BUSINESS PLAN




                                           Empowering International E-Commerce



                      ...
Empowering International E-Commerce


                                        SERIES A PREFERRED – FINANCING
             ...
Disclaimer


      e-Global Network, Inc., nor any of its representatives or advisors, have made

or will make any represe...
TABLE OF CONTENTS
  BUSINESS PLAN............................................................................................
EXECUTIVE SUMMARY

Latin America represents the world’s fastest growing region in number of online users. Despite
this gro...
SECTION 1         PRODUCTS AND SERVICES

The main elements of the Company’s solutions include the International Internet P...
SECTION 2                        THE PROCESS

The following diagram illustrates the process describing how consumers can o...
Funding the Global Card. To fund a Global Card, a consumer
will make a deposit at an affiliated bank that accepts Global
C...
Once the member acknowledges all cumulative charges [product prices + duties + shipping fees]
the International Internet P...
SECTION 3         PAYMENT AND SHIPPING TECHNOLOGY

At the center of e-Global Network’s enabling technology is the Internat...
   Capturing Global Card transactions
                  Applying necessary currency conversions
                  Appro...
SECTION 4         INTERNATIONAL DEPLOYMENT

In the first two years, the Company intends to focus on Latin America. Within ...
SECTION 5                   LATIN AMERICAN MARKETS

                                                Latin America is the w...
Latin America - Growth in Consumer E-Commerce Revenues

           $ in billions

           9.0
                         ...
Cross-border shipping and delivery issues.          Latin America lacks the
       infrastructure to delivering products t...
Mexico

Efforts by the government and major corporations within Mexico
                                                   ...
Argentina

Argentina remains behind Brazil in terms of online penetration and
Internet technology, but the stable politica...
SECTION 6            STRATEGIC ALLIANCES

Strategic alliances provide rapid market reach as well as operational infrastruc...
Both existing bank customers and non-customers can visit any branch location to sign-up for a
Global Card account, deposit...
have expressed strong support for the Company’s solutions. Under the terms of discussion, these
entities will:

          ...
granted to the members by FONACOT. FONACOT expects to issue well over $300 MM in
credit to their members in 2000. Through ...
SECTION 7           AFFILIATE MERCHANT ALLIANCES


Establishing Merchant Alliances

A comprehensive network of well-establ...
These merchants will lead the deployment of the Global Card in Mexico. The aggregation of
products and services the networ...
SECTION 8         MARKETING STRATEGY AND IMPLEMENTATION

e-Global Network, Inc. will launch to Mexico as the initial targe...
   Information on customer service
                  Statement of Terms and Conditions of Use
                  A small...
   Online Newsletter – periodic update utilizing a web-based newsletter to
               inform consumers of merchant sp...
The Consumer Website

The e-Global Network consumer website will serve as the primary vehicle for disseminating
company in...
SECTION 9         COMPETITIVE ADVANTAGES


Competitive Landscape

e-Global Network, Inc. sees current international paymen...
VISA Cash and Mondex Electronic Cash are point of sale mechanisms for micro-
   purchases such as buying a cup of coffee o...
SkyBox is essentially a band-aid solution resulting in longer shipment times, double charging
of shipping costs, and compl...
Competitive Advantages

e-Global Network’s payment and shipping solutions achieve numerous compound advantages
over compet...
affiliate merchants. Also, compared to smart cards that require a reader for e-commerce
   transactions, the Global Card i...
SECTION 10        MANAGEMENT AND CORPORATE STRUCTURE


Corporate Structure

The Company has been established as a Bermuda ...
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Business Plan for Americas
Upcoming SlideShare
Loading in …5
×

Business Plan for Americas

1,299 views

Published on

developing the fundamental payment and fulfillment infrastructure for consumer e-commerce in Latin America.

0 Comments
3 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,299
On SlideShare
0
From Embeds
0
Number of Embeds
4
Actions
Shares
0
Downloads
0
Comments
0
Likes
3
Embeds 0
No embeds

No notes for slide

Business Plan for Americas

  1. 1. BUSINESS PLAN Empowering International E-Commerce SERIES A PREFERRED FINANCING JUNE 05, 2000 ORLANDO A. MORENO Highlights:  $3.7 billion consumer market  Aggressive Latin American deployment  Integrated payment and shipping solution  Patent-pending processes and technology  Dynamic revenue generation  Diverse founding team This document is a Business Plan and does not constitute an offer to sell or a solicitation to purchase. The Business Plan, “the plan”, is confidential and contains proprietary information including trade secrets of e-Global Network, Inc. Neither the Plan nor any of the information contained in the plan may be reproduced or disclosed to any person under any circumstances without the express written permission of e-Global Network, Inc. Orlando Moreno omoreno@hotmail.com 408.656.2498
  2. 2. Empowering International E-Commerce SERIES A PREFERRED – FINANCING Prepared by Orlando Moreno Executive Summary...................................................................................................................................1 Section 1 Products and Services...............................................................................................................2 Section 2 The Process...............................................................................................................................3 Section 3 Payment and Shipping Technology............................................................................................6 Section 4 International Deployment...........................................................................................................8 Section 5 Latin American Markets..............................................................................................................9 Section 6 Strategic Alliances....................................................................................................................14 Section 7 Affiliate Merchant Alliances......................................................................................................18 Section 8 Marketing Strategy and Implementation...................................................................................20 Section 9 Competitive Advantages..........................................................................................................24 Section 10 Management and Corporate Structure...................................................................................29 Section 11 Implementation to Mexico.......................................................................................................33 Section 12 Risk Factors...........................................................................................................................39 Section 13 Financial Forecasts................................................................................................................40 This document is a Business Plan and does not constitute an offer to sell or a solicitation to purchase. The Business Plan, “the plan”, is confidential and contains proprietary information including trade secrets of e-Global Network, Inc. Neither the Plan nor any of the information contained in the plan may be reproduced or disclosed to any person under any circumstances without the express written permission of e-Global Network, Inc. Orlando Moreno omoreno@hotmail.com 408.656.2498
  3. 3. Disclaimer e-Global Network, Inc., nor any of its representatives or advisors, have made or will make any representations or warranty of accuracy or completeness of Confidential Information and shall have no liability resulting from the Receiving Party’s use of the Confidential Information except as may be provided in a definitive agreement with respect to an Investment, if any. All material was prepared by Orlando Moreno. Any questions and issues related to the material in this document shall be addressed to Orlando Moreno CONFIDENTIAL INFORMATION
  4. 4. TABLE OF CONTENTS BUSINESS PLAN................................................................................................................................................................................1 .............................................................................................................................................................................................................1 .............................................................................................................................................................................................................2 Disclaimer............................................................................................................................................................................................1 Executive Summary....................................................................................................................................1 Section 1 Products and Services................................................................................................................2 The Global Card..................................................................................................................................................................................2 Affiliate Merchant Network..................................................................................................................................................................2 International Internet Payment System™............................................................................................................................................2 Automated Tariff System™..................................................................................................................................................................2 Section 2 The Process................................................................................................................................3 Section 3 Payment and Shipping Technology............................................................................................6 International Internet Payment System™............................................................................................................................................6 Automated Tariff System™..................................................................................................................................................................7 Section 4 International Deployment............................................................................................................8 Section 5 Latin American Markets..............................................................................................................9 Mexico...............................................................................................................................................................................................12 Brazil..................................................................................................................................................................................................12 Argentina...........................................................................................................................................................................................13 Chile..................................................................................................................................................................................................13 Section 6 Strategic Alliances....................................................................................................................14 Latin American Banks.......................................................................................................................................................................14 Telcos and ISPs................................................................................................................................................................................15 Portals and Shopping Networks........................................................................................................................................................15 Shipping Carriers...............................................................................................................................................................................16 Card Distributors...............................................................................................................................................................................16 PC Manufacturers.............................................................................................................................................................................17 Commerce Technology Vendors.......................................................................................................................................................17 Section 7 Affiliate Merchant Alliances.......................................................................................................18 Establishing Merchant Alliances ......................................................................................................................................................18 Building an Affiliate Merchant Base..................................................................................................................................................18 Affiliate Merchant Integration............................................................................................................................................................19 Proactive Merchant Relationships.....................................................................................................................................................19 Section 8 Marketing Strategy and Implementation...................................................................................20 Branding the Product and Service....................................................................................................................................................20 Advertising to Consumers.................................................................................................................................................................21 Section 9 Competitive Advantages...........................................................................................................24 Competitive Landscape.....................................................................................................................................................................24 Competitive Advantages...................................................................................................................................................................27 Section 10 Management and Corporate Structure....................................................................................29 Corporate Structure...........................................................................................................................................................................29 Personnel Growth..............................................................................................................................................................................30 Key Individuals..................................................................................................................................................................................31 Section 11 Implementation to Mexico.......................................................................................................33 Demographics and Infrastructure Development...............................................................................................................................33 Implementation Plan..........................................................................................................................................................................35 Section 12 Risk Factors............................................................................................................................39 Section 13 Financial Forecasts.................................................................................................................40 Overview ...........................................................................................................................................................................................40 Revenue and Pricing.........................................................................................................................................................................40 Expenditures......................................................................................................................................................................................42 Summary...........................................................................................................................................................................................45 Capital Request.................................................................................................................................................................................45 Forecasted Income Statement..........................................................................................................................................................46 CONFIDENTIAL INFORMATION
  5. 5. EXECUTIVE SUMMARY Latin America represents the world’s fastest growing region in number of online users. Despite this growth, a large disparity is expected to emerge between the number of online users and those users who make online purchases. Over the next five years, the compound annual growth rate for online buyers (88%) significantly lags behind the growth in online users (133%).i The growing disproportion is a direct result of the fundamental inhibitors that restrain consumer e- commerce in Latin America:  Low Credit Card Penetration  Privacy and Security Fears  Cross-Border Shipping and Delivery Difficulties Despite these constraints, global Internet players as well as the largest Latin American providers of consumer products and services are infusing huge amounts of capital in an effort to become the first and most recognizable market leaders amongst this emerging user base. The focus of these players is to establish a critical user mass with the underlying assumption that the fundamental infrastructure for consumer e-commerce will be developed in the near future. The Company is positioned to play a crucial role in developing the fundamental payment and fulfillment infrastructure for consumer e-commerce in Latin America. Latin America currently lacks a cash-based transaction vehicle, relying solely on credit to complete transactions. e- Global Network will transform online users who merely interact, into online consumers who transact. e-Global Network enables consumers to purchase goods and services both locally and abroad using a secure, non-credit-based, non-exclusionary Internet payment solution. The Global Card (Tarjeta Global) instills purchasing power to the vast majority of the consumer population who do not qualify for or who are averse to using credit with cross-border purchases supported by an integrated shipping and tariff solution. Online consumers purchasing goods cross-border are subject to uncertain import duties and taxes, which are levied and must be paid by the consumer once the package reaches the customs broker of the destination country. The solution automates the calculation of all tariffs and associated shipping costs on a real-time basis, allowing the consumer to acknowledge and prepay all costs at the time of purchase. e-Global Network is establishing strategic alliances to provide operational infrastructure and extend Global Card reach across divergent channels to virtually every Internet user in Mexico. The Company is presently in discussions with Citibank de Mexico and Banco Bital as initial banks to act as points of distribution and deposit as well as co-marketing platforms. Alliance discussions are also in progress with Telmex, Prodigy, T1MSN, Terra Networks (Infosel), To2.com to promote our system within their network of online users and merchants. Strategic alliances have also been established with FONACOT, Universitarios.net, and United Parcel Service. The demonstrated need opens an extraordinary window of opportunity, as e-Global Network will be the first integrated cross-border online payment and shipping solution in Latin America. CONFIDENTIAL INFORMATION -1-
  6. 6. SECTION 1 PRODUCTS AND SERVICES The main elements of the Company’s solutions include the International Internet Payment System™ (IIPS) and the Automated Tariff System™ (ATS). Collectively, they form the backbone and infrastructure for an environment that fully enables international e-commerce by supporting all requisite phases of an electronic transaction from point-of-sale at an online merchant through point-of delivery to the customer. The Global Card The Global Card (Tarjeta Global) is a cash-based debit card that provides a means for rendering payment of international e-commerce transactions. Card value is based on the local currency of the card member. Consumers obtain the Global Card through traditional (banks) and non- traditional (i.e. ISPs, PC manufacturers, and Internet portals) distribution channels. Initial funding and replenishment of the card’s cash value is erected by the consumer making a deposit at a local affiliated bank branch. The Global Card is compliant with international standards for card identification and features a 16-digit card number coupled with a 4-digit PIN for activation and authentication. Affiliate Merchant Network The Affiliate Merchant Network is a gateway for card members to shop for products from U.S. and Latin American merchants accepting the Global Card as a payment option. The breadth of the Affiliate Merchant Network provides consumers with a broad cross-section of products not immediately available locally. Affiliate merchant information is indexed and fully searchable by region, country, merchant specialty, product, and merchant name. International Internet Payment System™ The International Internet Payment System™ (IIPS) explicitly handles currency conversions at the point-of-sale, enabling card members to purchase goods and services cross-border. The IIPS incorporates key proprietary and open technologies (currency conversion and calculation) that seamlessly integrate the fielded systems of strategic partners in the areas of finance and foreign exchange. Automated Tariff System™ Trade regulations and tariff agreements pose a barrier to international e-commerce. The Automated Tariff System™ (ATS) facilitates the international shipment of goods by automatically pre-calculating the costs associated with shipping, import duties, and tariffs when importing foreign-made goods into a country. Built upon proprietary and open technologies developed by e-Global Network, Inc., ATS removes traditional constraints to international e- commerce by reducing the complexities involved in shipping goods cross-border. CONFIDENTIAL INFORMATION -2-
  7. 7. SECTION 2 THE PROCESS The following diagram illustrates the process describing how consumers can obtain the Global Card and use it to make purchases. OBTAINING A CARD FUNDING THE CARD ACTIVATING THE CARD Purchase or receive Deposit funds at bank 1. Register Card Global Card 2. Select PIN Code Bank $ $ Website Fund Card $ Obtain Card Bank Activate Card Website Consumer Promotions Fund Card Go Shopping ISPs Telcos Affiliate PC Mfgrs Merchant Network Select a Merchant Ship Transaction Payment Online Product Processing Processing Merchant Consumer DELIVERING THE PRODUCT MAKING PAYMENTS 1. Generate Manifests PROCESSING THE MAKING A PURCHASE 1. Authenticate card 2. Ship product to consumer TRANSACTION 1. Select Products 2. Convert Currency 1. Settle account balances 2. Initiate Payment 3. Compute Tariffs 2. Record transaction (Duties & Taxes) 3. Generate receipt 4. Compute Shipping 4. Notify consumer 5. Review Order 5. Notify merchant 6. Approve Transaction Obtaining the Global Card. Through a number of distribution channels, a consumer will be able to obtain a Global Card to Bank make purchases from affiliate merchants. Distribution outlets include banks and other strategic alliances. Alternatively, a e-Global consumer may order the card directly from the e-Global Network Website consumer website. When obtained, the Global Card will have Obtain Card zero cash value and must be activated and funded prior to its use Promotional Offerings for purchase activities. As part of promotional agreements with strategic partners, consumers may receive the Global Card with ISPs Telcos a nominal value that can be used towards purchases. PC Mfgrs CONFIDENTIAL INFORMATION -3-
  8. 8. Funding the Global Card. To fund a Global Card, a consumer will make a deposit at an affiliated bank that accepts Global Card deposits. Once a deposit has been made, the consumer will be issued a deposit receipt, which can be used to verify and Fund Card reference card account balances. Deposits made into activated card accounts will be available for use once e-Global Network, Bank Inc. has verified the deposit. Fund Card Activating the Global Card. A consumer activates the Global Card by following a standard activation procedure that is clearly printed on its back as well as on product packaging. The Activate Card Website activation procedure implements security controls to verify the authenticity of each card. To activate the card, the consumer will be asked to enter the 16-digit card number, then followed by the 4-digit PIN provided in the introductory kit. Once the card is authenticated, the user is required to change the original 4-digit PIN. This activation procedure is performed only once. Making A Purchase. With an activated and funded Global Card, a member now has the ability to purchase products and goods from affiliated merchants. The Global Card member can either go directly to an affiliated merchant’s website or select an Go Shopping online merchant from the Affiliate Merchant Network. Affiliate Merchant Network Once at the merchant site, a consumer will browse for and select Select A Merchant products to be purchased. During the product selection process, items will be placed into the consumer’s “shopping cart”. Upon Online Merchant checkout, the member will select the Global Card from the list of available payment options. Making Payments. Having selected the Global Card payment method on the affiliated merchant’s site, the member is automatically directed to the payment server where all payment Payment Processing processing is performed. The International Internet Payment System™ will then query the member account to authenticate the Global Card in-use. Once the card in-use is authenticated, the member will be asked to provide additional information related to the delivery address for the purchased goods. This feature is provided to help facilitate the delivery of goods to specific international destinations. With shipping information provided by the member, the Automated Tariff System™ is then able to automatically compute all necessary customs, duties, shipping and handling fees, and any additional assessable tax for the products to be purchased and delivered. CONFIDENTIAL INFORMATION -4-
  9. 9. Once the member acknowledges all cumulative charges [product prices + duties + shipping fees] the International Internet Payment System™ approves or denies the transaction based on available funds converted to the affiliated merchant’s currency. If the transaction is denied for insufficient funds, the member will be notified to deposit additional funds. Processing the Transaction. The IIPS records approved and denied transactions and an associated receipt is generated and electronically sent back to the member through their e-mail Transaction Processing account as well as via an HTML-based receipt. For approved transactions, the affiliated merchant is electronically notified of the transaction approval and is provided with all required information to complete the fulfillment and delivery aspects of the order. Delivering the Product. On international shipments, affiliate merchants will generate accurate package manifests, based on the information provided by the e-Global Network system. For Deliver Product Ship affiliate merchants, the process of delivering goods into foreign countries is facilitated through the pre-calculation and pre- payment of all shipping, customs, duties, and taxes. This automated procedure significantly enables the shipping carrier to expedite the process of clearing packages at international points-of-entry. Card members can track packages from point-of-origin through point-of-entry (customs), and finally to point-of-delivery. Paying the Merchant. Settlement of all amounts for each affiliated merchant for transactions completed the prior week is completed on a weekly basis. The procedure includes the generation of detailed electronic reports and transaction summaries that take into account transaction surcharges, volume discounts, and merchant rebates. Settlement of a merchant payment is considered complete when e-Global Network, Inc. releases funds for transfer to the merchant’s account. Paying the Shipping Carrier. All payments associated with the shipment of packages to foreign destinations will typically be settled and reconciled on a weekly basis. For country-specific situations, the preferred shipping carrier (UPS) will assume the necessary costs (shipping, import duties, and taxes) to clear packages through international borders. Each week UPS and e-Global Network, Inc. will generate a summary report of shipping transactions for reconciliation. Upon acceptance of the shipping transaction summary, UPS will be reimbursed the total amount paid for shipping-related activities, less any volume shipping discounts. CONFIDENTIAL INFORMATION -5-
  10. 10. SECTION 3 PAYMENT AND SHIPPING TECHNOLOGY At the center of e-Global Network’s enabling technology is the International Internet Payment System™ (IIPS) and the Automated Tariff System™ (ATS). Together, IIPS and ATS form a comprehensive Internet-based network and communications infrastructure developed specifically to support international e-commerce transactions and fulfillment. Built upon numerous standard and proven Internet technologies, both systems support rapid deployment and integration with merchant systems through well-defined Application Programming Interface (API) structures. Standard web browser technology provides a universal client platform for enabling member and merchant access. International Internet Payment System™ The major components of the IIPS include the:  Online Account Manager  Transaction Processing and Management Engine  Automated Foreign Exchange Conversion System Online Account Management (OAM) Component. To allow users the greatest flexibility in performing domestic and international transactions, a web-based Online Account Management facility is provided to give users secure and real-time access to their account funds and information. Card value and account balances are maintained in the local currency of the member and transactions are converted to the local currency of the merchant. Accessed through the web, the Online Account Manager allows members to activate cards, check balances, change PIN access codes, view transaction details, generate transaction reports, monitor card value in local currencies, and transfer funds to other card accounts. This component is implemented using a number of proven and standard Internet technologies: public key certificates and SSL for security, active page generation for rapid interactivity with back-end server databases, and standard web browsers as universal clients. Transaction Processing Component. The Transaction Processing Component performs three major functions: Fund Management, Transaction Processing, and Payment and Settlement. The Fund Management Subsystem performs ledger functions for individual card accounts. This system maintains the security and integrity of all accounting and bookkeeping operations (i.e., debits and credits). The Fund Management subsystem monitors and records individual fund activity with the data available to account holders through the Online Account Management system. Account balances determined by the Fund Management subsystem are used by other system components to approve or deny transactions. The Transaction Processing Subsystem handles a number of activities that bridge the connection between the member and the merchant. Its primary functions include the following: CONFIDENTIAL INFORMATION -6-
  11. 11.  Capturing Global Card transactions  Applying necessary currency conversions  Approving and denying online purchase requests  Routing transaction information  Recording transaction activity  Generating transaction reports for members and merchants The Payment and Settlement Subsystem is responsible for overseeing the reconciliation and settlement of payments to merchants. On a weekly basis, based on transaction records maintained by the Transaction Processing subsystem, merchants are paid amounts equivalent to the total sum of all transactions completed, less all imposed per transaction fees and discounts. Using a secure web-based interface, merchants will be able to view information collected and generated by the Payment and Settlement subsystem to monitor and track sales and transactions. Settlements occur when funds designated for payment to merchants are transferred to their bank accounts. The Transaction Processing and Management component leverages commercially available enterprise database technologies to incorporate proprietary logic and algorithms that define the environment for enabling international e-commerce transactions. Automated Currency Exchange Component. The Automated Currency Exchange Component receives, analyzes, and determines real-time currency exchange rates in order to determine currency exchange spreads that protect e-Global Network’s embedded currency revenue. When online purchases are made the price of the product and other associated costs are automatically converted into the local currency of the affiliate merchant, providing the member with the total cost associated with the purchase. Since currency conversion rates are subject to day-to-day fluctuations, the Transaction Processing Component time-stamps the established currency rate on each transaction record for every multiple currency transaction encountered. Automated Tariff System™ Duties and tariffs levied upon imported goods vary from nation-to-nation and are oftentimes determined by complicated pacts and agreements meant to protect national industries from foreign competition. Merchants are reluctant to participate in international e-commerce because the task of computing duties and tariffs is complex. Duties and tariffs are typically determined manually at point-of-entry using the internationally recognized harmonizing code, a standard system for categorizing tariffable goods. Since most merchants do not assign harmonized code designations to their products, the task of determining duties and tariffs becomes daunting and serves as an impediment to realizing international sales through e-commerce. The Automated Tariff System™ (ATS) digitizes the Harmonizing Code System and maintains up-to-date duty and tariff schedules for the United States and countries of shipment. The product inventory of affiliate merchants will be integrated so that, for each product, the associated duties and tariffs can be determined in real-time. CONFIDENTIAL INFORMATION -7-
  12. 12. SECTION 4 INTERNATIONAL DEPLOYMENT In the first two years, the Company intends to focus on Latin America. Within Latin America, primary focus will be on those countries that cumulatively account for 91% of online commerce:  Argentina  Brazil  Chile  Mexico  Venezuelaii The selection of the five preceding countries take into account a number of key facts, including growth in online user base and revenues, per capita income, average amount spent online per year, as well as economic and political stability. As a result of our strong in-country relationships, we intend to launch to Mexico as the first country for deployment. Following Latin America, the Company will then look to expand operations into key markets within Europe and Asia/Pacific.iii Mexico Brazil Argentina Chile Venezuela Target Countries for Two Year Deployment Target Regions CONFIDENTIAL INFORMATION -8-
  13. 13. SECTION 5 LATIN AMERICAN MARKETS Latin America is the world’s fastest growing region both in e- Latin America commerce revenues and in online users. Latin America, at 2000E 2003E present, accounts for only about 16 million Internet users, but by Net Users 16.0M 43.4M the year 2003, it is estimated that there could be as many as 43 Consumer EC Rev $500M $3.7B million users in the region resulting in $3.7 billion in consumer 2003 % Home Internet Users Shopping Online* e-commerce revenues.iv Under this scenario, Latin America would double its participation rate to approximately 10 percent of the world’s Internet users. % 74 These developments suggest that while e-commerce holds 27 % % 26 tremendous potential for expanding trade and increasing Latin America’s competitiveness in international markets, the challenge lies in ensuring that e-commerce contributes to the integration and development of all regions. Attention will need Source: Jupiter Communications, 2000 * Morgan Stanley Dean Witter, 2000 to be paid to address the opportunities and create an enabling environment in order to avoid the deepening of inequalities in the access and use of information technologies that could widen the social and economic gap between and within Latin American countries. Latin America - Growth in Online Users Online users in millions % of Online users buying 66.6 70 60 55.1 50 43.4 40 31.9 30 23.0 34% 16.0 24% 31% 20 27% 18% 21% 10 2000 2001 2002 2003 2004 2005 Source: Jupiter Communications. Latin America: Online Projections. March 2000. CONFIDENTIAL INFORMATION -9-
  14. 14. Latin America - Growth in Consumer E-Commerce Revenues $ in billions 9.0 $ 8.3B 8.0 7.0 6.0 $ 5.8B 5.0 4.0 $ 3.7B 3.0 $ 2.2B 2.0 $ 1.2B 1.0 $ 500M 2000 2001 2002 2003 2004 2005 Source: Jupiter Communications. Internet Commerce Model. February 2000. Despite the strong growth potential in Latin America, there still exist a number of barriers to growth including: Poor quality and high Internet access fees. Barriers in the form of low quality telecommunications infrastructure, narrow bandwidth, and high connection costs in some countries slow the growth of e-commerce in Latin America. Latin American Internet access fees average $53 a month.v Low PC penetration rates. One key assumption is that the PC will continue to be the dominant means of accessing the Internet in Latin America over the next 10 years, but will begin to lose significant market share to new technologies such as cable access or wireless access. Currently, PCs have a Latin American population penetration of 6.1% and this will increase to 11.1% by 2005.vi Low credit card penetration rates. The use of credit cards is not widespread in Latin America and credit card purchases are almost non-existent amongst traditional retail channels. Lower-income consumers have essentially no access to these cards and those that do have been discouraged from using them due to extended periods of high interest rates. Security and privacy concerns. The electronic medium does not initially create the trust characteristic of face-to-face transactions. Latin American consumers have an inherent mistrust of online transactions. They may not be afforded similar protections in the online world as they are in traditional transactions with regard to privacy, security, authentication, and consumer protection. CONFIDENTIAL INFORMATION - 10 -
  15. 15. Cross-border shipping and delivery issues. Latin America lacks the infrastructure to delivering products to consumers in a timely and inexpensive fashion. Also, custom, tariff, and tax barriers protecting local merchants add confusion and uncertainty for the consumer when making international e- commerce transactions. Many of these issues will be eliminated as the Internet infrastructure continues to grow. PC penetration rates as well as Internet access issues are currently being focused on and addressed. Current initiatives are in process for free Internet access to be prevalent in Latin America. Development will be driven by the rate structure of local telephone calls, the possibility to generate revenues and cost savings in excess of the access cost, the need to offer economic incentives to a budget-minded Latin consumer to join the Internet, and the drive to keep client ownership. e-Global Network’s solution will eliminate the other barriers to e-commerce such as aversion to credit cards, security and privacy concerns, and fulfillment problems. E-commerce can help overcome the comparative disadvantages created by long distances and geographic barriers, and make it possible to access other markets at substantially lower costs. While the most immediate gains are likely to be in business-to-business e-commerce, especially in banking and financial services, consumer online purchases will continue to be a massive driver of e-commerce in Latin America. To the extent that Latin America can adopt non-cash payment systems, along with security protocols to protect online transactions, the region will see growth in online purchasing. However, Latin American consumers know brand names, want to buy brand names, and tend to be very loyal to chosen brands. IDC estimates that of those that shop online, 74% buy outside their local country. CONFIDENTIAL INFORMATION - 11 -
  16. 16. Mexico Efforts by the government and major corporations within Mexico Mexico have helped build up the necessary infrastructure for Internet and e- commerce to be a dominant industry in the country. However, low 2000E 2003E Net Users 2.2M 7.6M credit card penetration remains one of the largest inhibitors of e- Consumer EC Rev $95M $703M commerce. Only 14% of the population have a credit card,vii and of 2003 % Home Internet Users Shopping Online* those, 90% are domestic cards that have no international purchasing power. Therefore, only 1.4% of the people can actually make a purchase from a foreign merchant website. 27 % 29 % Of the 2.2 million online users, 19% will make a purchase through the Internet, and by 2003, that number increases to approximately 73 % 29% of the 7.6 million users.viii The average Mexican online consumer spent $210 per year in 1999 and estimates show an Source: Jupiter Communications, 2000 increase to $470 per user by 2003.ix * Morgan Stanley Dean Witter, 2000 For more detailed information on the Mexican market, please refer to Section 12: Implementation to Mexico. Brazil The population of Latin America is predominantly centered in Brazil, with 170 million of the region’s 435 million people. It leads Brazil all Latin American countries in development of the domestic 2000E 2003E business-to-consumer market. Besides having the largest economy Net Users Consumer EC Rev 8.4M $255M 20.1M $1.89B and population, Brazil also has the most online users in Latin 2003 % Home Internet Users Shopping Online* America, 8.4 million, a number expected to grow to 20.1 million by 2003.x These users translate to consumer e-commerce revenues of $255 million in 2000 and $1.89 billion in 2003. The average online % consumer will spend $168 this year and $303 by 2003.xi 66 37 % The strongest asset in its online development has been Brazil’s % 34 competitive and now virtually free Internet access market. The free access trend is being led by the banking industry, which is building on the popularity of online banking. Five banks are currently are or Source: * Jupiter Communications, 20002000 Morgan Stanley Dean Witter, will be offering free Internet access: Banco Bradesco, Unibanco, Banco Opportunity, Banco do Itau, and Banco Bilbao Viscaya. Other ISP’s and start-up companies are beginning to offer free access as well. However, one of the main structural problems still remaining in Brazil is low credit card penetration. Credit card usage is restricted to only 18% of the Brazilian population.xii Despite efforts by the major credit card companies, analysts say smart cards and other debit-based solutions, rather than credit cards, will be the dominant payment mechanisms for Brazil. CONFIDENTIAL INFORMATION - 12 -
  17. 17. Argentina Argentina remains behind Brazil in terms of online penetration and Internet technology, but the stable political conditions, high Argentina consumption levels, and high overall education level of the 2000E 2003E Net Users 1.3M 3.0M population, positions Argentina to be a powerful online presence. Consumer EC Rev $65M $481M Argentina has 1.3 million online users that will generate $65 million 2003 % Home Internet Users Shopping Online* in e-commerce for 2000 and by 2003, there will be 3 million users with 26% of them making purchases, resulting in about $481 million 74 % in online revenues.xiii Argentines also have a great demand for international goods online because, as of a year ago, only 37 Argentine retailers sold online and most of them have small, limited 26 % 27 % selections on poorly done web-sties. Consumers are beginning to look abroad to purchase products, but below average fulfillment infrastructure and a high aversion to credit creates limits for them. Source: Jupiter Communications, 2000 * Morgan Stanley Dean Witter, 2000 Internet access fees for most online users are in the range of $10 per month.xiv However, free access is rapidly becoming the standard. Several companies, such as ad-supported ISP start-up Icero, have or will launch campaigns throughout Argentina. Researchers believe that by next year, a large percentage of online users will have free access. Argentina has the highest PC penetration rate for Latin America with 6.9% of the population, and an expected increase to 12.1% by 2003.xv Argentina also has a 24% credit card penetration rate, but individuals are still very reluctant to use credit cards, particularly through the Internet.xvi Chile Despite the highest per capita income in Latin America, Chile has much room for Internet growth. Jupiter Communications expects Chile Internet growth usage to increase from 800,000 users in 2000 with 2000E 2003E Net Users 800K 1.9M consumer e-commerce revenues of $2 million to about 1.9 million Consumer EC Rev $2M $148M Chileans in 2003 with spending totaling $148 million.xvii Online 2003 % Home Internet Users Shopping Online* consumers will average $62 spent this year online and Chileans are estimated to be spending $190 by 2003.xviii This exponential growth will mainly be spurred by greater competition and lower fees in the Internet access market, which currently represents the largest 61 39 47 % obstacle to online adoption in Chile. % % Chilean ISPs charge around $19 per month in addition to a metered call charge of 3 cents per minute. xix These high access rates are a direct result of the lack of competition in the ISP market in Chile, Source: * Jupiter Communications, 20002000 Morgan Stanley Dean Witter, with two companies, Entel and Terra Networks, represent 80 percent of the market. However, through initiatives by the government as well as the entrance of free access alternatives, the few major ISPs will be forced into making significant price reductions. Also, current PC penetration rates are at 6.2%, but will increase to 9.7% by 2003.xx CONFIDENTIAL INFORMATION - 13 -
  18. 18. SECTION 6 STRATEGIC ALLIANCES Strategic alliances provide rapid market reach as well as operational infrastructure within Latin America. The Company is focusing alliance discussions with the major entities operating in Mexico. Among these entities, we have received an overwhelmingly strong response to the need for a non-credit based payment solution. These alliances collectively provide e-Global Network, Inc. with reach across divergent channels to virtually every Internet user within Mexico. Market Reach Infrastructure Latin American Banks Telcos/ISPs Shipping Carriers e-Global Network, PC Manufacturers Card Manufacturers Inc. Portals and Shopping Commerce Technology Networks Vendors Card Distributors Latin American Banks The Company is aggressively negotiating alliances with the largest banks in Mexico. Alliances with major banks across Latin America will provide e-Global Network, Inc. with a(n):  Customer base for co-marketing and distributing the Global Card  Extensive branch network for accepting card member deposits  Established influence to help build consumer confidence We are presently in discussions with Citibank and Banco Bital as initial banks in Mexico to act as points of distribution and deposit in over 3,000 branch locations. Under the proposed terms Citibank and Banco Bital will issue co-branded cards to their existing customers as well as non- customers visiting a branch office. Specifically, Citibank will act as a marketing platform to their existing customers and has verbally agreed to distribute the co-branded Global Card to their entire customer base of over 6 million people. CONFIDENTIAL INFORMATION - 14 -
  19. 19. Both existing bank customers and non-customers can visit any branch location to sign-up for a Global Card account, deposit funds, or transfer funds from existing checking/savings accounts, if applicable. We are in discussions to expand the agreement to enable electronic funds transfer (EFT) from customers’ existing checking and/or savings accounts to their Global Card account. Banks Corporate Contact Citibank Juan Garay Director of Bankcard Services Banco Bital Ernesto Vella Berrondo Board of Directors Telcos and ISPs Alliances with national telecommunications providers and Internet Service Providers (ISPs) in target countries will afford e-Global Network access to their existing and potential customer base. The Company will leverage the existing customer base of these providers to acquire new card members. The Global Card will be co-marketed as part of these providers’ packaged subscription offerings. ISP and telecommunications customers represent a consumer market readily positioned to use the Global Card. We have entered into alliance discussions with the leading telecommunications providers and ISPs in Mexico, including Telefonos de Mexico (Telmex) and Prodigy. Discussions with Telmex have also included joint ventures. Telcos and ISPs Corporate Contact Telefonos de Mexico (Telmex) Hector Slim Seade Director Jaime Chico Pardo Director General Claudio Interdonato Vice President Web Technologies Prodigy Saul G. Lavalle M. Director of Operations Portals and Shopping Networks Alliances with popular Internet portals and online shopping networks represent a significant opportunity for e-Global Network, Inc. to promote the Global Card, by capitalizing on the high- traffic draw and brand recognition of these types of sites. We have entered into alliance discussions with a number of leading Internet portals and shopping networks in Mexico, including T1MSN (a joint venture between Microsoft and Telmex), Terra Networks (Infosel), and To2.com (the third largest portal in Mexico. To2.com has offered to provide significant human capital and hardware resources to assist with development and integration in Mexico. The Company has also recently initiated discussions with StarMedia. Since these entities derive significant revenue from online purchases made through their merchant network, they understand first-hand the problem of low credit card penetration and CONFIDENTIAL INFORMATION - 15 -
  20. 20. have expressed strong support for the Company’s solutions. Under the terms of discussion, these entities will:  Promote our system within their network of online users and merchants  Provide direct access to both current and future consumers  Leverage merchants within their network to offer the Global Card as a payment mechanism Portals and Shopping Networks Terra Networks (Infosel) J. Antonio Murillo A. Director of Commercial Interactive Publications To2.com C.P. Alonso Carral Cuevas Director General and CEO Jose Castello Director General Adjunto T1MSN Jose Manuel Cortes Rios Director of Technology Shipping Carriers e-Global Network, Inc. has entered into an alliance United Parcel Service (UPS) that includes co-marketing to online merchants, resources for merchant integration, and a substantial volume discount for shipments. In geographic areas where UPS does not provide sufficient reach, the Company will establish preferred relationships with carriers that service the region. Discussions will soon be initiated with Federal Express, DHL, and Airborne Express. Alliances with shipping carriers will enable e-Global Network to provide benefits to affiliate merchants by providing value-added services to those merchants. The effect will:  Provide merchants with an increased volume of e-commerce shipments to international destinations  Significantly decrease the rate of return and delay for customer packages shipped internationally For shipping carriers, an alliance represents a prime opportunity to increase the volume of international e-commerce-related shipments. Shipping carriers also benefit from the elimination or reduction of time taken to clear packages at the points-of-entry (at present, 10 to 15 minutes per package). Card Distributors e-Global Network is targeting a number of major players in Mexico who can be leveraged for card distribution. The Company has binding letters of intent from two such entities: FONACOT and Universitarios.net. The Company is finalizing a deal with FONACOT, a credit association for approximately 7 million Mexican Federal Workers. e-Global Network will provide these members with a debit- based payment system for both online and point of sale in association with individual credit lines CONFIDENTIAL INFORMATION - 16 -
  21. 21. granted to the members by FONACOT. FONACOT expects to issue well over $300 MM in credit to their members in 2000. Through the agreement, FONACOT will pre-fund a co-branded Global Card in the amount of the credit line provided to each member. e-Global Network will manage all member purchase transactions, with the credit relationship being managed directly by FONACOT. e-Global Network, Inc. has also signed a strategic partnership agreement with Universitarios.net, a university-focused Internet portal for over a thousand colleges throughout all of Latin America. After only launching a few months ago, Universitarios.net has a growing member base of over 90,000 active users. PC Manufacturers Alliances with major PC manufacturers will provide a channel for distributing the Global Card to target markets and increase consumer brand awareness for the Global Card. Consumers purchasing new computers from PC manufacturers may receive a pre-valued promotional Global Card that, once activated, can be used to make a purchase from international online retailers. By packaging the Global Card as part of their products, PC manufacturers would distinguish themselves from non-participating PC manufacturers. Commerce Technology Vendors e-Global Network, Inc. intends to interface with a comprehensive list of e-commerce technology vendors which support widely accepted Internet standards. Commerce technology vendors are those that provide electronic commerce solutions for online merchants. Functionality often includes cataloging, shopping carts, and payment processing. Target vendors are:  ATG  ICat  Open Market The  Blue Martini  InterWorld  Oracle Company  BroadVision  Microsoft  Vignette intends to  IBM  Netscape form alliances with these solution providers to develop packaged application program interfaces (APIs) that isolate integration issues to defined points. An online merchant’s willingness to implement alternative payment mechanisms may depend on the ease and flexibility of integrating e-Global Network’s payment and shipping solutions with their existing infrastructure. With a set of packaged APIs already in place, online merchants can rapidly integrate with their existing e- commerce systems and infrastructures. CONFIDENTIAL INFORMATION - 17 -
  22. 22. SECTION 7 AFFILIATE MERCHANT ALLIANCES Establishing Merchant Alliances A comprehensive network of well-established online merchants is critical in building brand awareness and consumer market acceptance. This network provides card members with a broad selection of cross-border shopping alternatives with which to make purchases. Affiliate merchants seeking to establish or increase global customer reach will have the ability to aggressively market to these virtually untapped consumer market segments. Though many large traditional and pure-play retailers do enable international customers to purchase goods and services, their capability is severely limited by: (1) Lack of credit card adoption by international consumers (2) Aversion to credit (3) Compromised shopping experience (4) Currency conversion constraints (5) Cross-border shipping and delivery difficulties, including complex customs and duty calculations e-Global Network, Inc. captures the interest and participation of these online merchants by providing a comprehensive solution to such limitations, enabling online merchants to accept and fulfill international orders. In addition, online merchants can market to a much broader consumer population at a decreased customer acquisition cost. Through co-marketing campaigns with the Global Card, affiliate merchants will have greater marketing exposure to this new consumer base. The establishment of a broad cross-section of affiliate merchants is important in achieving the number of card members projected in the financial forecast. As the desired mass of affiliate merchants and card members is achieved, a leveraging effect is generated, significantly increasing the card member base. Building an Affiliate Merchant Base e-Global Network, Inc. is focused on building an initial base of U.S. and Latin America affiliate merchants. The Company will target U.S. online merchants with significant brand recognition and leverage our alliances with key Latin America portals and shopping networks in order to gain access to their merchant network. Through its relationships with major Latin American portals and shopping networks, the Company has immediate access to a number of key merchants, including:  Amazon.com  Paragon.com.mx  Decompras.com  Submarino.com  fiera.com  Ticketmaster.com.mx  flora.com.mx  T1MSN Shopping Network  Sanborns.com.mx  Terra Network’s Shopping Network CONFIDENTIAL INFORMATION - 18 -
  23. 23. These merchants will lead the deployment of the Global Card in Mexico. The aggregation of products and services the network of U.S. and Mexican affiliate merchants will provide to card members is a broad selection of competitively priced goods. Consumers in Mexico (as well as in Latin America) are faced with many compromises in their normal shopping experience, including: (i) A limited selection of goods and services compared to the U.S. (ii) Inflated prices (iii) Time consuming purchase processes (iv) An overall lack of established brands Affiliate Merchant Integration Once an affiliate merchant relationship has been established and agreed upon by a Merchant Service Agreement, the integration process is initiated. The process of integrating with a merchant e-commerce site is twofold. First, in order to access necessary components of the payment and shipping systems, technical modifications agreed to by the merchant will be made to the existing merchant e-commerce site. Second, if necessary, the business and fulfillment processes of the merchant will be modified to allow for the international shipping of goods through e-Global Network’s preferred carrier. Systems Integration. The Company will provide a corporate engineering team to work closely with merchant engineers during the integration process. A full integration with the payment and shipping solutions includes developing interfaces to the International Internet Payment System™ and the Automated Tariff System™. To reduce the complexity and time involved in integration, the majority of these modifications will be made through the use of pre-developed API software. In all circumstances, the e-Global Network engineers will minimize modifications to the existing systems. Fulfillment Process Tuning. When necessary, e-Global Network, Inc. will also assist the merchant in streamlining existing business processes for fulfillment. It is expected that most affiliate merchants will not have the appropriate processes in place to accept international orders, determine customs and tariffs, or handle the delivery of goods cross-border. e-Global Network’s preferred shipping carrier, UPS, will facilitate the entire process. An active role in helping merchants define processes will ensure the reliable delivery of products to consumers. Proactive Merchant Relationships It is e-Global Network’s belief that every business must be receptive to its customers’ needs. The Company shall accomplish this by continuously broadening its range of offerings through diligent and timely response to customer comments, concerns, and problems. Effective service to our members can only be achieved through strong relationships with affiliate merchants. To facilitate direct contacts with affiliate merchants, it will be necessary to create strong relationships with site developers as well as the logistics and fulfillment personnel of the merchant. CONFIDENTIAL INFORMATION - 19 -
  24. 24. SECTION 8 MARKETING STRATEGY AND IMPLEMENTATION e-Global Network, Inc. will launch to Mexico as the initial target country. The decision metrics to launch in Mexico took into account logistics, cultural purchasing patterns, geographical location, commercial infrastructure, demand for branded goods, target market size as a percent of total market, and corporate country knowledge. Although it is recognized that other targeted countries within Latin America have different demographics and cultures, the basic in-country marketing concepts share common, consistent, and transportable concepts. Adjustments will be made where appropriate, to account for specific cultural, language, legal, and trade biases of each target market. The Company is creating its own marketing department, which will initially work closely with an established advertising agency and public relations firm to establish brand awareness. This is necessary at the outset in order to establish a strong presence in target countries through aggressive marketing and advertising campaigns. After the initial marketing work has been completed, a substantial portion of the marketing and advertising functions will be brought in- house on an on-going basis, as this will be more cost effective. All forms of media advertising and promotional product literature will share a common “membership” within each targeted region. For each country there are specific variations that reflect the targeted country. The marketing effort will be focused on:  Branding e-Global Network products and services  Aggressive advertising campaigns  Marketing through distribution channels  Supporting card members through member services  Developing and promoting the e-Global Network consumer website  Creating strong merchant alliances Branding the Product and Service Branding efforts are designed to develop a recognizable card design, trademark, logo, and slogan for e-Global Network products and services. In addition, instructional and promotional material will be created in the form of an introductory package kit. The branding effort and the introductory kit will be developed to promote a club membership. Introductory kit contents will include:  A welcome message  An introduction of e-Global Network products and services  A description of benefits to consumers  A list of affiliate merchants  A promotional card  Instructions on card activation, use and replenishment  Information on the international shipping process  Information on account management CONFIDENTIAL INFORMATION - 20 -
  25. 25.  Information on customer service  Statement of Terms and Conditions of Use  A small token gift Advertising to Consumers An aggressive and highly focused media campaign will be initiated within each target country to inform consumers of e-Global Network’s products and services. The campaign will be aimed at enticing consumers to participate in electronic commerce through the use of the Global Card. The goals for this campaign will be achieved through the utilization of traditional interactive and mass media outlets and co-marketing efforts. The following section describes the advertising efforts to be undertaken in the initial target country – Mexico. Mass Media (Mexico Example)  Television. TVAzteca 600 spots/month (20 seconds) prime time  Radio. MVS Radio, DobleX, RadioFormula: 450 spots/month (60 seconds)  Newsprint and Magazines. El Mexicano, Informador, El Reforma, El Norte, Ocho Columnas: ½ page ads Mondays and Thursdays Major Markets: Mexico City, Monterrey, Guadalajara, and Tijuana Co-Marketing  Affiliated Banks – Provide in-house promotional literature to bank branches with possible distribution to account holders  PC Manufacturers – Distribute introductory kit with new computer purchases  ISPs and Telcos – Package introductory card kit with new subscriptions and introduce product to existing subscribers  Shipping Carriers – Package promotional literature with package deliveries  Portals and Shopping Networks – Cross-link advertising from portal sites  Affiliate Merchant Sites – Advertise and promote product Customer Retention The Company will establish loyalty and actively promote Global Card distribution and member usage. This will be accomplished through continuing communications that include:  Incentive Programs – a reward/points program for accumulated purchase transactions  E-mail Updates – periodic e-mail notification of incentive point balances, new merchant promotions, and Global Card information CONFIDENTIAL INFORMATION - 21 -
  26. 26.  Online Newsletter – periodic update utilizing a web-based newsletter to inform consumers of merchant specials, promotions and new card member services  New Merchant Updates – periodic update on new merchants participating in the Affiliate Merchant Network  Member rating capability for participating merchants Marketing through Distribution Channels Distribution channels for the Global Card represent a direct means for accessing consumers and acquiring new card members. Promotional material in the form of banners, placards, posters, and promotional gifts will be provided to distributors to aid in marketing of the Global Card. The following channels of distribution will be developed:  Banks  PC Manufacturers  ISPs and Telcos  Consumer website Member Services Member services will provide friendly, reliable, and responsive customer support to the card member base. A critical factor being overlooked by numerous merchants in the overall success of Internet commerce is customer service. A recent survey conducted by Jupiter Communications, showed that of 125 consumer sites contacted via e-mail with simple report requests, 46% took five or more days to respond, never responded, or did not post an email address on their site. e-Global Network, Inc. will create a Member Services group accountable and responsible for customer service. This will be done in association with affiliate merchants, who will both fulfill and ship goods directly to consumers. Members will feel comfortable with both the affiliate merchant and the Global Card as the purchasing process can be initiated from either the merchant’s website or the e-Global Network consumer website. In the context of a club membership environment, members will be able to communicate with e-Global Network, Inc. via e-mail or a toll-free number to bring problems to the Company’s prompt attention. All members shall be notified by return email that their issues either have been resolved or are being addressed. The Member Services group will be responsible for analyzing all correspondence received and will provide both company management and merchants with member feedback. Where applicable, action will be taken directly with the merchants concerned to correct service problems and if necessary change procedures in situations that are repetitive or reflect a trend. CONFIDENTIAL INFORMATION - 22 -
  27. 27. The Consumer Website The e-Global Network consumer website will serve as the primary vehicle for disseminating company information and for accessing the Affiliate Merchant Network. The site will promote a membership feel and instill loyalty to the brand through constant updates and refreshing of content. The website will be user-friendly and shall be presented in English as well as the native language of the target country. The website will feature a(n):  Description of the Company and its products and services  Downloadable product literature  Card sample  Worldwide shopping network of merchants  Online newsletter featuring merchant promotions and specials  Directory of participating banks and re-sellers  Merchant ratings by card members  Online Account Manager for card users  Description of incentive programs  Advertising information  Merchant information for sign-up and registration  Product and customer support information  “Catchy” cartoons to create stickiness and fortify brand loyalty  Free e-mail service CONFIDENTIAL INFORMATION - 23 -
  28. 28. SECTION 9 COMPETITIVE ADVANTAGES Competitive Landscape e-Global Network, Inc. sees current international payment and fulfillment solutions as flawed. Payment solutions do not address the fundamental issue of consumer access to credit in Latin America. Emerging fulfillment solutions are restrictive and do not integrate with the major international shipping carriers. Payment Solutions Debit and Smart Cards. Debit and smart cards are being piloted across Latin America and are expected to be the primary competitors in the area of payment solutions. Competing debit and smart card offerings include: Debit cards VISA Debit MasterCard Maestro MasterCard Debit (only available at U.S. financial institutions) Smart cards MasterCard Smart Card VISA Electron AMEX Blue Local smart card initiatives such as Banco Inbursa’s Proton in Mexico Access to debit and smart cards work on essentially the same model as credit, severely limiting the qualifying consumer base. These cards require an existing bank account at participating financial institutions as purchases and ATM withdrawals are deducted from consumers’ checking or current accounts. Their use is currently limited to the purchase of goods and services at point of sale terminals of participating merchants. Debit cards lack international transaction capability. Limiting the near-term prospects of smart cards, as a viable payment solution, is the slow deployment of card reader infrastructure required to support the vast network of smart card users, issuers, and merchants. Stored Value Cards. Although stored value cards are cash-based and do not rely on credit, they are intended for small purchases. These cards have been rolled out in a number of Latin American countries. The primary stored value card offerings include: Stored value cards Mondex Electronic Cash VISA Cash VISA Travel Money CONFIDENTIAL INFORMATION - 24 -
  29. 29. VISA Cash and Mondex Electronic Cash are point of sale mechanisms for micro- purchases such as buying a cup of coffee or movie tickets, using pay phones, or taking public transportation. Since their primary use is for micro-purchases, VISA Cash and Mondex Electronic Cash are not intended to carry large balances. Purchases are deducted from the balance of the card and can be reloaded at ATMs or at local bank terminals. Both Mondex Electronic Cash and VISA Cash have embedded smart card technologies, requiring card readers for their use, and have been designed and marketed for off-line micro-payments. VISA Travel Money is an electronic traveler’s check whose use is limited to the withdrawal of cash from ATMs around the world. The card is prepaid and its funds are not associated with a bank account. It is currently being offered on a limited basis at banks in Mexico and Brazil. Electronic Wallets. Many players in Latin America are offering electronic wallets, in conjunction with financial institutions. For example, Brazil’s Banco Bradesco is marketing an electronic wallet to its customers that can be used at pre-authorized merchant sites. The problems with electronic wallets are that they are credit-based and are complex to use from a consumer’s standpoint. Though wallets have been around for some time, they have yet to achieve significant adoption. The Company’s overall strategy is to establish a loyal member base with existing technology and migrate to smart card technology if and when the card reader infrastructure is put in place. VISA and MasterCard (Mondex) are subject to slow, bureaucratic initiatives associated with consortia decision making. e-Global Network, Inc. is targeting a consumer base that is not limited by the restrictions of credit, creating widespread appeal. The Company also sees the implementation of a strong club membership in line with the cultural biases of Latin American consumers as a differentiating factor in enticing and retaining card members. Fulfillment Solutions A number of companies are addressing fulfillment deficiencies in Latin America. SkyBox and From2.com, in particular, offer similar services that make it practical for Latin American consumers to buy U.S. goods online. They do not address the issue of shipping goods cross- border within Latin America. SkyBox focuses on helping Latin Americans receive U.S. goods shipped to them using a U.S. based address that acts as an intermediate point. Consumers using SkyBox’s service are provided with a Miami-based address to which they ship goods purchased from U.S. online merchants. SkyBox processes and consolidates packages into monthly shipments to the local SkyBox office in the consumer’s local country. Local delivery is then made to the consumer’s home address. CONFIDENTIAL INFORMATION - 25 -
  30. 30. SkyBox is essentially a band-aid solution resulting in longer shipment times, double charging of shipping costs, and complications in merchandise returns.  The use of an intermediate point results in longer delivery times.  Consumers are double charged for shipment of goods and also have to pay a yearly enrollment fee to maintain their Miami address. Though they handle customs clearance, SkyBox requires a credit card number up front and charges import duties and taxes as they are incurred, along with a 10% surcharge.  Merchandise returns are complicated, since there is no system in place to reimburse shipping costs for returned goods, if necessary. From2.com provides an all-inclusive solution for logistics, handling package pickup, customs clearance, and delivery to the consumer’s doorstep. Like e-Global Network’s tariff and shipping solution, From2.com provides a real-time calculator of import duties and taxes at the time of purchase. Despite their service, From2.com has drawbacks.  From2.com does not work with the major shipping carriers, making air freight delivery reliant on operators such as AmeriJet.  From2.com currently has a weak merchant base.  From2.com derives its revenue from shipping surcharges levied on the consumer, while e-Global Network sees its tariff and shipping solution as a value-added service to consumers, and derives the vast majority of its revenue from the payment side of the business. Spanning Payment and Fulfillment The “Click and Mortar” Solution. Some large retail chains in Latin America are trying to circumvent payment and fulfillment problems by offering payment and pickup at physical stores. Large retailers such as Elektra in Mexico and Globex in Brazil are implementing this “click and mortar” strategy. Main problems with this strategy are that it doesn’t provide door-to-door delivery service, has a limited service radius, and doesn’t support cross-border commerce. CONFIDENTIAL INFORMATION - 26 -
  31. 31. Competitive Advantages e-Global Network’s payment and shipping solutions achieve numerous compound advantages over competitors. Non-Credit Based The primary competitive advantage is that the Global Card is a non-credit-based payment solution. The Global Card is a cash-based debit card that does not impose eligibility requirements to the consumer base. By being a non-restrictive solution, it offers the highest degree of accessibility to the widest segment of the international consumer market. These consumers include individuals that choose not to use, cannot obtain, or are averse to using credit cards, which represents the vast majority of Latin American consumers. Merchants also see an advantage over credit-based solutions in that they bear no liability of credit card fraud. Consumer Confidence through Affiliations Latin American consumers are more inclined to do business with trusted companies. By having affiliations with major local banks (i.e. Citibank and Banco Bital), large domestic and international merchants (i.e. Submarino and Decompras), and Internet portals (i.e. T1MSN and To2.com), e-Global Network, Inc. will gain significant trust, loyalty, and overall brand recognition amongst Latin American consumers. These relationships with the largest financial and Internet players will help the Company to leverage a dominant position within the payment solution marketplace as well as making strong barriers to entry for other future start-up companies in taking market share from e-Global Network, Inc. Total Cross-Border Cost Calculation Unlike other payment solutions, e-Global Network seamlessly computes the total product cost (including duties, customs, and taxes associated with international transactions) and also provides real-time currency conversion. By the consumer paying for all costs at point of purchase, the Company is able to prepare documentation involved with cross-border shipping as well as pay all the necessary charges on behalf of the consumer. Addressing these issues in advance allows the product to be expedited through the customs broker and delivered directly to the consumer’s front door. Simplified and Immediate Solution The solution addresses the immediate need for the ability of consumers to conduct e- commerce and to do so in a simple and convenient way. With a Global Card, members will only need their account number and PIN in order to make an online purchase with any CONFIDENTIAL INFORMATION - 27 -
  32. 32. affiliate merchants. Also, compared to smart cards that require a reader for e-commerce transactions, the Global Card is available for use immediately after it is activated. Turn-Key Payment & Shipping Solution In spite of the numerous advantages that the Global Card achieves over its payment competitors, the critical determinant that differentiates e-Global Network, Inc. from others is the integration of a solid shipping solution that closes the transaction loop between the consumer and merchant. While major competitors focus exclusively on payment solutions, the Company recognizes that a viable solution to the constraints of online commerce in Latin America must go beyond payments alone to fully enable cross-border business-to-consumer e-commerce. In this regard, the Company has designed an e-commerce solution that includes and expedites the cross-border shipment and delivery of goods. When taken together, these compounding factors create a formidable argument for attracting both consumer and merchant participation. CONFIDENTIAL INFORMATION - 28 -
  33. 33. SECTION 10 MANAGEMENT AND CORPORATE STRUCTURE Corporate Structure The Company has been established as a Bermuda corporation with initial controlled foreign corporations (CFCs) established in the United States and Latin America. The initial CFCs will be located in the Silicon Valley and in Mexico City. This corporate structure was devised to minimize the Company’s tax liability. The Company has been working with Deloitte & Touche Corporate Tax Services to setup and implement this corporate structure. The Bermuda headquarters will be minimally staffed and will primarily manage foreign currency exchange. The U.S. subsidiary is mainly focused on core technology and systems development, strategic planning, financial planning, and will oversee all operations of the Latin American subsidiaries, including Mexico City. The Mexico subsidiary will be responsible for implementation, including all integration, marketing, and sales activities, and will also support U.S. systems development team. CONFIDENTIAL INFORMATION - 29 -

×