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Payments lanscape 2 12

The document discusses trends in online and mobile payments. It notes that mobile payments are expected to reach $1 trillion by 2014 as smartphone adoption increases. There are many types of mobile payment methods, including mobile wallets, mobile point-of-sale, payment platforms, carrier billing, and closed-loop systems. NFC technology enables fast and secure card-present payments directly from phones but requires upgrades to handsets and point-of-sale terminals to see broad use. Overall mobile payments are growing rapidly but challenges remain around technology adoption and business models.

Economy & Finance◦Business◦
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February 2012 Payment Trends Online to Offline By Patrick Gildea 1
Table of Contents • Background and Relationships • Mobile and Innovation at the POS • Financing, M&A and Valuations • Payment Startup Ecosystem
Background and Relationships 3
Selected Transaction Experience Closed more than $11 billion in M&A, Joint Ventures, and Financing transactions and more than 20+ corporate and business development transactions including pilots, supplier, and technology partnerships. Leveraged Buyout Cross-border M&A Buy-side M&A Sell-side M&A OSS Business Japan Operations Acquires Acquired by Acquires Acquires Acquires Acquires Sold to Sold to Assets Assets nvSRAM Business Joint Ventures Public Capital Raise Private Capital Raise Software License Between Between Create Create Initial Public Series C Series B, C and D Offering on TSE PIPE on NASDAQ Pilots Supply Chain Sales & Marketing Pilot test of Enters into Pilot test of first Enters into Enters into Enters into a Enters into a cardless debit / Exclusive BIN NFC mobile wallet strategic supply Exclusive supplier marketing marketing loyalty payment sponsor agreement in US at Safeway agreement with agreement with partnership with agreement with system at Safeway with
Payments Buy-side Relationships Extensive network of senior level relationships across many of the key buyers in Payments Networks Card Processing Prepaid MA/Gateway - SMB MA/Gateway - Legacy Mobile Payment Platforms Selected Venture Capital with Notable Payments Focus Investment Banks Private Equity
Mobile and Innovation at the POS 6
Mobile is Changing the Payments Landscape US Consumer Payment Transactions Healthy topline growth at Billions 128.3 136.5 156.5 3.5% CAGR 2010-15 100% 4.9 5.5 7.0 90% 25.8 Debit big benefactor of share 80% 41.5 shift- helped by bad 68.4 70% economy, credit tightening, 25.3 60% mobile and merchants push 26.1 for lower cost payments 50% 24.5 28.1 40% 17.5 30% 12.9 Share shift from cash and 20% 47.8 check to mobile wallet and 45.9 10% 40.1 ecommerce 0% 2006 2010 2015 Prepaid Debit Credit Check Cash Source: The Nilson Report and RJ&A research 10/2011
The Many Flavors of Mobile Payments Mobile payments expected to reach $1 trillion worth of global transactions by 2014* • Smart phone adoption finally reaching scale to sustain true mobile payments traction • Upgrade cost and merchants’ wait and see attitude still biggest hurdle to mobile enabled POS device adoption • Offers and loyalty will be carrot for shifting consumers to mobile mediums • Big data and location based intelligence infrastructure will soon follow • Winners will own both sides of payment transactions- consumer and merchant Payment Direct Carrier Closed Loop Mobile Wallet Mobile POS Platforms Billing Mobile Paying for items gift card Using mobile phone to Using mobile phones as Using mobile apps to Paying for items using or store credit in mobile pay at POS the POS device transfer money your phone bill app • Enabled • Software on the phone • In app billing, one of • Good for micro micropayments to enabled to manage the only current apps payments or frequent convert from cash to money and payments use locations cards • Starbucks trial did 3 • P2P players could million transactions in invade at micro level first 2 months *Source: Yankee Group, 2011
Mobile Wallets – Invasion of the Software Giants Comparison of Major Wallet Platforms Sneak Peak Source: Mercator
Yes, NFC Should Maybe Happen Evolution of Payments Thoughts on NFC Handset shipments with NFC enabled chips will be the single biggest critical factor in timing broad use of NFC in the U.S. Shared view with Mercator Barter Coins Paper Plastic Digital ? RFID/NFC QRC Cardless SIM • POS / Phone • Clumsy • POS software • Carriers still Upgrade experience upgrade working out the • Fastest & Most • POS add-on • Unsecure details secure • Available • Interchange rate? • Safe and secure • Card present rate today • Ease of use • Phone agnostic • Long-term winner • Doesn’t need a device RFID Successful Overseas – Can that migrate to the US • Longer range RFID might also come across the ocean, enabling proximity based offers and marketing, something • Octopus card first RFID rechargeable smart card in world- launched in Hong Kong like-> 1997: • More than 20 million cards in circulation, nearly three times the population • First likely acceptance will be for micro-payments at: of Hong Kong. • Convenience • The cards are used by 95% of the population of Hong Kong aged 16 to 65 • Fast food, coffee • Over 11 million daily transactions worth a total over HK$100 million • Gas pump (US$12.8 million) everyday. • Transportation • Grocery • Sony bitWallet first mobile RFID (NFC) wallet in Japan, operating on the Sony Felica platform • In-lane checkout speed and security will be key drivers • More than 40,000 retail locations in first 5 years of operations tipping NFC as the winner vs. existing alternatives • Accepted at all major convenience stores, railroads and at McDonalds • First wallet platform to incorporate targeted ads based on spend and geo- Many challenges remain but NFC will soon be here, though don’t location expect it to replace cards at the POS for many years to come. Source: Wikipedia, company websites.
So Where is All the Money Made? US Transaction Processing Revenue $25.0 Healthy topline growth at $20.2 4.7% CAGR 2010-15 $20.0 $16.8 $4.1 $1.4 $15.0 $13.6 $3.9 $1.1 $3.5 $10.0 $1.0 Merchant acquiring fastest $14.7 growing and biggest $5.0 $11.8 benefactor…. $9.1 $USD Billions CAGR $- 2006 2010 2015 5.0% Mobile Oh yeah, Card Issuing $3.5 $3.9 $4.1 1.8% innovation and more Prepaid $1.0 $1.1 $1.4 4.0% Merchant Acquiring $9.1 $11.8 $14.7 9.0% at POS online shopping Source: The Nilson Report, World Report and RJ&A research 10/2011
Cool Stuff Happening at the POS Innovation at the POS will support the shift from cash to electronic transactions and thus driving revenue growth for Acquirors. QR Codes Mobile POS Cloud POS Ultrasonic Quick Checkout Cardless Debit Carrier to Retail Wallet Loyalty Social Cards & Data
Themes to Watch For in Retail Payments Square market approach combines POS Own the customer + for merchants and wallet for consumers. This convergence optimizes CRM, enables more enhanced loyalty and offer features and merchant and frankly creates a nice and sticky switching cost for merchants. Big data will become more instrumental in tracking usage and behavior to drive timely and relevant offers to Loyalty, incentives, consumers. First evolution will be at card side, as PMs start ads and big data tying user # to merchant ID and track data on network backend. Next evolution will be at the wallet or POS, tapping into Level III data and tracking consumers across the network backend. Technologies that are convenient, easy to deploy, easy to understand and make the Customer experience Don’t wait in line Payment Enter my phone overall purchasing experience better for consumers will be great interim plays + pin and go – no wallet! until NFC goes mainstream.
Financing, M&A and Valuations 14
Q1 Payments Financing Activity Date Target Investors Amount 2/25/2012 Billmyparents n/a $0.22M 2/22/2012 GoPago JPMorgan Chase & Co. 2/16/2012 Flattr Passion Capital $2.1M 2/16/2012 Quickpay Fontinalis Partners 2/15/2012 Chirpify Upstart labs 2/10/2012 Stripe Sequoia Capital $18M 2/7/2012 Dwolla Thrive Capital, Union Square Ventures, Village Ventures $5M 2/6/2012 MoBeam DFJ Athena $1.5M 1/31/2012 Cardspring Accel Partners, Felicis Ventures, Greylock Partners, Morado $10M Ventures, SV Angels 1/31/2012 Mogl Austin Ventures, Avalon Ventures, Sigma Partners $10M 1/26/2012 HelloWallet Morningstar; TD Fund $12M 1/17/2012 ShopKeep Total Technology Ventures; Tribeca Venture Partners $2.2M 1/12/2012 Jumio Edquardo Saverin $25.5M 1/11/2012 Payoff.com Anthemis Group; FirstMark Capital; Great Oaks Venture Capital $2MM
Q1 Payments M&A Activity Date Target Buyer Amount 2/21/2012 OrcaOne Ingk Labs 2/20/2012 Kima Labs Groupon ~$10-$20M 2/17/2012 Princeton Payment Solutsions Financial Transaction Services, LLC 2/14/2012 WikiPay WikiLoan 2/7/2012 Integral Computers Sage Pay $27M 1/24/2012 eCommlink’s Prepaid Processing Assets Greendot $2.5M 1/20/2012 Mertado Groupon 1/19/2012 CardStar Constant Contact
Payments Public Valuations
Payments Startup Ecosystem 18
Payments Startup Ecosystem – There are Plenty! Prepaid / Cards Cash & SMB Financing / Bill Pay Mobile Payments Consumer Financing Gaming / Virtual Currency / Carrier Niche Transaction Processing Social Payments / Big Data Web Payments/ Loyalty Personal Finance / Gamification Mobile Deals / Loyalty Technology /QRC / POS Acquiring/Gateways