INNOVATION

IN PAYMENTS:
How Data, the Cloud, Mobile
Devices & Smart Card Technology
Will Drive Innovation

David S. Evans
November 4, 2008
Payments are in for some rough times
The payments industry has underperformed
Credit card lenders are sure to suffer more
In grim times, it always gets better
Income has steadily risen, despite bumps in the road
It always looks terrifying at the bottom
Strength comes from weathering storms
So, innovate for the long run
The future of payments innovation
Change is in the air, but will it really occur?
The elusive cashless society…
Check use declines, and eCommerce grows
The pervasive magnetic stripe card
 “Please rank the following aspects of your payment “When I am paying at the checkout I wish I could pay…”
experience by the level of importance to you” (by ranked level of importance)

Can sign the receipt 24% 30% 26% 13% By using my mobile phone 11% 15% 16% 52%

By using a card with multiple functions

Can enter a PIN 25% 28% 25% 13% 12% 24% 27% 20% 18%
(debit, credit, extended payment)

By tapping/waving my card instead of

Information is kept secure 68% 17% 11% 14% 26% 26% 27%
swiping

By typing into the PIN pad without

Offers convenience by being fast 35% 38% 20% 12% 22% 27% 35%
having to swipe

Offers convenience by not confusing

31% 42% 18% Without pulling out a plastic card 12% 21% 33% 29%
me

Can pay with anything I want 24% 42% 21% 9% Without signing a receipt 16% 24% 29% 25%

Consumers pretty much like it the way it is

Innovation for the sake of innovation doesn’t work
Into the 6th revolution in payments…
Change today focuses on the form factor
 Change
It’s in the data.

It’s in the cloud.

It’s in your hand.

Where to look for the revolution

In the U.S. alone, signature authorized transactions represent:

Over 1 billion Change

Cards in circulation It’s in the data.
Over 6 million
Merchant locations It’s in the cloud.

Over 44 billion It’s in your hand.

Transactions each year

Massive amounts of cardholder data

 87% of online consumers agree that less
than a quarter of ads they see online are
Change
relevant to their wants and needs.
It’s in the data.

It’s in the cloud.

It’s in your hand.

People actually like ads that are relevant to them

 Change
It’s in the data.

It’s in the cloud.

It’s in your hand.

Innovation is moving to the cloud

 Change
Merchant
Loyalty
Database Paymen
t
Provider
It’s in the data.
Leverage
Front-End
IPCommerce
Software
Integration
Processors

Transactio
n Data
Front-End
Host
Back-End
Host
It’s in the cloud.
Front-End Back-End
Host Host

Front-End Back-End
Integrated Reporting &
Host Host
Settlement to Merchant

It’s in your hand.

A platform for payments in the cloud

 Change
It’s in the data.

It’s in the cloud.

It’s in your hand.

The ubiquitous mobile phone

 SOUTH KOREA
MOBILE BROADBAND

BANGLADESH
M-COMMERCE

KENYA
COFFEE TRADING

peru Philippines
mobile payments p2p sms payments
& microfinance

Mobile payments around the world

Mashup #1
Mashup #2
Mashup #3
Innovation from the chip: Where could it fit?
Mag stripes and smart cards
The world has moved on
 Developer community

Software platform

• Can live in part on the device, and in part in the cloud

• Must have code, a rich set of APIs

Smart card chip

• Must be part of a real computing device

that people can use to run applications

Smart cards and cloud computing

Must be friendly to application developers
Take the iPhone as a model
Smart cards: An integral role in future mashups
 Failed poster
child of change

Business risk: Chicken and egg problems

Security and fraud: Convincing consumers
 High
Behavior Change Required
Consumer
No Go
Heavy Lifting
Degree of Consumer

Low High

King of the Merchant

Hill Heavy Lifting
Low

Degree of Merchant
Investment & Effort Required

Measuring the tradeoffs

 High
King of the Merchant

“Wow” Factor Level

Hill Heavy Lifting

Low High

Consumer
No Go
Heavy Lifting
Low

Degree of Merchant
Investment & Effort Required

At the heart of transformations to come

Finding the
Wow
Thank You
DAVID S. EVANS
david.evans@marketplatforms.com