Turning Digital Dollars into Real Life Gold - Monetizing via Mobile and Other Alternative Payments

1. Turning Digital Dollars into Real Life Gold
Monetizing via Mobile and Other Alternative Payments
By Steve Klebe, VP of BD & Strategy
Steve.klebe@billtomobile.com
650-823-5245 (mobile)

2. Agenda
Session Objective
Speaker Background
BilltoMobile Overview
Digital Goods/Services Paradigm Shift
Alternative Payments
Carrier Billing 1.0 vs. 2.0
Consumer Transaction Flow
Q&A

3. Session Overview
Insight into alternative payment methods that
are in high demand by teens and tweens, as
well as safety and privacy-oriented users who
appreciate additional options when it comes to
completing online transactions.
How adopting a mobile payment solution can
help drive spending and potentially increase
customers.

4. Speaker Background
Steve Klebe
Steve has over 30 years of experience in sales, strategic
alliances and product marketing in electronic payment, e-
commerce, authentication and fraud prevention.
Steve has previously worked at such companies as
VeriFone, CyberSource, RSA and Vindicia. He put the
original deal between Visa and CyberSource together 12
years ago resulting in an equity investment and a co-
branded, co-
He speaks at conferences regularly and recently spoke at
the Game Developers Conference 2011 in San Francisco.

5. Financial grade payment platform.
Direct connections with carrier billing systems.
Proven to add incremental revenue by tapping into a large mobile
subscriber base.
Leverages existing billing relationship and security.
Enables consumers to charge purchases to their mobile bill.
Hassel free - No enrollment, usernames/passwords needed to
make a payment.

6. Who We Are
Danal BilltoMobile
Technology proven over 10 years. Founded in the US in 2006.
Pioneered Direct Mobile Billing. Funded by Danal and Morgenthaler
Publicly traded Korean Co Ventures. March 2010, Danal
(KOSDAQ), $200M cap with 200+ became 65% shareholder.
employees globally.
Launched with Verizon Wireless in
Partnered with 14 mobile carriers in May 2010 and AT&T in October
3 countries (Korea, Taiwan & China). 2010. Sprint Announced in
February.
Processed ~$4 billion in payment
volume and 100s of millions of ~50 Merchants contracted & live
transactions. with dozens in the pipeline.
Integrated over 10,000 online Support ~85% of the U.S. Wireless
merchants in Asia. Market.

7. Selected Carriers / Partners
Carriers Merchants
Launched
May 2010
Launched
October 2010
Signed 2/11
Launch Q2
TBD
7

8. The Rise of the Digital Lifestyle / Consumer
Increase in digital content, gaming, virtual goods and
digital subscription services
Consumers shifting more of their purchases online
m-Commerce is fastest growing segment
Appeals to the youth market and mainstream
consumers
Consumers want frictionless and secure ways to pay
for their goods
Source: ABI Research; IDC Research
8

9. Why does it matter? Will they pay?
From Chris Anderson, Editor-in-Chief, Wired Magazine;
the Internet is
(was?) the land of the free
business models, such as "Freemium," a free version
-
be turned into cash with the wave of a venture
capitalist's wand or a well-timed acquisition. But this
year, for the first time since 2001, the overall tide of
investment and advertising won't rise. Indeed, it will
almost certainly fall. Venture capital has dried up, Google
is killing products rather than buying them, and Yahoo
can barely support itself, much less look for others to
fund.

10. top-10-free-to-play-growth-killers/
Posted by Adrian Crook
freetoplay.biz/2008/02/01/top-10-free-to-play-growth-killers/
#9 > Limited Payment Methods
fedEx
While other territories enjoy a plethora of tailored-to-the-consumer
payment methods, North America has embraced relatively few.
SMS would surely be nearly as popular a payment method here as it
50% a
transaction. Landlines - an expensive but very secure payment
option in China - might also be popular with some services.

11. What & how many payments do you need?
Who is your target audience?
B<>C, B<>B, S<>SMB, B<>UAC, B<>UBC
Where is your target audience?
US, Canada, South America, Asia, Europe, UK
What is your lowest/average/highest ticket?
risk can you afford?/how much transaction cost
can you afford?)

12. Payment Options
Popular Domestic Options
Visa/MasterCard/Discover/Amex
PayPal, Google Check-out, etc.
Prepaid Cards
Global Payment Options
Varies Widely By Country;
Germany = Bank Transfer
Korea = Carrier Billing

13. Taking Payments Globally
Wallets/Prepaid
Cash
COD
Cell phone
Konbini
DD/ELV/ACH
Real time BT
Bank transfer
Major cards
Local cards
References:
Zenith Finance
2006, EITO 2007,
USA Germany UK Australia China India Japan Brazil Nielsen 2007

14. Issues for Digital Content ecommerce, especially <$10 ticket size
Pricing Models
% + Flat Fee for Credit & Signature Debit Cards
2.9% + $.30 ($5 = $.445 fee or 9%)
Premium SMS Fees - Range from 25
Direct Mobile Billing Fees Range from 15-19%...
Prepaid Card Costs - Range from 15
Fraud/Chargebacks/Manual Review Costs
total online revenue which is 38% higher than for other merchant
Chargeback fees range from $10 to $25 (which really hurts on a $10 sale!)
Source = CyberSource Fraud Survey

15. What are consumers saying about payment preferences?
40%
35%
30%
25%
20%
15%
10%
5%
0%
On Cell Credit PayPal iTunes Amazon Other
Phone Card 1-click
Bill
80% cited as one of
the reasons
Source; Nielson App Playbook

16. Carrier Billing State of the State
Up until mid-2010, offering mobile payments for U.S. gamers via
carrier billing was not an appealing option for publishers and
merchants due to challenges like high rates, surcharges for the
consumer and high refund rates.
But in Asia, carrier billing accounts for 60%+ of all in-game sales,
thanks to the advantages offered by a technology called Direct
Mobile Billing (DMB).
Now that DMB is available in the U.S., it promises to change the
landscape for the gaming market dramatically.
Come learn what the differences are between PSMS (premium
SMS) based carrier billing 1.0 and DMB based carrier billing 2.0
and the difference it will make for your business.

17. Direct Mobile Billing vs. PSMS
M
Mobile E
Carriers S
S
PSMS
A 35% Fee 10% Fee PSMS 5-10% Fee
Aggregator
Processor Merchant `
G
I
N
Billing G Total Fees:
System
~50%
Direct Connection Into
Merchant `
Total Fees:
15-17%
17

18. Impact On Merchants & Consumers
Carrier Billing 1.0 Carrier Billing 2.0
Merchants Merchants
Fees of 40% to 65% Fees of 15-17%
1-Factor Authentication 2-Factor Authentication
Restricted pricing Dynamic merchant pricing and control
Inconsistent subscription support Fully supports subscriptions
High (~17%) refund rate Low (1-2%) refund rate
Consumers Consumers
Receive less than with CC Receive same value as with CC
Less control, no way to refund transactions More control and sense of security
with the provider Parental controls
No parental controls
18

19. Why Now?/ Why Here?
Barrier Problem Direct Mobile Billing
Cost of PSMS PSMS providers charging
approximately 50% merchant fees merchant fees to ~15-17%
Enrollment/Registration Conversion rates drop significantly No registration required user is already
for ordinary alternative when a user is required to enroll or approved for post-pay transactions by
register carrier
payments
Convenience Consumers tend not to adopt Incredibly simple and streamlined
payment offerings that are process that can be done in seconds
complex/ time consuming
Security/Parental Weak authentication and delayed Two factor Authentication + Real-time
Notification notification to account owner Parental Notification
Carrier Engagement Initially hesitant to offer lower rates Proven to reduce disputes and bring
and other key features due to fears mobile subscribers a positive value
of customer care costs

20. Consumer Payment Flow
The customer selects the
pricing option and BilltoMobile.
No registration!!
Enter phone number and agree to
415 123 4567
the terms.
x
20

21. Zip Code Validation
415 - 94410
We identify the carrier, check for limits, run
x 123 - fraud rules, and do zip code validation.
4567
A One Time Passcode (OTP) is then sent to
the phone via SMS.
ENTER
The customer enters OTP, which is a 4-Digit PIN. 2161
PIN
2161
SUBMIT
21

22. Transaction Complete!
415 -
We verify the OTP and processes 9
x 123 - 4
the transaction. 4567 4
1
0
Thank You
for Your
Purchase!
The customer then receives a confirmation SMS.
Call, E-mail, or
Chat Live with a Self Service
Rep
Consumer
Portal
Monitor
transactions,
initiate
dispute
22

23. What are merchants saying about DMB?
- Eric Kwun
http://www.youtube.com/user/BilltoMobile

24. Questions?
Thank you!