valid with any other Not valid with any other offer. Expires 31 Jan 2006 offer. Expires 31 Jan 2006 1st fill-up 2nd fill-up 3rd fill-up 4th fill-up Petrol ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- Coupon Coupon YESYOUWIN! Y---O---N- YE--O-W-N- YES-OUW-N- YESYOUWIN! Y---O---N- YE--O-W-N- YES-OUW-N- Expires 31 Jan 2006 Game expires 31 Jan 2006 Game expires 31 Jan 2006 Game expires 31 Jan 2006 Expires 31 Jan 2006 Game expires 31 Jan 2006 Game expires 31 Jan 2006 Game expires 31 Jan 2006
  34. 34. What happens when merchants prefer one brand over others? A simple, merchant funded promotion helped a Malaysian bank boost acceptance and usage of it’s cards at Pizza Hut. Maybankcard Purchases at Pizza Hut + 49% Sep 2005 Oct 2005 Nov 2005
  35. 35. Payment brands see increased transaction volume when they support targeted merchant promotions +150% +121% +96% Avg +80% + 75% +71% +50% +49% +30% +27% s s t n n et et r r en le le ic ic ai ai k k i i n n ch ch m ar ar ta ta ro ro e rm rm Re Re od od ct ct ov pe pe e e n n fo fo pr El El io io Su Su Im st st o/ o/ sh sh Fa Fa i i ud ud e Fa Fa om A A H
  36. 36. An opportunity to differentiate And an opportunity to address major pains which cannot easily be addressed with magstripe cards.
  37. 37. The problem must be solved at Payment schemes will find it more and more the payment network level difficult to attract issuers if they cannot promise higher interchange. Show issuers that the scheme’s new generation payment products provide more structurally stable interchange revenues.
  38. 38. The problem and regulators will continue Merchants must be solved at the payment the interchange model if challenging network level schemes don’t provide more value. Change perceptions by demonstrating to merchants and regulators that the payment scheme provides major new innovation for the benefit of merchants.
  39. 39. The problem must be solved at the payment network level Important scheme initiatives (contactless, mobile, EMV …) can fail without active merchant participation. Get merchants to see the scheme’s emerging payment technologies as an integral and strategic part of their communications and marketing activities.
  40. 40. Thank you Aneace Haddad Chairman, Welcome Real-time a.haddad@welcome-rt.com http://aneace.blogspot.com www.welcome-rt.com Copyright 2007 © Welcome Real-time All rights reserved. Material in this presentation can be copied on condition that “Source : Welcome Real-time” is included in a clearly visible fashion next to the copied material.
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