Deloitte Case Challenge 2012

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Deloitte Case Challenge 2012

  1. 1. Joining the Mobile Payments Chase Second City National BankDeloitte Consulting LLPAnna HuangStarling ShanMay 12, 2012
  2. 2. Q&AThe Fragmented Mobile Payment Market – Position of Second City National Bank Current Situation and Challenge Desired Outcome Demand Side Supply Side Second Fragmented Individual Merchant readiness City National Lack of sufficient Adaptable Innovation knowledge Driving Force Confusing message Interoperability Merchant Acceptance and Ecosystem coordination Adaptation Organizati Developer on Bypass Bridged Initiated • Developer • Financial • Financial • Authorizer Institution Institution Joint Force • Agent • Developer • Developer • Virtual Account • Carrier • Carrier • Manufacturer • Manufacturer Manufact • Network urer Carrier Majority, Passive, Fragmented Trial, Observation • Not centralized Collaborative • Non- collaborative Transaction • Individual attempts focused • Low coverage Slow expansion
  3. 3. Q&AWin On The Value Chain– Direction of Second City National Bank Shared Value Proposition (FAISO) Fast and Flexible Adaptable Inexpensive Secure Optimized• Plays an essential role• Currently only tapping on 1/3 of the value chain Objectives and Direction for Growth• Not yet established relationships with carriers/operators• Passive position on value chain
  4. 4. Q&AFierce Competition – The Gateway For Breaking Through Partnership with Google Wallet, ISIS and Others Technical Partnership Most Beneficial Operational Issue Strategic Issue Option Second City National Bank Initiation by Technical Multiple layers for transfer Acquisition 1. Lack of direct benefit 2. Operational issues unresolved Security and privacy 3. Not a necessary approach for One Stop Process financial institutions Limitation to retail 4. Less control Security and Optimization Achieved 5. Financial Institution in passiveLow trust towards technical position Proactive Control companies Direct Revenue Benefit Not the best option for Second City National Bank
  5. 5. Q&ALead with Initiation – Acquire Strong Technical Development Core Approach for Acquisition Criteria Measurement Target 1. At least 40% of the business portfolio 1. Number of current account in NFC1. NFC Technology 2. Above industry average 2. Number of technicians2. Talent Experience 3. At least 15% in average 3. Yearly revenue growth rate in past five3. Growth Potential 4. At least 10%, less than 40% year timeline4. Market Power 5. Between 70 to 100 million 4. Market share in the mobile industry5. Cost to Acquire 6. Total liabilities able to be cleared 5. Next five year cash flow NPV plus6. Current Liabilities before acquisition intangible and tangible assets 6. Total liabilities An Example of Target Companies – Blue Bite 1. NFC Technology - One of the best NFC innovator in the field 2. Talent Experience - Highly technical talent specifically for NFC and mobile 3. Growth Potential – about 15% 4. Market Power - Expected 15+ Mobile engagement in the industry 5. Cost to Acquire – about 80 million 6. Current Liabilities – unknown, currently not publically held
  6. 6. Q&ARisk Incorporated – Challenges of Acquisition Risk Areas Innovation Transition Time & Process Process Financials Risk Management • Requires both sides to be • Requires acquired talent on • Requires investment heavily on rock solid foundation board and able to achieve in the process of due diligence • Requires base company’s expectations and goals • Requires investigating all of pre-acquisition orientation in • Requires niche technology the potential hidden liabilities place development of the target company. • Requires mutual • Requires technical progress • Requires readiness from all understanding between both communicated at all levels levels, especially financial and parties of expected changes accounting
  7. 7. Q&AFinancial Perspective – Estimated Revenue Stream in Card Component8000 In millions7000 6858 Best Case6000 Nuetral Case 5128.555000 Worst Case4000 3050.4563000 Establish Merchant Establish Network with Network2000 Launch Year other Banks 2480.300141000 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Expected Acquisition Cost: $150 - $340 Million Assumed Growth peek at 2018 and 2020
  8. 8. Q&A Path to Success – Long Term TimelineAcquisition Research Launch &Marketing Feedback, Further New Market Leader- Prepare internally for &Development - Ensure accurate R&D - Achieved one stopacquisition - Focus largely on message - Ensure Message process- Transition the current communication communicated in all - Eliminated security- New company technology fraud - Ensure value chain level concerned resultedorientation - Security player support - Proactive from multiple layers- Adaptation stage development aligned response - Gain significant-Complete -invite insight from - Efficient and - Ensure changes market share value chain players accessible training adaptable to all - Achieve long term for users players benefits - Establish customer feedback channel FY13 FY15 FY16 FY16-20 FY23 Critical Stage for Long Term Success: 1. Technical development 2. Support system development 3. Merchant network development
  9. 9. Q&AStrategic Development – Critical Stages for Long Term Success Establishment of Establishment of Financial Establishment of Merchant Technical Core Institution Network Network Step 1 Step 2 Step 3 Complete the innovation of Gain sufficient coverage and Address the need of small NFC based payment encourage adaptability by to midsize businesses by technology working with other banks at establishing firm merchant similar size reward network Milestones Milestones Milestones1) Develop secure NFC 1) Connect with banks at similar 1) Build merchant reward network by connection size, encourage a joint network eliminating transaction cost for member2) Develop payment application 2) Other major banks adapt of the network3) Customized application based technology, system, and 2) Local small to mid size business on FAISO objectives infrastructure initiated by Second discount on membership fee4) Issue application, system and City National Bank 3) Exclusive marketing channel via Second infrastructure all under 3) A set membership fee connected City National Mobile Payment App Second City National Bank at a set time 4) Promised increasing stream of customer 4) Develop new source of revenue
  10. 10. ConclusionCustomer Second City National Bank Merchant Network NFC Technology Infrastructure System Bank Associations Initiated by SCNB Localized , connected small to mid size merchant community including retail, restaurants and hotels
  11. 11. Appendix
  12. 12. Appendix• Further analysis of the three options• Financials• NFC Power• NFC Power 2• How it works for consumers
  13. 13. Q&A Options for Technology Development Fast InexpensiveIn House Flexible Fast AdaptableAcquire Inexpensive Secure Partner Optimized 0 2 4 6 8 10 12 14 Long Term Approach • Feasible only with unlimited available resource • Tremendous cost and major time consuming • Total Control Best Realistic Head Start Option • Practical with current available resource • Great talent and expertise acquisition at manageable cost • Still maintain control Least Viable Option • Practical with current available resource • Great talent and expertise acquisition at manageable cost • Lost control
  14. 14. Q&A Financial AnalysisNo Effect 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2443.2322455.5262467.882 2480.32492.7812505.324 2517.93 2530.62543.3342556.1312568.993RevenuesBest Situation Launch Banking Network Merchant Network 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022Revenues 2443.2322455.5262467.882 2480.32703.5273000.9153451.052 3968.714762.4525714.943 6858Neutral Situation 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022Card Component 2443.2322455.5262467.882 2480.3 2629.1182786.8653065.5523372.1073877.923 4459.6115128.553Worst Situation 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022Card Component 2443.2322455.5262467.882 2480.32554.709 2631.352710.291 2791.62875.3482961.6083050.456
  15. 15. Q&ANFC Power
  16. 16. Q&ANFC Power
  17. 17. Q&AHow it works for consumers
  18. 18. Q&AList of Sources• http://www.readwriteweb.com/mobile/2011/03/nfc-2011-wells-fargo- tests-mobile-payments-in-san-francisco.php• http://www.infotouch.net/home/about.asp• https://www.x.com/devzone/articles/9-companies-watch-mobile- payments-space• https://www.nacha.org/userfiles/File/The_Internet_Council/Resources/M obile%20payments%202010%20-%20Innopay.pdf http://www- 935.ibm.com/services/us/gbs/pdf/GBW03136-USEN-00.pdf• http://www.egonzehnder.com/us/practices/industries/financialservices/t houghtleadership/article/id/17500695• http://www.mpf.org.in/pdf/Mobile%20Payment%20Systems%20and%20S ervices.pdf http://www.slideshare.net/victori98pt/mobile-payments- 2788055• http://www.slideshare.net/fullscreen/DanTrigub/blue-bite-presentation- 11887953/2

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