1. Booz Allen Hamilton White Paper Overview
The Pay-Buy-Mobile Ecosystem
A Macro-Economic Perspective
Barcelona
February 13th, 2008

2. Industry experts from Booz Allen’s Global Mobile NFC team devel-
oped the GSMA Pay-Buy-Mobile white paper in summer/fall 2007
Booz Allen’s Global Mobile NFC Team
Europe
Roman Friedrich Global Team with >25
Partner, Telco
Olaf Acker
members representing
Principal, Telco/Tech Booz Allen’s Telco,
Christopher Schmitz Banking, IT, Transport and
Principal, Financial Services
Holger Brohm Technology functions
North America Principal, Financial Services Asia/Pacific
Willy Dommen
Stefan Amling Ian Park, Working with MNOs,
Principal, Transport Principal, Banking suppliers, credit card
Princial, Transport
Oliver Wyrsch Tae Yamaura
Associate, Telco Senior Asc., Telco associations, transport and
Michael Catalano
Associate, Technology
Peter Spieckermann Curtis Pierce, technology providers on
Senior Consultant, Telco Associate, Transport
Anthony Scott
... …
making m-payment a reality
Associate, Technology across continents
…
Roman Friedrich Olaf Acker Oliver Wyrsch Peter Spieckermann
Partner, Europe, Dusseldorf Principal, Europe, Frankfurt Associate, Europe, Zurich Senior Consultant, Europe, Munich
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3. The white paper discusses the business potential of the Pay-Buy-
Mobile use case from a macro-economic perspective
Pay-Buy-Mobile White Paper – Background Information
The white paper investigates the feasibility, market acceptance and business
outlook for the Pay-Buy-Mobile ecosystem based on a standardized business case
It is complimentary to and differentiated from an MNO driven Pay-Buy-Mobile white
paper, developed by a group of MNOs in 2007
White paper focus was on a stand-alone business case, to prove that even the
most basic payment scenario with conservative assumptions can be profitable
The analysis was done for 10 markets plus 3 regions and covers a floating 5 year
window from a macro-economic perspective (top-down)
The white paper is also meant as a marketing tool to promote Pay-Buy-Mobile and
motivate sceptical stakeholders to join
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4. As it focuses on Pay-Buy-Mobile only, it reflects only a sub-set of
potential revenue streams expected from Mobile NFC
Payment Ticketing
Mobile payment at Mobile ticketing in
– Retail stores – Public transport
(POS) – Concerts
– Restaurants – Sport events
– Virtual credit & – Ski lifts
debit cards
Mobile NFC
Marketing Access Control
Loyalty Access control for
programmes – Office buildings
eVouchers – Computer
NFC enabled Systems
posters / billboards – Cars
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5. In addition to the country-agnostic Pay-Buy Mobile analysis, the
white paper covers 10 country markets as well as 3 regional cases
Country and Region Overview
Europe North America Asia / Pacific
Developed Emerging Developed Emerging Developed Emerging
Markets Markets Markets Markets Markets Markets
Austria Algeria USA Australia Bangladesh
Belgium Czech Canada Hong Kong China
Denmark Egypt Japan India
Finland Hungary New Zealand Indonesia
France Iraq Singapore Malaysia
Germany Israel
Latin America South Korea Pakistan
Greece Morocco Developed Emerging Philippines
Markets Markets
Ireland Nigeria Taiwan
Argentina
Italy Poland Thailand
Brazil
Netherlands Russia
Chile
Norway South Africa
Colombia
Portugal Turkey
Mexico Customer Research
Spain Ukraine by Serrula
Peru
Sweden Customer & Merchant
Venezuela Research by Serrula
Switzerland
UK Country Trial-Country1)
Note: Shaded countries are not in focus
(1) In underlined countries Pay-Buy-Mobile is piloted by local MNOs
Source: Booz Allen Analysis, Merrill Lynch Global Wireless Matrix
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6. The business case analysis is based on 3 pillars
Serrula Customer &
Public Research Expert Interviews
Merchant Research
Data from banks, credit Interviews with >50 industry Market research by
card associations, experts from Serrula
research companies and
– Banks – 2800 customers
other public sources
(online research)
– MNOs
– 200 merchants
– Credit Card Associations (phone interviews)
– Merchants
– TSMs
– Handset Suppliers
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7. Objective of the analysis was a to prove that there is a profitable
business case for all stakeholders involved
Key Stakeholders
Mobile Network Trusted Service Card Issuing Electronic Pay-
Operator Manager Bank ments Networks
Acts as platform provider Acts as middleman Is as debit or credit card Operates an electronic
that rents out secure between operators and issuer and operates the payment network
slots for mobile banks. Provides card value chain with for card transactions
applications on UICC and infrastructure and services acquirer
provides mobile network for virtual debit and credit
card applications
Merchant Subscriber Handset UICC
Supplier Supplier
NFC
Operates Point of Sales Is mobile subscriber and Manufactures NFC- Manufactures UICCs
with debit or credit card debit or credit card capable handsets that (Universal Integrated
terminals that are NF- holder. Has an NFC- allow subscribers to use Circuit Card) for NFC-
enabled enabled handset mobile NFC applications capable handsets
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8. To get there we need to reflect the perspectives of each player
in the business case logic
Mobile NFC Ecosystem
defend payment monopoly
Financial Services Industry
Service
Contract
Operate / Use Offer / Accept mPayment
secure mobile schemes for the
infrastructure for respective industry appl.
mPayment appl. (eg. eTicketing)
Trusted Service Manager (TSM)
establish business model
Service Service
Contract Contract
Mobile Network Operate / Use secure mobile Service Industries / Application Provider
infrastructure for the respective
Operator (MNO) (Transport, Consumer, Restaurants, …)
industry appl. (eg. eTicketing)
extend value chain leverage new technologies
and business models
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9. We created a standard business case model and applied it to all
10 country markets
Monetary Flow for Pay-Buy-Mobile & Investments
NFC-enabled Mobile subscription fee and
handset potentially Pay-Buy-Mobile fee
Customer
Card Holder & Mobile Subscriber MNO Rental fee for USIM slot for Pay-Buy-
Mobile application per card
Annual credit card fee and
(business model scenario)
potentially Pay-Buy-Mobile fee
Rental fee for USIM
Payment slot for Pay-Buy-Mobile
transaction application (alternative
at POS scenario) Trusted Service
(simplified)
Manager (TSM)
Fee per customer for updating card data
e.g. card issuance, expiration and
NFC-enabled maintenance (business model scenario)
terminals
Interchange fee (approx. 50% for CIB,
50% for acquirer)
Merchant CIB Existing monetary flows
New for Pay-Buy-Mobile
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10. The modelling of the business case is based on four separate
cases for each stakeholder – each needs to be profitable
Cost Revenue P/L
1 MNO Business Case
Revenue MNO P/L MNO
-
Cost MNO
2 CIB Business Case
Revenue Bank P/L Bank
-
Cost Bank
3 TSM Business Case
Revenue TSM P/L TSM
-
Cost TSM
4 Merchant Business Case
Revenue Merchant P/L Merchant
-
Cost Merchant
Market: Pay-Buy-Mobile Subscribers
Customer and Handset Supplier Perspective
Pay-Buy-Mobile are not described in individual cases
Subscribers
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11. Business Case Key issue #1: Who pays the MNO for Pay Buy
Mobile services?
Alternatives:
– Customer pays MNO (per service, per card or general fee)
– Banks pay MNO (per service, per card or general fee)
Booz Allen Hypothesis: Banks are in a better position to pay MNOs for slot use
– they have the option to subsidize Pay-Buy Mobile fees (important in markets
where customers are not used to pay fees for credit cards)
– fees multiply with each card put on the UICC (higher revenue potential for MNOs)
– rental fee agreements can be combined with other joint marketing activities
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12. Business Case Key issues #2 & #3: Can MNOs get a share of the
transaction fees? Will it be cheaper for merchants?
Sample Money Flows in Card Transactions
NUM
ILLU BERS
STR
ATIV
E
Card
Charges for Associations Charges for
Clearing/Authorisation 0.15 € Clearing/Authorisation
0.07€ 0.08€
Interchange (1.24 €)
Processing Processing Issuer
Acquirer Fees Fees
1.09€ 1.16€
Annual Fees
Disagio
2.40 €
Acquiring Issuing
Prozessor Prozessor
Terminal lease
and transaction
X.XX€ = money flows Merchant fees Network Operator Cardholder
97.60€ 100.00€
Transactions
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13. To be successful, the Pay-Buy-Mobile ecosystem needs to be open
to reach significant market share and offer benefits to all players
Key Features of Proposed Business Model
All CIBs and MNOs in a market can interact with each other securely and
Open Business
conveniently (e.g. through a TSM), limiting the amount of necessary interfaces
Model
and allowing easy integration of new market participants
Merchants, CIBs, and MNOs cover all potential (sub-)markets, and customers
Full Market
have access to any merchant POS
Coverage
Cooperative The business model allows profitable business cases for all stakeholders —
Approach stakeholders do not conduct business to the detriment of any other player
Shared Customer The customer will have a relationship with MNO for the mobile subscription
Relationships and with the CIB for the debit or credit card
Standardization & Standards will drive contactless card technology, security requirements from
Interoperability banks and credit card companies, as well as handset certification. All players
need a guarantee to invest in the “right” technology
Adjacent M-marketing and value-added services based on a consistent infrastructure
Revenue Streams will give Pay-Buy-Mobile an additional push
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14. Key driver of the case is an expected sales uplift at the POS due to
speed & convenience that will impact customer purchase behaviour
Key Drivers of Pay-Buy-Mobile Business Case
Speed & Convenience MNO Key Enabler
Speed & convenience are crucial for The MNO is the key enabler (and
most merchants to defend and grow beneficiary) of the business model, as
sales he invest in core infrastructure (POS
upgrade primarily driven by banks
Direct impact on revenue of the CIB
initially)
(interchange fees) and indirectly drive
revenue for MNOs and TSM
Cash Replacement Pay-Buy-Mobile Subscriber Fees
Often mentioned as a key driver, but Country-specific – strongly influenced
very limited potential to reduce cash by annual card fees customers are
handling costs from our analysis (in used ot pay (or not)
some countries large merchants are
even paid by bank for cash handling) Range of €3-€6 per year in countries
where customers are used to pay for
cards
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15. Thank you!
Your questions?
Olaf Acker
Principal / Mitglied der Geschäftsleitung
Booz Allen Hamilton GmbH
Grüneburgweg 102
60323 Frankfurt
Germany
Mobile: +49 170 2238 453
acker_olaf@bah.com
www.boozallen.de / www.boozallen.com
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