+                              SocialAlternative            LocalPayments:               Big                              ...
+ Your Presenters                          2    Tracy Duprey - Host    Andy Schmidt – CEB TowerGroup    Esmeralda Swart...
+ Overview                                 3    Next Generation Payments: What, Why    User Experience    Building it ...
+ US Noncash Payment Volumes Continue                                              4  to Grow Despite Market Turmoil      ...
+                                                     5    Virtual Currencies Replace Paper    and Coins with Bits and Byt...
+                                        6    “Freemium” Model has Taken Hold in    Many Games and Other Applications    ...
+                                                                                 7    Diablo III Brings Real-Money    Auc...
+ Swarms of New Payment Partnerships   8 in the Real and Virtual Worlds
+                                                                 9    What Questions Should the Market    be Asking?Ques...
+                                                              10    Three Simple Drivers     Traditional players     must...
+                                                                                                              11    Comme...
+ Establishing Alternative Payments                                 12  Brand    Trust and simplicity to drive customer b...
+ Adapt or Don’t Bother                   13        Indirect       Direct      Monetization   Monetization                ...
+ Back to Basics                 14 Understand the Buyer/User    Where, when, why they buy    How they behave    What t...
+ No Perfect Answer, Only Better                                         15  One(s)    Cannot spend months before launch ...
+ Acquire & Analyze: Data to Better        16  Serve Customers                         Heuristics                         ...
+ Billing Data Makes an Impact   17
+ A3 The New Model                             18 • Enroll                     Analyze   • Price • Meter                  ...
+ Creating Value to Accelerate Adoption                                19                             Alternative         ...
+ Case Study: Reconciliation                                                                                             2...
+ Pricing                                                              21    Difference in pricing is no longer whether o...
+ Summary                                                             22    The experience economy is powering virtual an...
+ Questions?               23 aschmidt@towergroup.com eswartz@metratech.com
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Alternative Payments: Turning Virtual Into Reality

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Last week’s alternative payments webinar with MetraTech’s chief marketing officer, Esmeralda Swartz, and Andy Schmidt, research director at CEB TowerGroup, examined alternative payment models for virtual currency and new business scenarios within which these currencies can be used. In the initial survey of webinar participants, 68 percent responded that their customers expressed interest in virtual currency and alternative payment options. This percentage is an indication that customers are driving the market to offer more flexible payment options. Just as plastic credit cards replaced paper currency, virtual currencies are now replacing plastic with bits and bytes. The market demand is clearly established, and in order to remain relevant, companies need to innovate and adapt to these trends in direct monetization.

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  • The US non-cash market is the largest payments market in the worldAnd, the debit card has become the dominant payment type in the US in terms of overall transaction volume, growing at a dizzying 14.9% annual rate between 2006 and 2009 as consumers focused on spending only what they had
  • Now while plastic is replacing paper, virtual is replacing plasticFacebook Credits now switching to local currenciesSounds really easy - but - there are lots of moving partsStarbucks enhances the brand - FB is a roadblock
  • Freemium is a business model by which a product or service (typically a digital offering such as software, media, games or web services) is provided free of charge, but a premium is charged for advanced features, functionality, or virtual goods.Charge to make it ads-free, etc.
  • Diablo III is the latest installment in Blizzard Entertainment’s Diablo franchise – one of the best selling computer game titles of all time
  • Alternative Payments: Turning Virtual Into Reality

    1. 1. + SocialAlternative LocalPayments: Big MobileTurning Virtual Into DataReality
    2. 2. + Your Presenters 2  Tracy Duprey - Host  Andy Schmidt – CEB TowerGroup  Esmeralda Swartz – MetraTech, Corp.
    3. 3. + Overview 3  Next Generation Payments: What, Why  User Experience  Building it  Optimize, Analyze, Act  Make Money  Create an Economy
    4. 4. + US Noncash Payment Volumes Continue 4 to Grow Despite Market Turmoil Noncash Transaction Volume by Type Percentage of Total Transaction Volume by Type of Transaction, 2011 . Trends in Noncash Transaction Volume by Type Noncash Transaction Volumes (in millions) by Type 2005 – 2016(E). Source: TowerGroup Payments Database
    5. 5. + 5 Virtual Currencies Replace Paper and Coins with Bits and Bytes Transactions are often peer to peer without the use of a central authority Relies upon “the network” to self- police Concept drives regulators crazy - Can’t rely on the network to stop/filter transactions - Proponents claim attention is just a ploy by banks to impede adoptionSource: Bitcoin, Facebook, MintChip, CEB TowerGroup
    6. 6. + 6 “Freemium” Model has Taken Hold in Many Games and Other Applications Freemium:  Product or service is provided free of charge  Premium is charged for advanced features, functionality, or virtual goods.
    7. 7. + 7 Diablo III Brings Real-Money Auctions (RMA) to Gaming  Moves items from eBay to monitored channel  Buyers can pay in “gold” or 9 different currencies DEAD AGAI N? Ma y be y o u n eed a  Fee structure is $1 per bet t er sw o r d – c l i c k he r e t o c o me t o t he a u c t i o n ho u se No w item and 15% percent of the purchase priceSource: Blizzard Entertainment, CEB TowerGroup
    8. 8. + Swarms of New Payment Partnerships 8 in the Real and Virtual Worlds
    9. 9. + 9 What Questions Should the Market be Asking?Questions for Banks Questions for Regulators How do I get there from here?  What about AML? What is the risk?  What can we do – if anything – about How do I get involved? vendors who switch How do I automate this? currencies to avoid taxes?
    10. 10. + 10 Three Simple Drivers Traditional players must innovate to Make currency Clear market need remain relevant ubiquitous
    11. 11. + 11 Commerce Today Yesterday Today Tomorrow Online Online 6% 4% Web- Online influenced Offline Offline + Offline 37% Offline 96% 2008 = $325B 2013 = $ 10T Source: Forrester, Euromonitor and Economist Intelligence Unit Source: Forrester Source: Economist Intelligence Unit
    12. 12. + Establishing Alternative Payments 12 Brand  Trust and simplicity to drive customer behavior  Strong organization/brand behind product  Clear value proposition for: Consumer, Merchant, Biller, and Financial Institutions  Convenience and ease of use
    13. 13. + Adapt or Don’t Bother 13 Indirect Direct Monetization Monetization Freemium/Causium Offers Pay to use m/ecommerce Ads Premium content Subscriptions Virtual currency Referrals Reselling Digital goods
    14. 14. + Back to Basics 14 Understand the Buyer/User  Where, when, why they buy  How they behave  What they prefer  When are they at risk  How to retain them
    15. 15. + No Perfect Answer, Only Better 15 One(s)  Cannot spend months before launch worrying about pricing  FACT: Pricing, bundling, and offers will be revised over time  Lots of data, how do you maximize expected lifetime value of the customer  Data has to be interpreted, source of data is critical  If you double prices, double short-term revenue, but triple churn not a good idea
    16. 16. + Acquire & Analyze: Data to Better 16 Serve Customers Heuristics + Aggregated Metadata = Meaningful Benchmark Stats/KPIs
    17. 17. + Billing Data Makes an Impact 17
    18. 18. + A3 The New Model 18 • Enroll Analyze • Price • Meter • Test • Pay • Analyze • Offer • Refine • Plan Acquire Act
    19. 19. + Creating Value to Accelerate Adoption 19 Alternative Payments Consumer P2P, Mobile, Consumers POS, Alt. Account (s) Currencies, Prepaid Merchants Access to customer data is key Non-Traditional Delivering relevant, personalized Merchants promotions Merchant Rewards integration (earn & burn) Intermediaries Convenience parity with other payment solutions Examples:
    20. 20. + Case Study: Reconciliation 20 Cash Management Accounting System Gateway Files Higher conversion & ACH reports, Bank/ sales Merchant “Compare, Identify, Statements Happier customers Bank Admin File (BAI) Adjust, Prepare” Daily Reconciliation: Ease of online selling • Cash Management • Gateway More targeted marketing • Bank Account ACH Files • Merchant Funding Shorter time-to-market Is this automated process More resources to focus between systems? Ease of adjustment for line on core capabilitiesMerchant Interchange Billback item & aggregate? Billing and Profitability analysis Payment System Accurate statements  Reconciliation: calculate aggregate net amount per merchant and generate ACH & merchant statements  Problems: manual process, poor integration, inaccurate calculations, delays in issuing statements, poor visibility to profitability  Solution: simplified and automated reconciliation process
    21. 21. + Pricing 21  Difference in pricing is no longer whether online or offline or virtual or real  Timeliness of offers  Functional goods drive more users to pay  Price points need to be experimented with  Understand user demographics and customize when appropriate
    22. 22. + Summary 22  The experience economy is powering virtual and physical worlds  Growing Virtual Economy  More users  More channels  Convert users to spenders  Get spenders to spend more money  Serve and retain high spenders  Offline and Online Commerce Blurring  Social Commerce  Acquire, Analyze, and Act  Release product  Change it, change it yet again  Simplicity  Locality
    23. 23. + Questions? 23 aschmidt@towergroup.com eswartz@metratech.com
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