• Save
Paydiant Marketing Plan
Upcoming SlideShare
Loading in...5
×
 

Like this? Share it with your network

Share

Paydiant Marketing Plan

on

  • 2,088 views

Fictional Marketing plan by students from the University of Applied Sciences.

Fictional Marketing plan by students from the University of Applied Sciences.

Statistics

Views

Total Views
2,088
Views on SlideShare
2,073
Embed Views
15

Actions

Likes
2
Downloads
0
Comments
0

3 Embeds 15

http://www.mefeedia.com 6
http://www.slashdocs.com 5
http://www.docshut.com 4

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

CC Attribution License

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Paydiant Marketing Plan Document Transcript

  • 1. Date of Publication:October 4th 2001 Paydiant Mobile Payments Marketing Plan Students from: University of Applied Sciences Amsterdam 2011
  • 2. 1. Executive summary2011 and 2012 are going to be a very exciting, very dynamic years when it comes to mobile paymentsbecause its the Wild West again, with all these players positioning in various different ways to redefinethe digital payments landscape.To succeed in such a competitive marketplace, Paydiant needs to be customer centered. Rather thancompeting on price, we belief Paydiant should focus on its competitive advantages and delivering valueto the customers better than the competitors.In the short term, within its first year of introduction, Paydiant aims to have a 10% market share of theUnited States. In the long term, Paydiant aims to gain and maintaining a market share of 30% in themobile payment industry. To achieve these goals, promotion activities should be build around informingcustomers about the new product and convincing them of the advantages of the Paydiant product.At first sight setting up its own ACH-based network looks very attractive as no one to share profit withand the possibility to offer low prices to costumers and merchants. However, all the other activities ofthis disintermediation of these shackles had to be replaced. The option to collaborate with atelecommunications provider was rapidly pierced as competitor ISIS, collaborating with AT&T, Verizonand T-mobile, have a combined market share of over 90%.Taking all of the previous in, we conclude that partnering up with current interchange-based partnersMasterCard and Visa. Paydiant should aim to deliver quality. Its focus should be to be the most secure,convenient, simple and exciting way of mobile payment. Let MasterCard and Visa worry about banks,Paydiant should focus on its core business of developing software. Mobile marketing is cheap and webelieve in this way our product will sell itself.To solve the problem where consumers are unlikely to sign when no retailers accepted payment systemand retailers will only sign up when a consumer base is present, a push strategy is most advised.Marketing activities should be directed toward channel members to induce them to carry the productand to promote it to final consumers.According to our forecast an investment in Promotional Costs with the guidelines mentioned in thismarketing plan should after 3 years of its introduction result in € 220 million in revenues. On the longterm, product development is required to keep up with the environment and evolving needs of thecustomers and merchants. Page 2 of 38
  • 3. Table of Contents1. Executive summary .................................................................................................................................. 22. Problem Statement .................................................................................................................................. 53. External / market analysis ........................................................................................................................ 6 3.1 Market analysis & market segmentation ............................................................................................ 6 3.2 External Environment analysis ............................................................................................................ 7 3.2.1 Demographic ................................................................................................................................ 7 3.2.2 Economic ...................................................................................................................................... 8 3.2.3 Social Cultural .............................................................................................................................. 8 3.2.4 Technological ............................................................................................................................... 9 3.2.5 Political/Legal ............................................................................................................................... 9 3.3 Competitor analysis .......................................................................................................................... 10 3.3.1 Direct .......................................................................................................................................... 10 3.3.2. Indirect ...................................................................................................................................... 12 3.4 Competitive Advantage & Challenges............................................................................................... 134. Internal analysis ..................................................................................................................................... 14 4.1 Company ........................................................................................................................................... 14 4.2 Current Marketing Mix...................................................................................................................... 14 4.2.1 Product ....................................................................................................................................... 14 4.2.3 Price ........................................................................................................................................... 14 4.2.2 Place ........................................................................................................................................... 15 4.2.4 Promotion .................................................................................................................................. 15 4.3 Financial Performance ...................................................................................................................... 15 4.4 Personnel .......................................................................................................................................... 155. SWOT analysis & Confrontation matrix ................................................................................................. 16 5.1 SWOT Analysis................................................................................................................................... 16 5.2 Confrontation matrix ........................................................................................................................ 186. Segmentation, Target Market, Positioning ............................................................................................ 19 6.1 Customer Needs and Wants ............................................................................................................. 19 6.2 Consumer Segmentation .................................................................................................................. 19 Page 3 of 38
  • 4. 6.2.1 Geographic ................................................................................................................................. 19 6.2.2 Demographic .............................................................................................................................. 19 6.2.3 Psychographic ............................................................................................................................ 20 6.2.4 Behavioral .................................................................................................................................. 20 6.3 Merchant segmentation ................................................................................................................... 20 6.4 Market Targeting .............................................................................................................................. 21 6.5 Positioning Map ................................................................................................................................ 227. Strategy .................................................................................................................................................. 248. Objectives............................................................................................................................................... 25 8.1 Short Term .................................................................................................................................... 25 8.2 Long Term (1+ Years) .................................................................................................................... 259. Marketing Mix ........................................................................................................................................ 26 9.1 Product .............................................................................................................................................. 26 9.2 Place .................................................................................................................................................. 27 9.3 Price .................................................................................................................................................. 28 9.4 Promotion ......................................................................................................................................... 2910. Profit & Loss Statement / Budget (3 year) ............................................................................................ 3111. Recommendations to the decision maker ............................................................................................ 3212. Source list .............................................................................................................................................. 3313. Appendices ............................................................................................................................................ 3414. Peer Evaluation ........................................................................................ Error! Bookmark not defined. Page 4 of 38
  • 5. 2. Problem StatementPaydiant planned to introduce a new, alternative payment system at the end of 2011. Unfortunately,this deadline could not be achieved, and Paydiant is forced to formally launch their service in 2012. Thedelay can cause severe disadvantages to Paydiant. New competitors can enter the market and decreasePaydiant’s chance of success. Thus, various problems/issues occurred, which need to be solved in thevery near future. In the following section we will examine these challenges.First of all, one of the most significant and basic problems Paydiant faces, is the so-called ‘Chicken andEgg’ problem. It concerns the willingness to install the service as a merchant, and to which degree theconsumer is willing to adopt the system. Merchants only accept this method if a substantial amount ofconsumer is already able to pay this way; consumers want to install the system if many merchantsprovide the service.Secondly, several direct and indirect competitors are fairly dominant in this market. Examples are Visaand Mastercard, who run an almost oligopolistic market. How should Paydiant react to these threats?What will be the most profitable manner to penetrate or enter this market? There are options varyingfrom cooperating with the large players, to building a healthy and stable company ourselves, actingsolely.The third challenge concerns safety of Paydiants’ service. In order to gain competitive advantage andboth the interest of merchants and consumers, a safer system needs to be implemented. Consumers’privacy is extremely important, as well as reducing fraud percentages to a minimum. So, how do weprotect our potential consumers?Furthermore, the technology provided needs to be convenient. Consumers and merchants prefer a fastservice, which can be implemented in an instant. Transactions need to be completed in a fair amount oftime. It will increase consumer satisfaction.At last, a long term plan needs to be created. It is important to make a precise outline; a route Paydiantwants to pursue. What can make Paydiant a valid threat to the large competitors, and how can we gainmarket share. Page 5 of 38
  • 6. 3. External / market analysis3.1 Market analysis & market segmentationPaydiant Mobile Payments not only has to deal with merchants but also will have to keep track of thecustomers that eventually will use their products. Source: “End of Credit Card”, By Blake Ellis, CNN News, January 24, 2011Mobile payments are expected to hit $214 billion by 2015. Transactions made by scanning a mobilephone at the register are forecast to reach $22 billion -- up from "practically none" last year. The mobilepayment sector continues to prove itself as a hotbed of opportunity for developers. This sector ispredicted to get a sixfold increase in mobile payment transactions globally by 2011, with 490 millioncustomers using their phones to move cash around. By way of comparison, the 2010 market was $162billion.Retail technology - particularly the integration of internet shopping with mobile phone devices - will bethe hottest trend in the U.S. retail industry in 2011. According to predictions from CNBC News EditorChristina Cheddar Berk: “Consumers are ahead of retailers with mobile technology, so retail technologyinvestments in 2011 will focus on allowing customers to find what they are looking for in the way theychoose to look for it - in-store, online, or via smartphone.”1Conscious consuming is expected to continue in U.S. retailing in 2011 due to continuing highunemployment. Merchants are required to attracting these shoppers with discounts and allowances.But according to the payment usage trends survey results for exhibit 1, 42,6 percent of the surveyresponders indicated that their use of electronic accounts deduction have increased somewhat orincreased a lot in relation to the other payment methods.1 Christina Cheddar Berk, CNBC.com News Editor, “Predictions 2011: Christina Cheddar Berk On Retail”,http://www.cnbc.com/id/40255744 Page 6 of 38
  • 7. SegmentationConsumersThe most distinct segmentation criteria for Padient’s mobile payment products are smartphone usersand non-smartphone users since the required software is only compatible with smartphones. Where in2008, only 20 percent of the phones were smartphones, something exclusively for the innovators, theyare nowadays owned by the early majority.MerchantsThe US retail industry includes about 1 million outlets. A separation of POS activity by retail industry isshown below:QSR = Quick Sale RetailSource: Goel, Anand (2009) “PinsRising” Optimized PaymentsConsulting, Inc.Almost half of the retail industry’s POS activity occurs within the grocery sector, followed by petroleum(gas stations) with 13.8 percent. The rest of the market is separated into several smaller segments. Fortargeting, the market can be segmented according to the categories: Small Merchants, Large Merchantsor all segments.3.2 External Environment analysis3.2.1 DemographicAccording to exhibit 4, in April 2011, nearly half (48.7%) of smartphone owners in the U.S. werebetween the ages of 25 and 44. The 25-34 year old demographic makes up the largest segment of thesmartphone population representing 27.2% of owners. This while younger users between the ages of 13and 24 represented nearly one fourth of all smartphone owners (23.8%). Even more significantly is thesmall amount of users among 65 years and up segment with a flimsy 4.9 percent.The demographics of smartphone ownership, Exhibit 6, show that the rate of smartphone possessionamong American adults increases in correlation with the household income and education level. Only 22percent of the servants from the lower income (less than $30,000) owned a smartphone, compared to59 percent for the highest household income ($75,000+). Furthermore, 48 percent of the servants with Page 7 of 38
  • 8. at least a college degree pointed out to possess a smartphone, where for attendees without a highschool diploma this was only 18 percent.There is a slight variation in geographic location for the demographics of smartphone ownership. 39percent of the US Adults from Urban and Suburban areas own a smartphone, where inhabitants withthis type of phone from a Rural area are slightly less represented with 21 percent.3.2.2 EconomicConsumersStatistics on Nominal Consumption, exhibit 7, show that while buying powers decline is slowing it is stillmoving in a negative direction. Big issue in the American economy remains the home prices. Comparedto 2009, the household buying power of American citizens has decreased with 48 billion of dollars in2010.MerchantsThe US retail industry includes about 1 million outlets with combined annual revenue of $4 trillion. Datain exhibit 6 on Annual Retail Trade shows that there is a moderate decline in retail sales after 2008, afteralmost a decade of extensive growth. The sudden decrease can be explained by the financial crisis thathit the U.S. consumer consumption. However, data from financial technology company HiddenLeversshows a promising recovery of the retail sales growth with an average of 1% monthly increase.3.2.3 Social CulturalAccording to a Firethorn consumer survey, 76 percent of the consumers wish there was an alternative tocarrying around a walled stuffed with cards, money, offers, coupons etc. Date from this same surveyconcluded:  59% would like to use their phone to organize and tracking their gift card, loyalty and reward accounts  64% of consumers say they are interested in using their mobile phones as a shopping assistant for price comparisons  61% are interested in using their phone to access credit card details, balances and transactions  Nearly two—thirds (62%) of consumers say that they are likely to download and use a free account management application that would allow them to organize and track their financial and shopping account information.A study from the U.S. Federal Reserve Bank of Boston uncovered that the average American cardholderhad a total of 7.3 charge cards, incorporating an average of 1.3 debit cards, 3.7 credit cards, and 2.3prepaid cards.As shown in exhibit 8, 54.0 percent of the customers of this assessment of characteristics of paymentinstruments have security as most important issue. A percentage of 27.6 consumers have convenienceas most important. Paydiant should adapt to these demands from the customer. Page 8 of 38
  • 9. 3.2.4 TechnologicalDespite a lack of production innovation on the general market, towards the end of the last decade,multiple companies have created new technologies. Since the founding of PayPal in 1998, several otherareas of innovation have presented itself. Paypal allowed individuals and small business that previouslyhad been unable to accept credit card payments from consumers for their products.A second area of innovation is contactless payments and near-field communications (NFC) technologies.These inventions got the ball rolling, providing several companies with the opportunity to take a shot attheir share of the market. With each day that passes, Paydiant faces the issue of competing companieshaving the first launch.3.2.5 Political/LegalThe American Consumers Union (CU) outlined a series of steps lawmakers and regulators need to taketo ensure consumers making mobile payments are protected. They stated that the Federal Reserve’sRegulation E, which establishes the rights, liabilities, and responsibilities of parties in electronic fundstransfers and protects consumers when they use such systems, needs to be extended to mobile phoneusers who charge payments to prepaid phone deposits.That rule also should be amended to include a right to reverse disputed charges when goods or servicesaren’t delivered on time, similar to protections for credit card users under the Fair Credit Billing Act.In addition, the CU paper said, wireless carriers should be added under Regulation Z — whichimplemented the Truth in Lending Act — to ensure that consumers who charge mobile payments towireless accounts have the same protections against unauthorized use and billing errors as consumerswho use credit cards.Consumers Union also suggested that the new Consumer Financial Protection Bureau and states may beable to “close the gaps” and extend existing consumer protections, regardless of whether they pay bycash, charge or cellphone. (Wasserman (Elizabeth, 2011) “Mobile payments: Who will regulate?”)In conclusion, the uprising of mobile payment is expected to bring up regulator measurements in thenearby future. These measurements are required and important to monitor for paydiant as sixty-fivepercent of mobile payment security stakeholders expect a substantial or enormous increase in threatsto mobile payment security. Just 10 percent think mobile security incidents will stay the same ordecrease. Page 9 of 38
  • 10. 3.3 Competitor analysis3.3.1 Direct Paydiant Google Wallet Square GoPaymentOperator/ Undecided Citibank, MasterCard, Visa, MasterCard, InuitPartner and Sprint Discover and American ExpressTechnology Software NFC chip Hardware card NFC chip and reader Hardware card readerLaunch 2012 2011 2011 2010Primary Segment Undecided All Segments All Segments Small businessUnique Features Increased safety SingleTap combines Photo verification Bluetooth desktop through multiple- coupons, loyalty cards and Rewards scanner with built-in factor and payment method program printer for receipts authentication of with one single tap. management customer data.Transaction Time N.A. N.A. 4 seconds 7 secondsDeposit Time N.A. 1 day 1 day 2 to 3 business days.Installation/ Free Free Free $145 for the scannerSystem / Service Lower VolumeFee Free (until 01-02-12) Higher Volume $12.95 monthlyTransaction Fees N.A. $0.30 per transaction + Visa: 1.21% Lower Volume Lower Volume MasterCard: 1.16%. $0.15 2.9% Other: 2.75% Higher Volume Higher Volume $0.30 1.9%Discount Rate N.A. 1.59% 3.50% + $0.15 per Lower Volume transaction 2.7 % Higher Volume 1.7%Fees Non- N.A. Non Non Lower Volumequalified 3.7 %transactions Higher Volume 2.7 %Compatibility N.A. Only Nexus S 4G iPhone, iPad or 40 mobile handsets Android phone Page 10 of 38
  • 11. Paydiant PAYware Mobile IsisOperator/ Undecided Verifone, Google Verizon Wireless, AT&T and T-Partner MobileTechnology Software NFC Chip NFC chipLaunch 2012 2010 2012Primary Segment Undecided All Segments All SegmentsUnique Features Increased safety through Honors all forms of credit Can also store Debit Cards, multiple-factor transactions including debit Reward Cards, Discount authentication of cards Coupons, Payment Coupons, customer data. Tickets and Transit PassesTransaction Time N.A. 30 seconds N.A.Deposit Time N.A. 2 days N.A.Installation/ Free Lower Volume (-1500) N.A.System / Service $99 for the card readerFee Higher Volume (+1500) $15/month for the payment gateway. $29 activation feeTransaction Fees N.A. Lower Volume (-1500) N.A. 2.75% + $0.15 per transaction Higher Volume (+1500) 1.65% + $0.20 per transactionDiscount Rate N.A. 1.69% N.A.Fees Non- N.A. 1.99% + $0.20 per transaction N.A.qualifiedtransactionsCompatibility N.A. iPhone 3G, 3GS, and iPhone 4 HTC, LG, Motorola Mobility, RIM, Samsung Mobile and Sony EricssonThere are several suppliers on the market involved with mobile money technology. However, to look atthe direct competitors we stick with the core business of Paydiant: In-store mobile payment possibilityconnected to POS systems. Page 11 of 38
  • 12. 3.3.2. IndirectData for indirect competitions is from a report on 2012 Statistical Abstract from the U.S. Census Bureau. Other forms of electronic payment include Pre-Paid Cards and gift card. Check Cash Credit Cards Debit Cards Other (Gift/Prepaid)Transaction 70 51 32 32 N.A.TimeUsage 2009 $ 12 billion $ 34 billion $ 23 billion $ 39 billion $ 1.6 billionUse of Payment 8.2 18.4 11.2 19.0 0.8Instruments ina TypicalMonth (2009)Transactions $ 24.5 N.A. $ 21.6 $ 37.9 $ 6.02009 (billions)Value 2009 $ 31.6 N.A. $ 1.9 $ 1.4 $ 0.1(trillion dollars)Average value $ 1,292 N.A. $ 89 $ 38 $ 24per transaction2009 (dollars)Consumer Convenient Broad Reward Broad Carry less cashAppeal and easy to Acceptance program, cash acceptance, use flow timing, Carry less cash broad acceptanceMerchanteffective cost N.A. N.A. 1.75% - 2.25% 1.00 % - 1.50 % 0.40 %per transaction Page 12 of 38
  • 13. 3.4 Competitive Advantage & ChallengesFrom these tables we can conclude that Paydiant’s primary competitive advantages are the free ofinstallation charges for both consumers and merchants and increased safety through multiple-factorauthentication of customer data. Paydiant also separates itself from the rest in convenience; its ownsoftware requires no new software for both sides.Paydiant, Inc. provides various benefits to both consumers and merchants. For merchants, lowimplementation costs are attractive and software can be installed on existing POS system, thereforeadditional costs are minimal. In turn, consumers can easily adapt to the system, by just installing an‘App’ on their smartphone. Furthermore, unlike indirect competitors, consumers enjoy the convenienceof not having to carry around wallets. Alternative existing payment systems require plastic cards.With Intuit, GoPayment has the advantage of a familiar and trusted brand with funding to back up thenationwide launch of the product. Its existing presence in acquiring, its accounting and personal financesolutions also give them a lead at time of introductionGoogle wallet had a head start with its early introduction. Retailers that already are compatible with theGoogle Wallet are: Toys’R’us, Coca Cola, Foot Locker, Subway among others. On the other hand, Googlealso has a problem. PayPal sued Google for hiring their personnel and using secret information whendeveloping the Google Wallet, creating negative tension around the brand.Both Square and ISIS, are supported by Visa, MasterCard, American Express and Discover. This givesboth parties a head start over Paydiant, as well a tremendous amount of backing from the largestplayers in all of mobile. Square is a company enables consumers to put money on your mobile phonefrom your credit card through a card reader. Also possible is to pay someone to his phone with yourcredit card, a whole other way of mobile payment than NFC.OligopolyMarket leaders Visa and MasterCard enjoyed a long time oligopoly, setting the prices higher than theequilibrium price and controlling the market. Interchange fees have risen dramatically and almostdoubled from 2000 till 2009. Retailers are fed up and looking for a ways to break this dominance. Theywant a new system, a better working and fair way of credit payment. The retailer’s customer loyalty toVisa and MasterCard isn’t strong, creating the opportunity for Paydiant to fill this gap in the market andgain market share rapidly.Safety / TechnologyData from the magstripe of a credit card is easily copied to another card. PCI DSS is a technology difficultto implement and very expensive. NFC is a safer technology because it applies to smartphones, it createsthe possibility to apply anti-virus software, pin-codes and other forms of interactive identification.Because NFC is a hardware-based payment technology the costs are very high and it is not likely to beadapted very quickly by retailers and consumers. Paydiant’s technology is a mobile software-basedpayment system. Compared its competitors, Paydiant’s technology has lower implementation costs. Page 13 of 38
  • 14. 4. Internal analysis4.1 CompanyKey FactsCompany: Paydiant, Inc. Industry: TechnologyCEO: Kevin Laracey Entity Type: CorporationFounded: 2010 Location Natick , MA , USAVisionSuccessfully implement an alternative and convenient electronic payment system.4.2 Current Marketing Mix4.2.1 ProductCore customer valuePaydiant offers several problem solving benefits that consumers seek. The payment system provides amore convenient method. It is an alternative payment method to carrying a wallet stuffed with cardsand other items. Also additional security is provided by multiple factor authentications.Actual productThe Paydiant system is built around software. An electronic serial number is provided that enablesconsumers to enroll with their smartphone. After the enrollment, a free Application can be downloaded.Merchants receive software that can be transferred to their POS systems. With the help of the acquiredsoftware, a two dimensional code can be displayed. Consumers scan the barcode with their camera ontheir smartphone, using the Paydiant Application. Paydiant is going to be launched as a manufacturer’sbrand with a new brand for this newly created company.Augmented productThe software offers additional services and benefits. Credits for loyalty programs are applied during thetransaction process. At last no additional costs are incurred by consumers.4.2.3 PricePricing strategies are not announced yet by Paydiant since the go to market date is still several monthsaway. However, each part of the business process uses cost-based pricing to get to their prices. Below isa visible representation of the industry standard for credit card transactions and fees. Discount Fee Interchange Fee Transaction Fee Card Merchant Acquiring Bank Issuing Bank Association Keeps: 97,4% Keeps: 0.5% Keeps: 2% Keeps: 0.1% Consumer Page 14 of 38
  • 15. 4.2.2 PlaceThe Paydiant mobile payment system does not yet have physical presence in United States retail stores.However, the system is planned to be installed on existing POS points. These points are present inmerchants’ stores, across America.Functions of business process shacklesCard issuing banks Marketing functions to attract potential card holders  Bore the credit risk Granted credit, managed the account  Provide consumer credit and marketing Ensure merchants are paid data to merchantsAcquiring banks Merchant’s link to the card association network  Accepted fund transfers from issuing banks Ensures the credit card is valid and has on behalf of the merchant sufficient available credit  Managing bank accounts and providing merchants credit card activity statements4.2.4 Promotion Paydiant does not significantly use promotional tools yet to inform consumers and merchants. Littleactions have taken place since the foundation of the company in 2010. Nevertheless, they created andplaced newsworthy information in the news media through a press release in February, 2011. Throughthis form of public relations they announced that North Bridge Venture Partners and General CatalystPartners will invest $7.6 million dollars in the Paydiant company.4.3 Financial Performance CEOThe single piece of information that is available on Paydiant’s financial for the Kevin LaraceyPaydiant company performance is the earlier mentioned $7.6 million dollars,which indicates their starting capital.4.4 Personnel DirectorPaydiant was co-founded by Chris Gardner, Kevin Laracey and Joe Paratore. Chris GardnerLaracey was formerly venture partner at Sigma Partners and co-founder andCEO of the online billing and payments company edocs. Later on he went onto join premium SMS mobile payments provider m-Qube as vice president of Co-Founderproducts and marketing. Joe ParatoreGardner was Chief Marketing Officer at ExtendMedia, a digital media contentdelivery and commerce platform software company. Joe Paratore was edocs’VP of engineering and technical services. He also joined m-Qube andsubsequently Verisign after its acquisition. Since March 2011, Jed Rice, former Deal GuyVice President of Corporate Development at Skyhook Wireless, was added to Jed Ricethe Paydiant team as Deal Guy. Page 15 of 38
  • 16. 5. SWOT analysis & Confrontation matrix5.1 SWOT AnalysisStrengths  Simplicity of product reduces confusion for both consumers and merchants about different types of credit- and debit cards.  Paydiant product easy to adopt  Paydiant’s product Increases competition in payments  Low implementation cost as ‘Apps’ are relatively cheap  Are specialized in software  Received $7.6 million dollars starting capital through investments  Very experienced board of management with experience in telecom field of work.Weaknesses  Smartphone can run out of battery  Not the possibility to go in-debt with paydiant, where consumers that can go in-debt spend more than consumers who can’t.  Electronic Payment Systems brought fraud and other security concerns to card users, merchant banks, networks and card associations.  The value of the service depends on the number and identity of users connected to the service.  Paydiant has compared to their competitors not a lot of money to spend on marketing activities.  Late time of entering the market compared to other products  Company is still at starting up phase  Uses a lot of outsourcing which makes them dependant on other parties.Opportunities Consumer  Consumers increasingly use smartphones, by the end of 2011 smartphones would exceed 50% of market share.  Alternative to carrying around a wallet stuffed with plastic cards, money, offers, coupons etc. on a daily basis.  95% of America’s population carries a mobile phone  76 percent wishes there was an alternative to carrying around a wallet stuffed with cards  Consumer’s use of cash and paper checks decreased and increased the use of electronic payment methods.  Online banking using their phones becomes more used: half of the iphone and android users and a quarter of blackberry users had done so. Page 16 of 38
  • 17. Merchant  Merchants look for ways to break dominance of existing providers.  Reduces risk of payment for merchants  Merchants have lower payment processing costs through getting consumers to use the merchants’ preferred tender type  Ability for merchants to participate in the development of the mobile payment market could reduce costs in the long run.  Merchants can increase revenues (advertising and coupons) and reduce costs (reduction in security breaches).  Market Hungry for new payment options with little production innovation in the generation.  Retailers fear increasing cost of credit- and debit cards, more rapidly than the benefits brought to retailers.  For merchants handling less cash reduces some theft losses  Magnetic stripe technology very unsafe  Ability for merchants to increase enrollment of consumers in usage of loyalty programs, providing better consumer date and targeting information to merchants.  Paydiant‘s product required no new software for either consumer or retailer as acquired software could be loaded onto existing POS system.  Merchant no longer needed to encrypt the consumer’s payment credentials when sending transaction date on to the acquiring bank.  Faster transaction for merchants, consequently speeding the checkout process, when a consumer is presented with both credit card and loyalty card.Threats Consumer  Not all people have Smartphone’s  Consumers unlikely to sign when no retailers accepted payment system  Possibility of theft and fraud, where 91% of consumers won’t shop at business from which date was stolen makes merchants fear their reputation.  ‘Apps’ might enable hackers to obtain personal data Merchant  Visa and Mastercard may designate a paydiant transaction as Card Not Present transaction  Visa and MasterCard dominated oligopolistic market makes it difficult to penetrate market  Retailers will only sign up when a consumer base is present  Rules from card associations might withhold merchants to use smartphone payments.  Visa is also experimenting with this kind of payment system  Difficult to quantify the return on investment for the merchant. Page 17 of 38
  • 18. 5.2 Confrontation matrix Opportunities Threats Consumers Increasingly use Do not want to Magnetic stripe Not all people "Chicken-and- Hackers of smartphones carry wallet unsafe have Smartphones Egg" problem Software (no hardware) + 0 0 - + 0 Strengths 1 type of payment + ++ 0 - 0 - Easy to adopt + ++ ++ - + 0 Fraud sensitive - - 0 0 -- -- Weaknesses No in-depth 0 0 0 -- - 0 Low privacy - - + - - -- ++ We need to focus on simplicity and offering one type of - - We need to use mobile technology to make our product less fraud payment because consumers dont want to walk around with a fat sensitive using to increase the popularity of our product wallet and hundred credit cards Opportunities Threats Merchants Merchants Rules by No consumer Less cash = More interest already installed card- base present Break dominance less robberies smartphones NFC associations Consumer statistic + 0 + 0 0 - Faster Transactions ++ 0 + - 0 0 Strengths Low implementation + ++ + -- 0 + Costs Low brand Awareness - + +- - -- -- Weaknesses Fraud sensitive 0 +- 0 - 0 - No in-depth - 0 0 - 0 - + +, We need to focus on the low implementation costs to create a - -, Because our product is relatively new we need to promote our product competitive advantage versus the NFC technology and credit cards in the best possible way, this to ensure that merchants will buy our product and also to make sure that consumer will know our product and are willing to use it, - consumer base present.Consumer Statistic: Due to the payment process, merchants can see what the consumer buys in their shops and can therefore us use a loyalty program andoffer coupons for the consumers:
  • 19. 6. Segmentation, Target Market, Positioning6.1 Customer Needs and WantsNeedsUltimately, the need of the consumers is to pay for their products at retail stores to fulfill the physicalneed to in the first place consume food and obtain clothing and warmth.WantsConsumers that are interested in Paydiant want an alternative payment method to carrying a walletstuffed with cards.DemandThe demand for consumers it a product that provides a more convenient payment method, withadditional security at no additional cost.6.2 Consumer SegmentationKnowing that mobile payment as a product is in the early stages of the adoption process, we believethat Paydiant will first have to reach the innovators, who try new ideas at some risk. Below is the profilewe advise to target.6.2.1 GeographicWe advice to focus on the cities or villages sized with over 5.000 inhabitants because in these citiesthere are enough companies who are willing to adapt to the Paydiant system and also fits the profile ofsmartphone ownership most. The mobile network in urban areas works better than in rural areas. Thissame geographic segmentation also applies for the Merchants. Country Region City size Density ClimateConsumer USA Whole USA 5.000 + Urban All Suburban6.2.2 DemographicWe target people that are between the age category 18 and 44 because this is the biggest share of U.S.smartphone users and most likely to be ready for adopting the product. Furthermore, you are notallowed to have a credit card under 18. Besides having an income of a minimum of $ 30.000 a year thereis not much demographic variability for the use of smartphones and paydiant. Age Gender Education IncomeConsumers 18 - 44 Male/Female High school + $ 30.000 +
  • 20. 6.2.3 PsychographicBecause we target smartphone users, our social class target market consists of the middle-class andabove. For merchants we target them who supply to consumers from our targeted social class. As forour costumer’s lifestyle, we believe that they are credit-card type of users. They actually spend likethere is no tomorrow and fancy digital technology like gadgets. Compulsive buying is an importantpersonal characteristic for our consumers. They also need to be outgoing and generous. Social class Lifestyle PersonalityConsumers Middle-class + Credit card users Compulsive buyer Actualization through Outgoing digital technology Generous6.2.4 BehavioralBecause of the quality, speed and convenience of our product paydiant should be the ‘normal way ofpayment’ in a short-term notice. For now everybody will need to experience the product first, growingto become everyday users. After this we help them to find what they really want to buy, making them tobecome loyal to the use of our product. We assume our first users will be fascinated and enthusiastic bythe idea of using our technology and have a desirous will to use it. Occasions Benefits User status User ratesConsumers Regular Quality Smartphone user Medium user/ Heavy user Speed Convenience Loyalty status Readiness state Attitude towards productConsumers Strong Desirous Enthusiastic Positive6.3 Merchant segmentationOur company resources are limited. Therefore in the introduction phase of the product we cannot offerour service to everybody. We distinguished different types of merchants and decided to concentrate onSupermarkets, Convenient Stores and Hardware stores.SupermarketsAre relatively large and sell high volumes of products. Their products and brands vary, but they mostlymaintain the same products for a longer period of time. In this way, employees do not have toalter/change barcodes often. Page 20 of 38
  • 21. Convenient storesConvenient stores are relatively small and always located near urban residential areas. They usually areopen 24/7 and they sell products that have a high turn-over. Their product line is stable so they don’thave to adjust the barcodes often. This all makes our service attractive for convenient stores visa versa.Digital hardware storesTo implement our product we approach the innovators of the adoption curve. We believe we can findthem in stores that sell products equal to our products. Since we are a digital innovating company,merchants who sell mobile phones, computer, games and software will easily reach our target group.Also the suppliers of the products in this store will be interested in cooperating faster than usual.6.4 Market TargetingPaydiant is a new business with a new product. Therefore we cannot analyze data on current segmentsales, growth rates and expected profitability. We have a large target group from which we target onone certain important characteristic: smartphone users. Therefore, we advise Paydiant to use aconcentrated marketing strategy. By focusing on this particular segment, Paydiant can specialize andachieve a stronger market position because of greater knowledge of consumer needs.Various other companies want to introduce mobile payment services. Most of our competitors use aniche or concentrated marketing strategy, using an undifferentiated strategy would thus be very risk fulland ineffective. That is why we believe that by using a concentrated marketing strategy we can achievea strong market position and generate a large share of this market in the future. Page 21 of 38
  • 22. 6.5 Positioning MapWe advise to position Paydiant as “more for the same”. At a comparable price we offer increasedsecurity system that is simple and easy to adopt. Product quality and in-store service are off greatimportance.MerchantsPaydiant is the only mobile payment service that doesn’t require additional hardware. Therefore weposition ourselves as a service with low implementation costs. GoPayment requires both card readersand NFC installations and is the most expensive for merchants. In this market interactive marketing isthe key to stimulate consumers to buy more products. Developing software is our core business; thismakes us together with google on the long term most competitive for innovating useful products. Positioning Map (Merchants) 10 9 8 Implementation Costs 7 Paydiant (Scale 1- 10) 6 5 Google Wallet 4 Sqaure 3 GoPayment 2 PAYware 1 0 ISIS 0 2 4 6 8 10 Buying Stimulation (Scale 1 - 10) ConsumersMobile payment is a new issue in the market, therefore it is necessary to be very convenient and easy toadopt. This means simple technology that works smoothly on your smartphone. We believe the NFCchip will cause a lot of headache to consumers; this gives us a competitive advantage. Just install the appand you are ready to go. What might be the most important issue to mobile payment users is safety.New technology gives fraudsters new opportunities. Our software development experience gives us theedge over competitors like ISIS. Page 22 of 38
  • 23. Positioning Map (Consumers) 10 9 8 7 Paydiant (Scale 1- 10) 6 Simplicity 5 Google Wallet 4 Square 3 GoPayment 2 PAYware 1 ISIS 0 0 2 4 6 8 10 Safety (Scale 1 - 10)In conclusion, in order to reach the customers and show them the competitors’ advantage of the newPaydiant product, the highlight for the marketing strategy should be on:  System build around software, easy to adapt, free app and loaded onto existing POS systems.  Added value merchants: faster in-store transactions and lower payment processing costs through getting consumers to use the merchants’ preferred tender type and reduce cost in the long run.  Increased security though multiple-factor authentication of customer data.Positioning Statement “To innovative smartphone users between 18 and 44 years who want an alternative payment“ method to carrying a wallet stuffed, Paydiant is a convenient mobile payment method, with ” additional security at no additional cost. “ Page 23 of 38
  • 24. 7. StrategyAs corporate level strategy launch of Paydiant and to ensure the long-term survival of Paydiant weadvise to partner up with existing interchange-based partners partners Mastercard and Visa. Thebusiness-level strategy to build a profitable relationship with our target group, the smartphone users inthe age category 18-44, is based upon the marketing concept of delivering the desired satisfactionsbetter than competitors do.Consumers and merchants will consider several comforts issues before adapting to this new type ofpayment instead of the traditional ways. First of all, discomfort for consumers will include having topurchase new software or even a new phone to make use of this technology. Secondly, safety forconsumers will play a major role in the decision to change to this new payment method. Finally, formerchants it has to be of additional value before parting ways with traditional methods.In the early phase Paydiant needs to direct its funding and marketing activities on the five stages of theadoption process (Awareness, Interest, Evaluation, Trial and Adoption) to get the innovators to use theirproducts. Complicated here is the so called “chicken and egg” problem where consumers are unlikely tosign when no retailers accepted payment system where retailers will only sign up when a consumer baseis present.Our resolution to help consumers move through these stages and solve the issue on functional-strategiclevel would be by investing in effectively approaching our target market and putting the product in theirhands to experience the advantages of Paydiant for themselves, where the focus is on the advantages.Merchants should be informed on the benefits of Paydiant’s product to consumers: faster in-storetransactions and lower payment processing costs through getting consumers to use the merchants’preferred tender type that reduce cost in the long run.At the time of the launch in 2012, four of Paydiant’s direct competitors have already made theirentrance to the market. To succeed in such a competitive marketplace, Paydiant needs to be customercentered. Rather than competing on price, we belief Paydiant should focus on its competitiveadvantages and delivering value to the customers better than the competitors in order to persuade bothcurrent users and non-users to go make use of the Paydiant product.Other than customers, marketing intermediaries also play an important role for Paydiant. Merchants arenot only functioning as client but also the face and link between for the customers and Paydiant. Theyprovide service to customers and are the quality of this service depends on who provides them andwhen, where and how. To ensure the quality of service variability, educating merchant employees andinteractive marketing is required.Another marketing intermediary is the acquiring bank. Not only function they as base for transferringmoney but also perform functions as ensuring the credit card is valid and has sufficient available creditor share marketing data.On the long term, product development is required to keep up with the environment and evolvingneeds of the customers and merchants. Page 24 of 38
  • 25. 8. ObjectivesAll the strategies are designed to achieve certain SMART formulated short- and long term objectives. Allof the goals set fall under the wing of the company’s strategy.8.1 Short Term 1. Reach break-even within 12 months of Paydiant’s introduction 2. Paydiant aims to have a 10% market share of the United States market in one year time. 3. The Paydiant product has a maximum estimated fraud costs of 0,01% over one year 4. Have 250.000 Paydiant application downloads by the end of next year8.2 Long Term (1+ Years) 1. Gaining and maintaining a market share of 30% in the mobile payment industry within 3 years. 2. Doubling our investments by March 2015 3. Maximum estimated fraud costs of 0.005% in 3 years 4. Have 1 million Paydiant application downloads in the third year of introduction 5. Reach a minimum of 50 million users in three years 6. In three year have 100.000 merchants offering the Paydiant mobile payment possibility. Page 25 of 38
  • 26. 9. Marketing Mix9.1 ProductDespite several alternatives already available on the market at the time of the introduction, Paydiantwill be an unsought product for the majority of the consumers. When the product life cycle of Paydiantreaches the growth stage, the product will become more of a shopping product.Core Customer ValueThe core product remains as the payment system that provides a more convenient method. It is analternative payment method to carrying a wallet stuffed with cards and other items.Actual ProductQualityAs we focus on the best quality rather than price, delivering high conformance quality is of greatimportance to fulfill the demands of the customers. When consumers rely on the product, they cannotcome across any defects that withhold them from doing grocery shopping or other purchases. As asoftware company we specialize in developing the required software, for that reason Paydiant requiresa top notch performance quality over less specialized companies.Style and Design & PackagingUser interface convenience of the application is of great importance. The innovators might be able tofigure it out, but to be accepted by the rest of the majority on the long term simplicity of design isrequired. To attract these innovators, design can be the eye-catcher. As the app is fully electronic, nomaterial is used on packaging.BrandPaydiant should be launched as a manufacturer’s brand, carrying the paydiant name and logo. This way,Paydiant can start building on nationwide brand awarenessAugmented ProductThe software offers additional services and benefits. Credits for loyalty programs are applied during thetransaction process. Furthermore, it speeds the transaction time in favor of both merchants andconsumers. At last no additional costs are incurred by consumers for all of this. Page 26 of 38
  • 27. 9.2 PlaceFor Paydiant’s distribution they forge an indirect marketing channel with multiple intermediaries. Theircontractual vertical marketing system has all channel members coordinate their activities and manageconflicts through contractual agreements as all fees are established for merchants and consumers inadvance.Business Model Consumer Issuing Card Aquiring Paydiant Merchant Bank Association BankAs Paydiant targets merchants that are sharing and supporting our costumer’s profile, Paydiant usesselective distribution to select the merchants who are willing to carry the Paydiant software on theirPOS system.BackwardsPrimary backwards parties in the distribution system are the card associations MasterCard and Visa.Proper negotiations with the card associations are required on pricing and service to ensure stability.ForwardsThe application for consumers should be intensively distributed on free and paid app stores. Accordingto exhibit 10, these are some examples of the most used app stores in the United States:Android Market BlackBerry App World Android App Market Placemarket.android.com appworld.blackberry.com/webstore android.t-mobile.com/android-appsSamsung Apps Aple App Store Verizon Application Storesamsungapps.com apple.com/iphone/apps-for-iphone ediastore.verizonwireless.comOvi App store Sprint Software Store AT&T AppCenterstore.ovi.com softwarestore.sprint.com mediamall.wireless.att.comThis way, not only will innovators first become aware of the product, obtain more information andeventually download the free app but also early adapters start reading into the possibilities of the appbefore adopting it. Page 27 of 38
  • 28. 9.3 PriceAs the market is somewhat under oligopolistic competition it is important to be alert to competitor’sstrategies and moves. Despite the high level of technological knowledge required to enter the market,there is still fierce competition out there trying to obtain a large share of the market in the introductionphase of the product. For that reason, Paydiant should use a competitor-based pricing.Despite aiming for the innovators in the earlier stage, we aim to move to the early adaptors quickly. Forthat reason, during the introduction stage we advice to use market penetration pricing in order topenetrate the market quickly and deeply, attract a large number of buyers quickly and win a largemarket share. The increase in sales volume should eventually result in falling cost, allowing the companyto cut its price even further. Below is a visible representation of the pricing and fees. Consumer receives Consumers pays goods or services amount to bank from merchants Consumer Issuing Card Aquiring Paydiant Merchant Bank Association Bank Interchange Fee Profit Paydiant Transaction Fee Discount Fee 1.80% 0.05 % 1.19% 1.59%An example of a purchase of $100 made in goods or services from merchant:Consumer Receives $100 in goods or Paydiant Pays acquiring bank $97.70 less services from merchant $1.16 transaction fee = $96.54Consumer Pays $100 to issuing bank Acquiring Bank Pays merchant $96.54 less $1.53 discount fee = $96.01Issuing Bank Pays card association $100 less Merchant Loses $100 in goods and receives $1.80 = $98.20 $96.01 in payment = cost of $3.99Card Pays Paydiant $98.20 less $0.50Association profit for paydiant = $97.70 Page 28 of 38
  • 29. 9.4 PromotionTo execute our strategy and communicate customer value and build customer relationships we haveconstructed a clear and effective promotion mix. With a relatively small marketing budget, compared tothe competitors owned by telecom giants, Paydiant has to be creative and effective to reach customers.To solve the problem where consumers are unlikely to sign when no retailers accepted payment systemand retailers will only sign up when a consumer base is present, a push strategy is most advised.Marketing activities should be directed toward channel members to induce them to carry the productand to promote it to final consumers.Public RelationsBy using press relations, we want media specialized in technology news to place information to attractattention to the product and explain and convince our target market on the safety advantages of usingPaydiant. Innovators will browse on these websites and consider them as righteous and becomeinformed before adopting the product. Examples include Wired.com, Computerworld, Cnet.com andeWeek.com.Moreover, a Press release should be sent out on the announcement of the product launch to attract theattention of the media. The press release should be mailed, faxed, or e-mailed to newspapers,magazines, radio stations, or television stations.AdvertisingThe advertising objective of this promotion mix is informative and persuasive advertising for our targetgroup, innovative smartphone users in the age category 18-44. First of all, informative advertising toboth merchants and consumers is used to introduce the new product and brand plus explaining how theproducts works. Persuasive advertising should bring out the message to persuade customers to use theproduct and current users to switch to Paydiant.The media selected with their responding number of total average paid circulation are the magazines:Popular Science (1,319,602), PCMagazine (750,000), Wired Magazine (798,020), PC World (745,000) andNuts and Volts (720,000). Through these magazines we reach a estimate of 3,5 million users with arelative low cost. We air a campaign for the launch of the Paydiant product to the U.S. market.Sales PromotionTo accompany the strategy of putting the product in their hands to experience the advantages ofPaydiant for themselves, personal selling both producer and retailers is required. With the use of Point-of-Purchase (POP) Promotions, such as demonstrations that take place at the point of sales inside theretail stores should inform and persuade the customers. By letting the consumers experience theconvenience and possibilities of the Paydiant product. Page 29 of 38
  • 30. Personal SellingThrough a territorial sales force structure, each salesperson is assigned to an exclusive area. By satisfyingsales people through training and compensation we encourage sales people to work hard and worktoward sales force goals. In the retail stores, we advise sales people present to demonstrate the productto customers, equal to the sales promotion. Consumers can get in touch with Paydiant sales people andget all their questions answered.Direct MarketingMobile MarketingOur primary marketing activities will go out to mobile marketing as this is most effective in reaching ourtarget market.Click through rates for banner ads are notoriously poor, but by innovative use and meeting theconvenience and interest of the smartphone users mobile banners work better. After capturing theirattention on “Buy the next Call of Duty with your phone with our free app”, users would then be led to aPaydiant mobile site providing more information about what they were looking for.Furthermore, by advertising at existing apps and emphasizing on the free use of a new app shouldpersuade customers on using the Paydiant product. Finally, QR Tagging, which turn your phone into abar code scanner, should be presented in participating retail stores. The handset would then load up thePaydiant site.Social MediaAnother part of the promotion mix to reach the innovators in the introduction phase is the use of Socialmedia. Social media interfaces such as Facebook and Twitter should contribute to creating awareness ofthe product and explain its use to prospect users. Page 30 of 38
  • 31. 10. Profit & Loss Statement / Budget (3 year)Budget is set according to the affordable method. A percentage that remains of the starting capital afterall the company and research and development cost have been deducted.RevenueTo realize a budget we started with the expected value of the market of NFC (32%) mobile payments in2015 (3 years), as this comes closest to our category of mobile payment. This is $ 92.3 billion. WeMultiplied this number with our objective as market share in 2015(20%) and then with our share in thetransactions (0.05%) = $ 230.7 million. In 2012 our goal was only a market share of 5% and NFC accountsfor only 15% of mobile payments leaving us with $ 28.8 million.In the MagazinesTo realize the costs to be in a national magazine we took advise from Xander Becket, he tells us that itwill cost from $ 5.000 to $ 25.000 per issue. We calculated 20.000 times 52 weeks, what would be 1 timea week comes to $ 1,040 million a year.Public RelationsMike Nicolich, from the NIU Alumni Board, tells us that to hire a PR agency this will costs us from $50.000 to $ 200.000. For the best quality one time per quarter this will costs us $800.000 per year.Personal SellingAccording to KnowThis.com personal selling costs average $300 dollar per acquisition. For 250 workingdays, 2 acquisitions a day and 50 employers our costs come out at $750.000 per year. We don’t reducethe intensity during the first three years because we want to double our market share every year. Year 1 Year 2 Year 3Starting Capital € 7.800.000,00Revenues € 28.840.000,00 € 76.906.666,67 € 230.720.000,00 Press relations € 800.000,00 € 1.600.000,00 € 3.200.000,00 Magazines € 1.040.000,00 € 2.080.000,00 € 4.160.000,00 Personal Selling € 750.000,00 € 1.500.000,00 € 3.000.000,00Total Promotional Costs € 2.590.000,00 € 5.180.000,00 € 10.360.000,00Total Revenues € 28.840.000,00 € 71.726.666,67 € 220.360.000,00ExplanationWe want to double our market share every year. Therefore, Paydiant should double the marketingintensity every year for the first 3 years. This is the reason why every year all costs are doubled. Page 31 of 38
  • 32. 11. Recommendations to the decision makerThis marketing plan provides a number of issues Paydiant is facing with the introduction of the newPaydiant products to mobile payment market. Based upon our research and findings we came to thefollowing recommendations:  To ensure the long-term survival of Paydiant we advise to partner up with existing interchange- based partners MasterCard and Visa which would grand Paydiant with brand awareness and attract merchants if it reduces transaction fees on payments. This way, Paydiant can stick to its core business of developing software and leave the monetary issues in others their expertise.  Paydiant is still in the business analysis stage. When the product concept passes the business test it moves into product development, which require a large investment. With the indirect competitors somewhat reaching the maturity phase, Paydiant is going to be launched into the introduction phase. Introduction takes time and much of the marketing effort should be put into introducing the product to the market to create awareness.  To solve the problem where consumers are unlikely to sign when no retailers accepted payment system and retailers will only sign up when a consumer base is present, a push strategy is most advised. Marketing activities should be directed toward channel members to induce them to carry the product and to promote it to final consumers.  At the time of the launch in 2012, four of Paydiant’s direct competitors have already made their entrance to the market. To succeed in such a competitive marketplace, Paydiant needs to be customer centered. Rather than competing on price, we belief Paydiant should focus on its competitive advantages and delivering value to the customers better than the competitors.  Make effective use of alternative methods to promotion than expensive advertising. Primary marketing activities should go out to mobile marketing as this is most effective in reaching the target market.  Exploit the competitive advantage of increased security though multiple-factor authentication of customer data. Through advertising and public relations, putting emphasis on the increased safety will speed up the adoption process for consumers.  On the long term, product development is required to keep up with the environment and evolving needs of the customers and merchants. Page 32 of 38
  • 33. 12. Source listAite Group (2001) “How Americans Pay Their Bills: Sizing and Forecasting Bill Pay Channels andMethods, 2010-2013”, October 27, 2010http://www.aitegroup.com/Reports/ReportDetail.aspx?recordItemID=715Becket, Xander (2009) "The Cost of Advertising Nationally Broken Down by Medium"webpagefx.com/blog/business-advice/the-cost-of-advertising-nationally-broken-down-by-medium/Ellis, Blake. “End of Credit Card”, January 24, 2011. From :http://money.cnn.com/2011/01/24/pf/end_of_credit_cards/index.htm“Google and Visa Team Up on Mobile Payments”, Sudan Vision 2011, September 24, 2011http://news.sudanvisiondaily.com/details.html?rsnpid=199644Kim, Ryan (2011) “Square Drops Transaction Fee as Payment Battle Heats Up”, GigaOM, February 22,2011http://gigaom.com/2011/02/22/square-drops-transaction-fee-as-payment-battle-heats-up/MacManus, Richard (2011) Top Trends of 2011: Mobile Payments, Read Write Web, July 28, 2011http://www.readwriteweb.com/archives/mobile_payments_2011.phpMcGlaun, Shane(2010) “AT&T, T-Mobile, Verizon Wireless Showcase Isis Mobile Payment System “http://www.dailytech.com/ATT+TMobile+Verizon+Wireless+Showcase+Isis+Mobile+Payment+System/article20152.htmNikolich, Mike, (2010) “What Does It Cost? How to Budget Your PR Program by the Numbers”http://www.tannedfeet.com/IR899.htm“The trillion-dollar question: Who will power your mobile wallet?”, CNN Money, July 19, 2011http://tech.fortune.cnn.com/2011/07/19/the-trillion-dollar-question-who-will-power-your-mobile-wallet/“US SmartPhone Users By Age: Comparison Chart”, Online Marketing Trends, June 20, 2011http://www.onlinemarketing-trends.com/2011/06/internet-users-across-globe-per-100.htmlWasserman, Elizabeth; “Mobile payments: Who will regulate?”http://dyn.politico.com/members/forums/thread.cfm?catid=1&subcatid=70&threadid=5333283 Page 33 of 38
  • 34. 13. AppendicesExhibit 1 - Payment Usage Trends Survey (Percent of Responders) Decreased Increased Decreased Increased Somewhat or Somewhat Somewhat or Somewhat Decreased a or Decreased a or Lot Increased Lot Increased a a Lot LotActual Expected(2005-2008) (2009-2011)Cash 43 % 16 % Cash 32.3 % 13.4 %Checks 51.6 % 8.3 % Checks 39 % 8.3 %Debit Cards 17.3 % 49.5 % Debit Cards 11 % 34.9 %Credit Cards 28.5 % 34.2 % Credit Cards 26.3 % 20.2 %Prepaid Cards 28.7 % 14.1 % Prepaid Cards 28.9 % 10.8 %Electronic Account 14 % 42.6 % Electronic Account 15.2 % 26.8 %Deduation DeduationOnline Bill 10.3 % 60.6 % Online Bill Payments 8.8 % 47.3 %PaymentsSource: “2008 survey of consumer payment choice, Federal Reserve Bank of Boston version of April 2010Exhibit 2 - Annual Retail Trade Survey—2009: Retail Sales 3.350.000 3.150.000 2.950.000 2.750.000 2.550.000 Retail Sales 2.350.000 2.150.000 1.950.000 1.750.000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Date Source: “Annual Retail Trade Survey—2009”, U.S. Census Bureau, USA Page 34 of 38
  • 35. Exhibit 3 - Ten Largest Credit Card Exhibit 4 - % Composition of U.S. Smartphone Owners by AgeIssuers (Year end 2008) Card Issuer Market Share JPMorgan Chase 21 % Bank of America 19 % Citi 12 % American Express 10 % Capital One 7% Discover 6% Wells Fargo 4% HSBC 3% Source: “US SmartPhone Users By Age: Comparison Chart”, Online Marketing Trends, June 20, 2011 U.S. Bank 2% USAA Savings 2% Source: “Credit Cards: Rising Interchange Fees have increased costs for 88% merchants, but options reducing, fees pose challenges,” U.S. Government Accountability Office (GAO), November 2009Exhibit 5 - US Mobile phone subscribers, By Type of Device 100 90 80 70 60 50 40 30 20 10 0 Q2 - Q3 - Q4 - Q1 - Q2 - Q3 - Q4 - Q1 - Q2 - Q3 - Q4 - Q1 - Q2 - Q3 - 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 Feature Phone Smart phoneSource: “Smartphones to Overtake Feature Phones in U.S. by 2011,” Telecompaper World, March 29, 2010 Page 35 of 38
  • 36. Exhibit 6 - The demographics of smartphone ownership% of US adults within each group who own a SmartphoneGender Education LevelMen 39 No High School Diploma 18Woman 31 High School Grad 27 Some College 38 College 48Household IncomeLess than 30,000 22 Geographic Location30,000 – 49,000 40 Urban 3850,000-74,999 38 Suburban 3875,000+ 59 Rural 21Source: “Smartphone Adoption and Usage”, Aaron Smith, Pew Research Centers Internet & American Life Project, July 11,2011Exhibit 7 - Nominal ConsumptionSource: “The U.S. Consumer Is Still Losing Spending Power And Yet Theyre Buying More And More”, Business Insider, Inc.,http://www.businessinsider.com/deutsche-bank-spending-power-2011-3 Page 36 of 38
  • 37. Exhibit 8 - Assessment of characteristics of payment instrumentsSource: "Survey of Consumer Payment Choice" Version of April 2011, Federal Reserve Bank of Boston.Exhibit 9 - Adoption of Payment InstrumentsExhibit 10 - Most Used App Stores Source: 2011 The Nielsen Company. Page 37 of 38
  • 38. Exhibit 11 - Comparison Table OptionsOption 1: Partner with player Option2: Create Paydiant own Option3:Partner within existing interchange-based ACH-based network telecommunications provider likeworld Verizon or SprintAdvantages Name brands and access to  Could set own pricing below  Use brand awareness and merchants through existing both credit and debit name, saving valuable relationships. networks to increase marketing and advertising Popular for merchants merchant adoption dollars looking for lower cost  Take share from interchange-  Combine payment bill with payment options and based players phone bill consumers who use debit  Highest revenue potential to  Extensive customer lists and cards more frequently than paydiant consumer payment credit cards  Capture most of the credentials, reducing Gain advantage in capturing revenues versus fighting for a acquisition and payment share of the mobile market smaller share of a debit guarantee system costs Reduce fears that credit network’s existing revenues  Credit risks may be reduced, card incumbents would given consumer fear of a telco develop a mobile payment stopping cellular service as a technology standard result of past due payments Merchants interested if  Expand Paydiant’s customer increase leverage and base to include “unbanked” reduce the rates they pay consumers on credit card transactions  Establish pricing below rates charged by debit networks,Tradeoff Established pricing with merchants 1.0% to 1.5% per  Very expensive  negotiate revenue share with transaction and any share  Need to pay for an anti-fraud telco partners, which would to Paydiant would eat into and payment guarantee most likely result in a higher payment network’s existing system that interchange- rate charged to the merchants margins based players already have in  Relative size of telco could Afraid of losing their place make for a risky partnership, depository customers where telco demand (credit cards) extremely favorable terms  “bill shock” when consumer’s phone bills suddenly increase Page 38 of 38