Mobile Payments in The Financial Services Industry

Mobile Payments in The Financial
Services Industry

Jeﬀ
Fleischman

CEO,
Blue
Panda
Interac9ve

New
York,
NY

July
2012

© 2011 Blue Panda Interactive. Proprietary And Conﬁdential.! 1!

“The M o b i l e - S o c i a l E c o n o m y is the
convergence of mobile and social media enabled by
technology. Financial institutions stand on the
threshold of a new paradigm in which payments,
customer experience, and personalized offers will
merge. Those ﬁrms that adapt will succeed and grow,
those that don’t face an uncertain future.”!
!
Jeffrey Fleischman 
CEO, Founder 
Blue Panda Interactive!


Trends That Influence Mobile Payments (mPayments) Growth
Summary
²  mPayments is rapidly becoming the payment vehicle of choice for consumers
worldwide. The primary drivers that have inﬂuenced this growth include
mobile banking, social media, enabling technology, “unbanked” communities,
and consumer/retailer acceptance of mobile commerce.!

²  Growth in mobile and tablet sales is outpacing computers and in many
markets now exceeds those of computers.!

²  Acceptance and usage of mobile/tablet banking, payments, money movement,
and other ﬁnancial transactions are growing rapidly.!

²  Mobile social media’s global exponential growth has become the primary
channel for people to interact with friends and brands.!

²  Convergence of mobile/tablet usage combined with social media are evolving
into new, dynamic interaction models and ecommerce opportunities.!

²  Financial service companies, most notable Banks, are faced with
disintermediation and must rethink payment models and customer centric
experiences.!

Drivers Of mPayment Growth
There are several irreversible trends that will drive mPayment adoption and usage
as the primary payment vehicle.!

Technology

Social

Unbanked

Media

Consumer

Mobile

Banking

mPayments
&
Retailer

Acceptance



Technology

Social

Unbanked

Media

Consumer

Mobile
mPayments
&
Retailer

Banking

Acceptance


Mobile Banking
The surge in mobile banking and cost dynamics are the main catalysts for the
acceptance and usage of mPayments.!

²  More than 40MM U.S. consumers will be using mobile banking by 2012.!
²  The cost of servicing for mobile transactions is relatively small compared
to all other channels and reduces overall costs for banks.!
²  Banks are setting aside over one-third of their digital channel investments
for mobile initiatives with a focus on alerts, remote deposit capture (RDC)
and person-to-person payments.!
²  Mobile applications and technology have created complete pricing
transparency.!
²  In the U.S., 15% of online adults were active mobile bankers in 2011, up
from 5% in 2008. In Canada, 20% of online adults are active mobile
bankers, up from 8% in 2010.!


Source: Forrester; The Yankee Group

Drivers of mPayment Growth - Mobile Banking
One of the biggest advantages that mobile banking offers to banks is that it
drastically cuts down the costs of providing service to the customers. !

²  An average teller or phone transaction costs about $2.36 each,
whereas an electronic transaction costs only about $0.10 each. !
²  Mobile banking and payments such as SMS text messaging can reduce
the burden on customer service and IT resources. !
²  Using secure and integrated messaging platforms reduces the costs
and errors associated with paper-based payments.!
²  Mobile banking provides the opportunity to capture greater level of
detailed information on spend, payments, location for CRM activities.!
²  Additionally, this new channel gives the bank ability to cross-sell up-sell
their other complex banking products and services such as vehicle
loans, credit cards etc. !


SOURCE: Mobile Banking News

Mobile Banking – What Customer’s Want
Mobile banking has had the highest usage rates among basic transactions and is
now growing more rapidly for transfers, payments, and purchases.!

What transactions customers are doing:!
²  Balance Inquiry: 74%!
²  Notiﬁcations: 73%!
²  Statements: 48% !
²  Notiﬁcation of account limit: 47% !
²  Transfer funds between accounts: 35% !
²  Pay accounts: 28% !
²  Make a purchase: 21% !


Source:
Berg
Insight

Mobile Banking – Remote Deposit
The surge in U.S. mobile banking features such as online remote deposit capture
(RDC) and mobile check deposit are a catalyst for the growth of mPayments.!

² RDC
can
dras@cally
reduce
the
@me
and

cost
of
deposi@ng
checks,
many
banks
are

now
oﬀering
RDC
to
cater
to
new

customers
as
well
as
to
retain
exis@ng

ones.

² RDC
has
shown
an
impressive
growth

rate
of
70%
from
2004
to
2008.

² RDC
via
a
mobile
device
launched
in
the

U.S.
in
2009
and
has
quickly
been

adopted
by
many
large
US
banks
with

high
adop@on
rates.

² Mobile
RDC
capture
will
eliminate
over

1.5B
check
deposit
transac@ons
from
U.S.

bank
branches
by
2014.


Source: Market Research.com; Mercatus

Mobile Banking
The surge in mobile banking is a catalyst for the acceptance and usage of
mPayments and a means to build and protect customer relationships.!

Consumer Beneﬁts!
²  Reduce Visits to Branches !
²  Reduce Calls to Contact Centers!
²  Change Their Spending Patterns!
²  Generate More Transactions!
²  Become more aware of their money !
²  Become more educated about money!
!

Bank Beneﬁts!
²  Realize a Reduction in Costs!
²  Be able to Generate More Loyalty!
²  Be Able to Increase Their Customer Base!
²  Create new mechanisms to stimulate impulse buying !
²  Create new sales and marketing approaches!


SOURCE: MOBILE-FINANCIAL.com

Mobile Banking Is Dramatically Cheaper Than Other Channels
As online and mobile continue to pick up share of volume, companies will see
average cost to service decline.!

Call
Center

$4.00

Branch

$3.75

IVR

$1.25

ATM

$0.85

Online

$0.17

Mobile

$0.08


Source: Tower Group Fiserv Mcom Data, 2009


Technology

Social

Unbanked

Media

Consumer

Mobile
mPayments
&
Retailer

Banking

Acceptance


Drivers of mPayment Growth - Social Media
Social media’s popularity, smart phone sales, and app proliferation have combined
to create an organic and seismic shift in mobile-social media.!

²  Social networking accounted for 50% of all page views on mobile phones in
2011.!
²  Facebook mobile users quadrupled in 2 years from 50MM to 200MM.!
²  More people access Twitter and Facebook on mobile devices than on desktop
computers.!
²  There are 200MM mobile video playbacks from YouTube every day.!
²  There are 1.2B internet connected smartphones and 77% of individuals use
mobile phones for search.!
²  Nearly 30% of consumers conduct product research on mobile devices.!
² Over 300,000 apps have been developed in the past 3 years and downloaded
more than 10.9B times.!



U.S. Social Media Habits Are Similar To Other Markets
Social networks/blogs grabbing a large share of consumers time online –
expect mobile to become the primary channel for social media consumption.!
Time spent condensed to the equivalent
of one hour !

Facebook remains the premier social media
platform eclipsing all other competitors
combined.!


Source: comScore; Google; Statista; Nielsen

China’s Sina Has Become Immensely Popular In China Due To
Its Microblogging Platform Known As Weibo
With over 513MM netizens in China, Sina’s 50MM Sina Weiboers represents rapid
growth in a relatively short period of time since it’s launching in 2010.!

Sina
Sta9s9cs:

²  Monthly
Increasing
Rate
of

Registra@on:
33.8%

²  Rate
of
Mobile
Blogging:
38%

²  Blogs
per
Day:
25MM

²  Number
of
Users
of
Sina
Weibo:

50MM
(Oct,
20,
2010)

²  Number
of
Partnered
Sites:
10M

²  Total
Blogs:
200MM
(Nov,
7,

2010)

²  Blogs
per
Second:
785

²  Daily
Traﬃc
that
Weibo
Brings:

30MM


Source:
Sina
Nov,
16,
2010

Users Spend Well Over 8 Hours Per Month On Social
Media Properties; Facebook Is The Predominant Leader
Top 10 Web Brands by Time Spent Top 10 Global Social Networks
Time per viewer, hh:mm, per month, August 2011 By unique visitors (000), June 2011
Source: The Nielsen Company Source: comScore

Facebook 7:46 Facebook 734,240

AOL Media 2:53 Twitter 144,441

Yahoo 2:12 Windows Live Profile 119,467

Google 1:48 LinkedIn 84,356

MSN/Windows Live/Bing 1:44 QQ.com microblogging 74,821

MySpace 71,526
YouTube 1:41

Renren 66,073
Wikipedia 1:18

Vkontakte 61,035
Apple 1:06

Orkut 51,754
Microsoft 0:45

Yahoo Pulse 37,600
Amazon 0:31


Mobile Access To Social Media Networks Has Grown Sharply
Across All Age Demographics
Social Network Growth, by Age, Ethnicity
% change, Q3 2010 v. Q3 2011

109%

76%
68% 70%
67%
61%

45% 44%
41%
37%

16%

Source:
The
Nielsen
Company

Females,18-34 Year Old, Are The Most Active On Social
Networks
U.S. Social Network Use by Age, Demographics
Base: U.S. social media users, Q3 2011

108
103 104 103 102
100 101 101
96 98
94
91
88

Source:
The
Nielsen
Company

Over 50% Of Online Consumers Expect Weekly or Monthly
Updates Through Social Networks
Marketing Contact via Social Networks
% of respondents (n=2,997) June 2011

28%
26%

13%
11%

7%
6%
4% 2%
3%

More than Once Every other Twice Once Twice a month Once a month Never Other
once a day a day day a week a week or less


Source:
ROI
Research
and
Performics

Mobile Is a Growing Access Point For Smartphone Owners
Accounting For 51% Of Facebook And 12.5% Of Twitter Users
Facebook, Twitter Reach among Smartphone Users
3-month average, ending June 2011

50.9%

31.7%

12.5%

7.4%

U.S. smartphone users European smartphone users

Facebook Twitter


Source:
Experian
Hitwise

Approximately 39% Of Consumers Seek Purchase Advice
For Financial Services Products
Social
Networks
as
a
Source
of
Purchasing
Advice

%
of
respondents
who
sought
advice,
June
2011

46%
42%
39%

34% 33% 33%
31% 30%
28% 28% 26%
25%
Consumer Average 29%

24% 23% 22% 21%
19%
17%


Source:
ROI
Research
and
Performics

Globally, Chinese Internet Users Spend The Most Amount Of
Their Leisure Time Online Displacing Traditional Media
China
44%
²  In
Urban
areas
the
Web
will
soon

Sourth
Korea
40%
replace
newspapers
as
the
medium

Japan
38%
with
the
second-‐highest
daily
reach.

Italy
31%
²  Among
individuals
under
the
age
of

30,
the
Internet’s
penetra@on
is

US
30%

almost
as
high
as
television’s.

Spain
29%

² Chinese
will
be
surﬁng
the
Web
more

Austraiia
29%
oden
at
home
and
at
work
and
less

Canada
28%
oden
at
Internet
cafes.
They
will
also

France
28%
be
relying
on
their
mobile
phones.

UK
28%
² In
2011,
69%
of
users
said
they
used

Germany
23%

their
phones
to
access
the
Web—up

30
percentage
points
in
just
three

Norway
22%

years.
The
share
of
hours
spent

Netherlands
19%
accessing
the
Internet
on
mobile

Sweden
18%
devices
is
rising
rapidly
among
all
age

Finland
15%
groups.

Denmark
14%


Source:
TNS
“Digital
World,
Digital
Life”
December
2008

There Is A Growing Shift In The Consumption Of Social Media
On Mobile Phones
U.S.
Top
Mobile
Apps
for
iPhone
and
Android
by
Unique
Ac@ve

Users
(Age
18+)

iPhone
Top
Mobile
Apps
Android
Top
Mobile
Apps
Mobile’s Growing Inﬂuence!
YouTube
Google
Search

² Over 50% of Facebook and Twitter
Google
Maps
Gmail
trafﬁc!
Facebook
Google
Maps

² 200MM+ daily YouTube views !
Yahoo!
Weather
Facebook

² 86% of mobile internet users use their
Pandora
Radio
Google
News
and
Weather

mobile phones while watching TV!
Angry
Birds
YouTube

² Americans spend an average 2.7 hours
Yahoo!
Stocks
Pandora
Radio

socializing on their mobile phones!
ESPN
ScoreCenter
Angry
Birds

² By 2014 mobile will surpass desktop
The
Weather
Channel
Adobe
Reader

usage!
Google
Search
Words
With
Friends

² 70% of all mobile searches result in
Words
With
Friends
Twiker

action within 1 hour!
Nellix
Yahoo!
Messenger

² One half of all local searches are
Fruit
Ninja
Amazon
Appstore

performed on mobile devices!
Twiker
Yahoo!
Mail

Movies
by
Flixster
Google
Talk

Facebook
Messenger
The
Weather
Channel

Source:
comScore
Mobile
Metrix
2.0,
Beta
Data,
Dec-‐2011,
U.S.,
Mobile
Marketer

Case Study: American Express


Case Study: American Express
The Emergence Of The Social eCommerce Model
American Express is arguably one of the most innovative companies to generate
engagement and sales from the integration of web, mobile, and social media.!


The Emergence Of Social eCommerce Model
"Go Social" Tool for Small Business Merchants - Launched May 14, 2012 !

The "Go Social" offer tool is a virtual
one-stop shop that allows American
Express merchants to:!
²  Create and manage coupon-less
offers into digital channels such as
Facebook and other platforms.!
²  Track offer campaign results across
multiple social networks and
locations.!
²  Help merchants to build their
business and evaluate their social
offer campaigns with detailed reports
that they can access through their
own secure dashboards.!
²  The platform is built upon American
Express' Smart Offer API.!

“Sync, Tweet, Save” Twitter Initiative – Launched March 2012 !

American Express turns twitter #hashtags into couponless national merchant offers and
Cardmember savings using its smart offer APIs. API enable Amex to provide valuable merchant
reporting about customers’ spending behaviors. Cardmembers can now sync their cards with
Twitter, tweet, and save at national merchant partners including Best Buy®, McDonald’s, Whole
Foods Market, Zappos.Com, and more. The campaign generated over US $12.8MM in it’s ﬁrst
two months.!

“Link, Like, Love” Facebook Initiative Launched July 2011!

²  On the American Express Facebook
page, cardmembers can link their cards
to the program and choose their
favorite deals. !
²  American Express will send statement
credits to cardmembers' accounts as
they shop online or in stores, without
the need to pre-purchase anything,
print out or show a coupon at the point
of sale. !
²  Delivers deals and offers based on
cardmember Facebook activity, pages
they like and share, as well as the
activities of Facebook friends. !
²  When the related transaction is made
with the American Express card within
a speciﬁc time period, the discount is
credited to cardmember account. !


American Express Has Spent Years Developing The OPEN
Small Business Network Community

OPEN
is
American
Express’
strategy
is
to
drive
higher
sales
and
share
of
wallet.

²  OPEN is American Express’ strategy to
create market leadership and
engagement beyond its customer base!

²  The OPEN Forum is a central location
for the small business community!

²  OPEN Forum includes pertinent articles,
blogs, and contributors!

²  Articles and content throughout OPEN
Forum can be shared through Twitter,
Facebook, Linkedin, emai, RSS, etc. !
!
²  Mobile and tablet applications are being
introduced as additional distribution
points!


There are several underlying trends that will drive mPayment adoption and usage

Technology

Social

Unbanked

Media

Consumer

Mobile
mPayments
&
Retailer

Banking

Acceptance


Drivers of mPayment Growth - Technology
As carriers and telecomm companies have upgraded their infrastructure it has led to
a corresponding increase in adoption and usage. This trend will bolster mPayments
globally.!
²  3G networks have seen dramatic growth and we expect to see the same
trajectory for next generation systems (e.g. 4G).!
²  Mobile subscriptions surpassed the number of landlines in 2002 and is
now is 3 times larger globally.!
²  Smartphone sales were up over 63% in 2011 from 2010 (488.5MM) and
approximately 5.9B people use mobile phones globally!
²  iPad/tablets have the fastest adoption rate in history – outstripping iPhone
adoption by over 3 times.!
²  Android-based devices continue to outpace iPhone sales and is the
dominant mobile platform. The Google based system lags behind Apple
app development but it is expected to narrow over the next 3 years.!
²  There are a number of disparate mobile platforms that companies must
build their mPayment capabilities for as standards vary by region. !



In Q411 There Were 1.1B Global Mobile 3G Subscribers, Up
37% YoY With A 18% Share Of All Mobile Subscribers

Q411
3G
3G
3G

Q411
3G
3G
3G

Subscribers
Penetra@on
Subscribers
Subscribers
Penetra@on
Subscribers

(MM)
YoY
Growth
(MM)
YoY
Growth

1
USA

208
64%
31%
16
Canada
16
62%
34%

2
Japan
122
95%
9%
17
T
aiwan
14
48%
17%

3
China

57
6%
115%
18
South
Africa
13
21%
49%

4
Korea
45
85%
10%
19
Turkey
13
20%
62%

5
Italy
44
51%
25%
20
Portugal
13
78%
19%

6
UK
42
53%
25%
21
Vietnam
12
11%
358%

7
Brazil
41
27%
99%
22
Mexico
11
11%
55%

8
India
39
4%
841%
23
Malaysia
10
27%
7%

9
Germany
38
36%
23%
24
Sweden
10
73%
25%

10
Spain
33
57%
21%
25
Philippines
10
11%
45%

11
France
30
45%
35%
26
Saudi
Arabia
10
19%
17%

12
Indonesia
29
11%
27%
27
Netherlands
9
44%
34%

13
Poland
28
57%
17%
28
Egypt
8
10%
60%

14
Australia
22
76%
21%
29
Austria
7
58%
24%

15
Russia
17
8%
45%
30
Nigeria
6
6%
51%

Global
3G
Stats:
Subscribers
=
1,098MM

Penetra@on
=
18%

Growth
=
37%


Source:
Informa
WCIS+.

In 2002 A Global Milestone Was Reached As Mobile
Subscription Surpassed Landlines
Mobile subscriber growth continues to grow rapidly while landlines are in a slow
rate of decline!

Global
Install
Base
MMs


Source: International Telecommunications Union

Apple Has Achieved Exponential Growth With Each Successive
Product Launch

First 8 Quarters Cumulative Unit Shipments!

iPad
vs.
iPhone
=
3x

iPad
vs.
iPod
=
60x

iPhone
vs.
iPod
=
20x


Source: KPCB; Apple

The iPhone Sales Rate Has Been Eclipsed By The Android
Platform And Continues To Outpace Apple
First 13 Quarters of Cumulative Unit Shipments!


Source: KPCB; Gartner; Morgan Stanely

Tablets And eReaders Are Growing Rapidly And Have Become
A Third Screen For Consumers
Tablets will play an increasingly integral role for digital consumers – banks and
retailers will need to adjust their strategy and experiences speciﬁcally for them.!

%
Ownership
US
Adults
With
A
Tablet
or
eReader

60%
55%*

50%

40%

29%

30%

18%

20%
16%

14%

10%
5%
6%

3%
4%

2%

0%


*Estimate Source: Pew Research; Independent Research

In 2011 There Were 2.3B Global Internet Users, Representing
A 8% CAGR From 2008
Rank
Country
2008-‐2011
New
2011
Internet
YoY
Popula9on

Internet
Users
(MMs)
Users
(MMs)
Growth
Penetra9on

1
China
215
513
12%
38%

2
India
69
121
38%
10%

3
Indonesia
37
55
22%
23%

4
Philippines
28
34
44%
35%

5
Nigeria
21
45
N/A
28%

6
Mexico
19
42
19%
37%

7
Russia
16
61
3%
43%

8
USA
15
245
1%
79%

9
Iran
14
37
N/A
48%

10
Turkey
11
36
26%
49%

Top
10
444
1189
12%
32%

World
663
2250
8%
32%


Source: KPCB; internetworldstats.com


Technology

Social

Unbanked

Media

Consumer

Mobile
mPayments
&
Retailer

Banking

Acceptance


Drivers of mPayment Growth - Unbanked
The worlds unbanked are rapidly adopting mPayments without the need for a
bank. Banks will face stiff competition to win marketshare.!

²  There are over 2.5B unbanked people globally, many of which are in Africa,
Asia, and Latin America.!
²  Because most of the unbanked currently own a mobile phone they are readily
adopting mPayment based options.!
²  Mobile payments are bringing disparate players together in collaboration to
provide new payment options to the unbanked.!
²  The majority of mobile payments are focused on retail and person-to-person
(P2P) payments.!
²  The ability to enhance the unbanked regions will vastly improve the ﬂow of
funds and ultimately spur economic growth that would otherwise be difﬁcult to
obtain.!


Source: Mobile Banking News

Many Parts Of The World Have A Large Percentage Of
Unbanked Consumers
mPayments will provide access to a more efﬁcient and lower cost payment system
fueling new economic prosperity for the world’s unbanked.!

Unbanked
Banked

11%

45%

55%
61%
67%

76%
82%

89%

55%

45%
39%
33%

24%
18%

High
Income
East
Asia
&
Europe
&
La@n
America
South
Asia
Sub-‐Saharan
Middle
East
&

Economies
Paciﬁc
Central
Asia
&
Caribbean
Africa
North
Africa


SOURCE: Demirguc-Kunt and Klapper 2012

Emerging Partnerships and Platforms In China – UMPay
Launched
in
2003
It
provides
China
Mobile
users
with
a
comprehensive
mobile
payment

plalorm
and

mPayment
system
that
provides
mobile
wallets,
ﬁnancial
message
services,

top-‐ups
and
mobile
@cke@ng.

²  According
to
UMPay,
e-‐
and

mPayment
users
will
exceed
500MM

people
and
currently
has
100MM

mPayment
users.
Most
of
these

users
are
the
unbanked.

²  The
greatest
growth
will
be
from

rural
farmers.

This
is
the
strategy
of

UMPay
today
-‐
to
saturate
the
rural

loca@ons
with
UMPay
access

growing
to
half
a
billion
in
the
very

near
future
according
to
UMPay
CEO

Bin
Zhang.


India Is The World’s Second Most Populous Nation And Has
Over 450MM Unbanked People
In a country where cash is used in 65% of retail transactions and mobile phones
are common, mPayments are poised to grow.!

India Facts & Figures!
²  Mobile phone connections outnumber bank
accounts by more than a factor of three: 893MM
mobile phone subscribers and 250MM bank
accounts. !
²  The National Payment Council of India (NPCI)
launched the Interbank Mobile Payment Service
(IMPS). IMPS allows a person to pay/remit money
to a merchant or an individual in real-time using a
mobile phone number and a mobile phone
identiﬁer. !
²  M-commerce been gaining traction. India's leading
m-commerce player, ngpay, has over 1.5 million
registered users who can purchase products
through their mobile phones. Their mobile mall has
a daily volume of 40,000-50,000 unique users, with
about 15% of those making purchases with an
average transaction size of about Rs 700.!

Payments Using SMS And USSD Has Grown Exponentially in
Certain Regions Will Expand Globally
²  Consumers in Africa, the Middle East, and India rely on telecoms including
Vodafone and MTN to provide mobile money options.!
²  Western Union has partnered with MTN in Uganda to launch a mobile-transfer
service. WU has agreements with 11 mobile operators and an additional 17 is
in the works.!

M-Pesa Facts & Figures!
²  M-Pesa, Swahili for money!
²  SMS based mobile money mPayment
Kenya
launched in 2007!
²  By 2011 68% of adults use mobile money!
²  Average transaction size is $30!
²  Users give cash to agent, money is loaded
onto account, payment made via SMS,
conﬁrm given to merchant via SMS!



Technology

Social

Unbanked

Media

Consumer

Mobile
mPayments
&
Retailer

Banking

Acceptance


mPayments – Consumer & Retailer Acceptance
The proliferation of digital technology and the rise of social media have contributed
to a growing adoption and usage of mPayment services.!

² Purchases from mobile devices is on the rise with consumers - 24% bought
on a mobile website and 18% on a mobile app.!

² Mobile technology enables retailers to push local mobile offers, discounts,
and rewards to incent in-store traffic. !

² Retailers have seen a substantial increase in online traffic and sales coming
from tablets. !

² In the 2012 Shop.org/Forrester Research State of Retailing Online survey,
49% of retailers reported that the average order value via a tablet device is
now higher than a smartphone or desktop. !

² Retailers with both tablets and smartphone apps, 45% of their total mobile
web traffic for smartphones occur on the Web and 17% on apps. For tablets,
28% occur on the Web and 11% on apps.!


Source: Mobile Banking News

The Emergence Of The Mobile Web As The Dominant Channel
Of Choice – It’s Become Mainstream

Facebook mobile users have! Nearly 30% of consumers conduct product
research on mobile devices !

from 50MM in 2009 to 200MM in 2011!

Twitter has over active users
There are mobile video
playbacks from YouTube every day! sending over tweets a day!

Social networking accounted for 86% of mobile internet users use their mobile
of all page views on mobile phones in 2011! phone while watching TV !

Over 300k apps have been developed in the 90% of the largest retailers have a mobile site
past 3 years and downloaded more than 10.9B or smartphone app!
times!


Globally, Mobile Devices Are Increasing The Device Of Choice
For A Variety Of Activities
Mobile
Ac@vi@es
by
Share
of
Total
Mobile
Audience

Mobile’s Growing Influence!
US
EU5
Canada
Japan

²  Overall Text messaging is highest with
Sent
text
message
74.3%
84.4%
69.2%
44.4%
Europeans preferring it the most at 84.4%.
Japanese are much less likely in
Took
photos
60.3%
59.8%
55.1%
63.9%

comparison at 44.4%!
Used
email
40.8%
30.0%
35.9%
57.3%

²  Mobile social media and blogging are
Accessed
Social
35.3%
25.7%
31.2%
19.6%
relatively new and North Americans have
networks/blog
the highest rates above 30%. Expect these
Accessed
weather
35.2%
23.2%
29.8%
35.1%
numbers to jump globally.!
Played
games
31.4%
27.5%
30.8%
15.3%
²  Photos, and email rank consistently among
the highest activities across all regions.!
Accessed
search
29.5%
20.4%
25.6%
30.8%

²  Gaming is bigger in the US and Canada
Accessed
maps
26.5%
18.2%
21.65%
19.4%

than other regions that may be influenced
Accessed
news
25.5%
20.0%
20.1%
24.3%
by popularity of the iPhone.!
Listened
to
music
23.8%
27.4%
23.0%
13.3%
²  Japanese are more likely to do email and,
Accessed
sports
info
21.8%
16.5%
16.0%
19.7%
in general, access and search for content.!

Accessed
financial
15.1%
11.3%
11.4%
17.9%
²  Watching video from YouTube and
news
or
stock
quotes
proprietary content providers will continue
to grow as smartphone ownership
Accessed
online
retail
12.2%
8.2%
6.1%
10.0%
increases and content becomes available.!


Source:
comScore
Mobile
Metrix
2.0,
Beta
Data,
Dec-‐2011,
U.S.

Mobile Consumer Behavior
Mobile devices have become an indispensible part of our lives……!

Over 300k apps have been developed in the past 3
years and downloaded more than 10.9B times!

……
And
are
used
universally
by
consumers
throughout
the
day

98%

89%

79%
74%

64%

At
Home
On
The
Go
Shopping
At
Work
Commu@ng


Mobile Web Traffic Will Surpass Desktop Web Traffic By 2015
Tablet access to the web will gain a large foot hold as it’s growth is eclipsing
desktop sales and growing at a faster rate than mobile.!

Web
Surﬁng
By
Device

100%

80%

73%

60%
57%
52%

40%
43%
48%

20%
27%

0%

2007
2011
2015E


Mobile Web Traffic Growth
Global mobile traffic as a % of total web traffic has grown by a factor of 20 over the
past 4 years. !

2011
Year
in
Review
and
Outlook
for
2012

Mobile
data
traffic
as
a
percent
of
total
web
traffic

²  Mobile
data
traffic
more
than
doubled

in
2011.

Global
mobile
data
traffic

166%
CAGR
more
than
doubled
growing
133%
in

2011,
for
the
fourth
year
in
a
row.

²  Mobile
data
traffic
will
double
again
in

2012

²  Cisco
es@mates
that
traffic
in
2012
will

grow
110%,
reflec@ng
a
con@nua@on
in

the
tapering
of
growth
rates.

²  The
evolving
device
mix
and
the

migra@on
of
traffic
from
the
fixed
to

mobile
network
has
the
poten@al
to

bring
the
growth
rate
higher.


China Has The Largest Online Population And By 2015 It Is
Expected To Become The World’s
Largest Online Retail Market

China has become a major Internet market with increasingly sophisticated consumers. !

² By 2015, China will add nearly 200MM users,
reaching an Internet population of more than
700MM users—double the combined number
of Japan and the U.S. !
² In 2011, consumers spent 1.9B hours a day
online— an increase of 60% from two years
earlier. !
² Online buying and selling, including group
purchasing, is the second fastest growing
activity after micro blogging. !
² Chinese consumers are quickly adopting
mobile usage that will be used as a primary
access point and payment choice for the
internet.!
² Users have not only adopted real-time mobile
social networking at a growing rate they are
also doing so with increasing frequency.!


Source:
Bain,
Nielsen

Internet Sales Have Taken Off As Online Retailers Gain Share,
Mobile Will Become A Key Component Of This Growth
In
2010,
more
products
were
purchased
on
Taobao
than
at
China’s
top
ﬁve
brick-‐
and-‐mortar
retailers
combined.

² Between 2011 and 2015, online retail sales will
increase 300% to more than $360 billion. !
² China’s consumer behavior continues to
evolve as they rapidly adopt a digital lifestyle. !
² Half of Internet users say that the Internet is
their most trusted source of information,
followed by television at 30% and
newspapers at 15%. !
² Between 2008 and 2011, the online share of
consumer spending increased from 11.8%
to 14.3%. Between 2011 and 2015, per
capita online spending will likely rise by 15%
annually. !
² Consumers research products online that they
eventually buy in physical stores and 25% of
consumers research online before buying
ofﬂine – a trend consistent in other markets.!

Source:
The
Boston
Consul9ng
Group,
China’s
Digital
Genera9ons
3.0

Mobile Commerce =
Adoption Of Mobile Payments Has Accelerated in 2010 And Is
We Have Lift Off!
Expected To Continue On An Upward Trajectory
Mobile Sales or Payment Volume –
eBay / PayPal / Amazon.com / Target / Square, 2009-2011E
$5
Gross Mobile Sales or Payment

$4
eBay

PayPal
Volume ($B)

$3
Target
$2
Amazon.com

$1 Square

$0
2009 2010 2011
Note: Amazon.com disclosed 2010 mobile gross sale, 2009 / 2011 data are KPCB estimates.
Source: eBay, Amazon.com, Target, Square.

Copyright 2011. All rights reserved.
31

Source:
KPCB

MobileMobile Search –
Queries Are Growing Rapidly As Consumers Are Using
Them Increasingly For Information and Transactions
Growing Rapidly
Google US Mobile Queries (Indexed), 2007 – 2011

120

100 4x Growth
in past years
80

60

40

20

0
2007 2008 2009 2010 2011

Source: Google.
19
Copyright 2011. All rights reserved.
© 2011 Blue Panda Interactive. Proprietary And Conﬁdential.! 55! 19

Source:
comScore,
KPCB

As US eCommerce Grows The Percent Of Mobile eCommerce
Is Climbing, Reaching 8% in Q1 2012


Source:
comScore,
KPCB

Social Sites Are A Source For Information, Comparisons, And
Ratings That Influences Buying Behavior
Community,
Social
Tools
that
Impact
Buying

%
of
respondents,
June
2011

User-generated
59%
product reviews

Online customer Q&A
42%
on product website
Community forums
(conversations between 26%
customers)

User-generated videos 15%

Facebook company
13%
fan pages
Facebook newsfeed
(friends talking about 13%
products)
Mobile (iPhone app,
9%
text alerts)

Twitter (monitor,
9%
respond to, and post tweets)


Source:
e-‐tailing
group,
PowerReviews

“Give people more control over their banking and you’ll
win their loyalty. That’s because mobile is not a
channel so much as a way consumers live their lives
and consequently, the way banks have to conduct their
business.”!
!
Douglas Brown!
Senior VP Mobile Product Development!
Bank of America!


mPayments Summary

²  The Financial services industry has undergone a broad and rapid
transformation over the past decade driven largely by technology and web
based services!

²  Mobile phone proliferation, development of mobile platforms, and
capabilities have created a new dynamic paradigm in the payments industry!

²  Convenience and ease of use of mobile capabilities has created a seismic
shift in the consumer mindset and acceptance of mPayments !

²  Social media coupled with mobile phones have been the catalyst to a
growing opportunity to engage consumers and win share for companies!

²  mPayments will grow rapidly as a percentage of total payments, however,
banks risk disintermediation by non-bank competitors!

²  A big driver of mPayments will be the nearly 2.5B unbanked people in
developing markets turning to non-bank mPayment options!


mPayment Roadmap For Banks – Creating Frictionless
Finance Networks
²  Success will come from continued focus on building new distribution
models and capabilities to enable mPayments.!

²  In order for the mobile wallet and payments to grow in adoption, it has to
be simple, ubiquitous and have a compelling value to consumers.!

²  Proliﬁc growth of smartphones and consumer acceptance is driving growth
in mPayments.!

²  Banks must invest in several mPayment technologies as standardized
platforms have yet to emerge and will likely vary across geographies.!

²  Banks must rethink their relationships with telecommunications companies
and retailers to build and maintain market share and protect their payment
marketshare form new competitors.!


History of Payments From Barter to Frictionless Finance
There has been more transformation in the payments space in the past 5 years
than the prior 2,500 years.!
BARTER/
COINS
PAPER
CHECKS
CREDIT
mPAYMENTS

TRADE
MONEY
CARDS

BEFORE
600BC
–
806
–

321BC
–

1800s
–

PRESENT
–

600
BC
PRESENT
PRESENT
PRESENT
PRESENT
FUTURE

Source:
SapientNitro

Evolution of Electronic Payments
Coinciding with the evolution of payments has been the development of
technological advances that have created a frictionless, global ability to move
money anywhere anytime.!

Late
1970’s

–
Mid
1980’s
1994
1997
Today

Rudimentary
Home
Online
Banking
and
First
Mobile
Fric@onless
Finance
–

Banking
system
based
on
Bill
Pay.

Ability
to
Banking
service
device,
currency

landlines
access
accounts
agnos@c

any@me


Mobile Users By % of Population

87%
of
the
world’s
popula@on
Smartphone
sales
increased
63.1%

have
a
mobile
phone
from
2010
to
2011

CIS
14.3%
Americas
103.3% Europe
11 9 . 5 % Asia
73.9%

Arab
States
96.7%

Africa
53%

30%
of
the
world’s
mobile

users
live
in
China
and
India


Source:
KPCB
Internet
Trends,
Mary
Meeker
May
30,
2012

Growth In mPayment Users 2010 – 2011: Use of mobile
phone as payment device that is pre-loaded with funds.
Emerging markets have higher penetration and growth rates for mobile payments. !
USA
CHILE
BRAZIL
KENYA
SINGAPORE
HONG
KONG
CHINA

6%
8%
1%
7%
9%
20%
10%
25%
10%
13%
21%
16%
17%

9%

Source:
NitroSapient


The Growth Rate For mPayment Users By Region
Mobile payment users had double digit growth across all markets from 2009 to
2010. !

Mobile
Payment
Users
By
Region
(000)

Region
2009
2010
%
Change

Asia
Paciﬁc
41,865
62,
828
50.0%

EMEA
16,823
27,091
61.0%

La@n
America
5,131
8,010
56.1%

Western
Europe
4,519
7,127
57.7%

North
America
1,905
3,502
83.8%

Total
70,243
108,558
54.5%


Source:
Javelin
Strategy
2009

Global mPayment Transaction Growth By Regions
mPayments across all regions have experienced substantial growth from 2008 to
2012; rates will slow as markets reach saturation.!


Source:
Arthur
D.
Likle

Electronic Payments In The US Grew By Over 82% In 2011
Mobile usage is growing rapidly for retail and payments creating an opportunity to
gain share of wallet for ecommerce.!

40,000
US
Top
Mobile
Categories
By
Growth
In
Audience
(000)
160%

Dec-‐10
Dec-‐11

35,000
134%
140%

30,000
120%

Audience
(000)

25,000
100%

87%

80%
82%

77%
74%
74%

20,000
72%
70%
69%
80%

15,000
60%

10,000
40%

5,000
20%

0
0%

comScore
MobiLens,
3
month
average
ending
Dec.
2011
vs.
Dec.
2010,
US

mPayments In China 2010 - 2013
²  mPayments are expected to grow by 1132% and mobile payment users will
increase by 472%. !
²  In 2011, 69% of users said they used their phones to access the Web—up 30
percentage points in just three years.!
481
Payment growth will be fueled by:!
Mobile
Payments
(Billion
Yuan)
² The share of hours of internet access
Mobile
Payment
Users
(MM)
on mobile devices is rising rapidly
among all age groups. !
308
² Growing usage of mobile apps.!
² Technology that increases the utility of
219
mobile devices as a payment option.!
191

² Proliferation of mobile devices and
121
mobile infrastructure.!
102

48
² Greater access to the web through
19
mobile devices.!
² Convenience in researching product
2010
2011E
2012E
2013E
information and pricing transparency.!


Source:
China
Internet
Watch

The Players: Several Industry Groups Are Working On One
or More mPayment Options
The digital wallet is “owned” by several industry segments that each provide key
components for mPayments and digital wallets.!

Financial
Telecommunica@on
Retailers

Ins@tu@ons
Companies
(1)

(1)Telecommunica@on
companies
include
carriers,
handset
makers,
chip
makers,
OEMs

The Players: Each Industry Group Has A Unique Role
Within The mPayment Process
Collectively mPayment players each provide key components for mPayments and
digital wallets. They must work together to create end-to-end experiences.!

Financial
Telecommunica@on
Retailers

Ins@tu@ons
Companies(1)

Banking
services
Wireless
Networks
Loyalty
Programs

Loans
Handsets
Merchandise

Payment
Processing
Mobile
Apps
Shopping
Experience

Credit
Card
services
Mobile
Payment
Services
Consumer
Data

Security
Infrastructure
Mobile
Coupon
Services
Point
of
Sale

Security
Infrastructure
Security
Infrastructure

(1)Telecommunica@on
companies
include
carriers,
handset
makers,
chip
makers,
OEMs

The Players: Who Owns The Customer Relationship?
The mPayment customer relationship is fragmented with each player having a
unique role that will vary by market.!

Financial
Retailers

Ins@tu@ons

Shopping
Experience

Financial
Rela@onship

Telecommunica@on

Companies(1)

Reliability

(1)Telecommunica@on
companies
include
carriers,
handset
makers,
chip
makers,
OEMs

To Establish A Mature mPayments Environment Key Issues
Need To Be Addressed

² Financial Institutions, Telecommunication Companies,
Financial
Telecommunica@on

and Retailers need to collaborate
and structureRetailers

Ins@tu@ons
Companies
(1) a
revenue share model.!
² How businesses will get enough consumers to use the
digital wallet and enough merchants to accept mobile
payments.!
² Ensure that the end-to-end user experience is easy to
use, intuitive, and seamless.!
² Focus on establishing global standards that can
facilitate the growth of mPayments.!

(1)Telecommunica@on
companies
include
carriers,
handset
makers,
chip
makers,
OEMs

KPMG 2011 mPayments Global Survey Highlights
²  Survey focused on projected success of the current and emerging mPayment methods,
which were described in the survey as: !

Ø  M-wallet (mobile wallet): account and transaction info is stored on a SIM card; !
Ø  M-banking (mobile banking): direct access to the subscriber’s bank services and
information via the mobile device; !
Ø  Contactless card systems: a short-range high frequency wireless communication
technology which enables the exchange of data between devices; !
Ø  Specialist online payment systems: for example, Google checkout or PayPal; !
Ø  Carrier billing: for example, purchases are billed on the subscriber’s mobile phone
bill. !
²  Opinions across geographies were remarkably consistent, while variation across
industries was in some cases more pronounced. !

²  Only mBanking and online payment systems are seen as gaining traction in the short
term. However, most respondents believe the mPayments will grow dramatically over the
next 4 years. !

²  For the remaining solutions, respondents were most likely to say that it was still too early
to predict whether or not the solution would be adopted widely. !

KPMG 2011 Mobile Payments Global Survey Highlights
Global Sentiment Indicates Signiﬁcant Growth In Mobile Payments Across All
Regions.!

When asked respondents over 75% of those asked believe mobile payments will become mainstream in
the next 4 years.!

39%
39%

39%
40%

37%

37%

Mainstream
Today

1-‐2
Years

3-‐4
Years

14%

15%
5-‐10
Years

5%
10+
Years

6%

2%

3%
5%

5%

4%

ASPAC

EMEA

Americas

Source:
KPMG
2011
Mobile
Payments
Global
Survey

Mobile Payments in The Financial Services Industry

Mobile Payments in The Financial Services Industry

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