Payments from the Future Backwards - Sitemason from the...• Mobile Payments ... Forecast of U.S. Adults’ Mobile Banking Adoption, 2009–2017 . ... © 2013 Javelin Strategy & Research

Payments from the Future Backwards Will Your Bank Play in the Way Consumers Pay?

September 20, 2012

1

©2011 Jack Henry & Associates, Inc. All Rights Reserved.

@leewetherington

Lee Wetherington, AAP Director of Strategic Insight ProfitStars®

Lee Wetherington Director of Strategic Insight

2

• Develops actionable insight and strategy for the financial services industry

• Delivers keynotes nationwide • Technology Faculty Chair and guest

lecturer for graduate banking schools • Authors articles for industry trades • Degrees in Economics and English

from Duke University • Accredited ACH Professional (AAP)

Presenter

@leewetherington

Agenda

• Trends 2013 – The Future of Payments – Checking; Churn; Demographics; “FPM” – 3 Things You Need to Know

• Mobile Payments – Things We Know – Things We Don’t

• How FIs Win the Mobile Wars – Leveraging Data You Have That They Don’t – What That Looks Like – Integrity, Integrity, Integrity

April 17, 2013


3

The future of payments isn’t so much about the

payments…

The future of payments is more about data than

payments…

Payments Data = New Revenue

SO

UR

CE

: McK

inse

y P

aym

ents

Pra

ctic

e

Top Payments Trends in 2013

1. New alternatives at the Point-of-Sale

2. Banks’ position of trust threatened

3. Mobile wallets will be hybrids (NFC/cloud)

4. Retailers challenge payments stakeholders

5. FIs must master their data

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“10

Tren

ds fo

r Fin

anci

al S

ervi

ces

in 2

013:

Fo

rgin

g a

New

Fro

ntie

r for

Ban

king

, Pay

men

ts, M

obile

, and

Sec

urity

”; Ja

nuar

y 20

13

Death of Checking Emergence of the “DeBanked” & the Rise of “NeoChecking”

9

Check Use Declines

61% 56 %

51 % 47 %

38 % 34 %

31 % 30 % 26%

23 %

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Fiserv 2011 Consumer Trends Survey

Percent of payments paid by check

Overdraft Volumes Remain High

Source: Moebs Services, FDIC, NCUA, OCC, Federal Reserve

$0

$10

$20

$30

$40

2007 2008 2009 2010 2011

Overdraft Revenue (US$ billions)

SO

UR

CE

: Aite

; “Tr

ends

in R

etai

l Ban

king

”; R

on S

hevl

in; M

arch

201

3

2009: Worth Switching to Prepaid?

$(2,100)

$(1,600)

$(1,100)

$(600)

$(100)

$400

$900

$1,400

$1,900

Potential savings to checking account holders from switching to prepaid debit cards

18% would save

Median savings (US$)

Source: Aite Group

82% would be worse off

SO

UR

CE

: Aite

; “Tr

ends

in R

etai

l Ban

king

”; R

on S

hevl

in; M

arch

201

3

Monthly Account Fees Up…

Source: Bankrate.com

$ -

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

1998 2000 2002 2004 2006 2008 2010 2012

Average Monthly Service Fees on Checking Accounts

SO

UR

CE

: Aite

; “Tr

ends

in R

etai

l Ban

king

”; R

on S

hevl

in; M

arch

201

3

ATM Fees Up…

Average ATM Fees on Non-Customers

$ -

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00


1998 2000 2002 2004 2006 2008 2010 2012

SO

UR

CE

: Aite

; “Tr

ends

in R

etai

l Ban

king

”; R

on S

hevl

in; M

arch

201

3

…and interest rates are down

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

2001 2003 2005 2007 2009 2011

0.79%

0.08%


Average Checking Account Yield

SO

UR

CE

: Aite

; “Tr

ends

in R

etai

l Ban

king

”; R

on S

hevl

in; M

arch

201

3

The “Debanked”

Mainstream consumers who willingly opt out of the traditional banking system

SOURCE: Aite; “Trends in Retail Banking”; Ron Shevlin; March 2013

“NeoChecking” Accounts

Characteristics of “NeoChecking”

• Mobile-first design • PFM the focus, not the add-on • Blending prepaid, debit, and credit

– Functions/transitions from one to the other do not require closing/opening of accounts


Branch Facts

• Self-service reduces branch traffic dramatically

• Deposits are 25-30% of image ATM transactions

– 40% of deposit-taking ATMs are image enabled

• Daily per-branch deposits will decline from 250/day to 50/day by 2016. (Celent)

• 23% of banks expect branch contraction over the next five years

– No credit unions expect branch contraction

SOU

RC

E: C

elen

t; “T

OP

TREN

DS

IN R

ETAI

L B

ANK

ING

201

3”

By

Bar

t Nar

ter a

nd th

e C

elen

t Ban

king

Tea

m; D

ecem

ber 1

2, 2

012

Online Banking & BillPay Forecast

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“201

2 O

nlin

e B

anki

ng a

nd B

ill-P

aym

ent

Fore

cast

:: H

ow to

Boo

st P

rofit

abili

ty W

hen

Faci

ng F

lat-L

inin

g A

dopt

ion”

; Aug

ust 2

012

60

81

92

32

44 52 41

47

-

10

20

30

40

50

60

70

80

90

100

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Milli

ons o

f Onl

ine

Hou

seho

lds

Actual Forecast© 2012 Javelin Strategy & Research

Banked online

Actual Forecast© 2012 Javelin Strategy & Research

Paid at biller site

Paid at FI site

Banked online

53

Mobile Banking

77% Adults Own Smartphones by 2017

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“201

2 M

obile

Ban

king

, Sm

artp

hone

, and

Tab

let F

orec

ast:

M

obile

Ban

king

Gai

ns 1

0 M

illio

n U

sers

as

Sm

artp

hone

and

Tab

let A

dopt

ion

Soa

rs”;

Dec

embe

r 201

2

Forecast of U.S. Adults’ Smartphone Adoption, 2009–2012

Mobile Banking Rides Smartphone Rev

Jave

lin S

trate

gy &

Res

earc

h: “2

011

Mob

ile B

anki

ng, S

mar

tpho

ne a

nd T

able

t For

ecas

t: M

obile

Ban

king

Mov

es M

ains

tream

to M

id-s

ized

, Com

mun

ity B

anks

and

Cre

dit U

nion

s”; D

ecem

ber 2

011

202182

202 205 209 212 216 219

36 35

5768

7989

99111

43

66

90102

114127

142158

0

50

100

150

200

250

2009 2010 2011 2012 2013 2014 2015 2016

Mobile users (in millions)

Mobile banking users in the last 12 months

Smartphone owners

Base: US adults with mobile phone.© 2011 Javelin Strategy & Research

Actual Forecast

Num

ber o

f mob

ile p

hone

use

rs (i

n m

illio

ns)

U.S. Mobile and Mobile-Banking Users, 2009–2016

Android Widens Lead in Mobile OS

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“201

2 M

obile

Ban

king

, Sm

artp

hone

, and

Tab

let F

orec

ast:

M

obile

Ban

king

Gai

ns 1

0 M

illio

n U

sers

as

Sm

artp

hone

and

Tab

let A

dopt

ion

Soa

rs”;

Dec

embe

r 201

2

Forecast of U.S. Adult Smartphone Owners by Device OS Type, 2009–2017

Mobile Bankers Double in Next 5 Years

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“201

2 M

obile

Ban

king

, Sm

artp

hone

, and

Tab

let F

orec

ast:

M

obile

Ban

king

Gai

ns 1

0 M

illio

n U

sers

as

Sm

artp

hone

and

Tab

let A

dopt

ion

Soa

rs”;

Dec

embe

r 201

2 Forecast of U.S. Adults’ Mobile Banking Adoption, 2009–2017

Tablets: 52% of Mobile Adults by 2017

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“201

2 M

obile

Ban

king

, Sm

artp

hone

, and

Tab

let F

orec

ast:

M

obile

Ban

king

Gai

ns 1

0 M

illio

n U

sers

as

Sm

artp

hone

and

Tab

let A

dopt

ion

Soa

rs”;

Dec

embe

r 201

2 Forecast of U.S. Mobile Adults Who Use Tablets, 2011–2017

Switchers: Sizing Churn

& Opportunity

Big Banks Vulnerable to Switching

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“Onl

ine

Ban

king

and

Bill

Pay

For

ecas

t Rev

iew

201

2”; S

epte

mbe

r 201

2

Javelin Benchmark™: Likelihood to Switch Primary FIs in Next 12

Potential Switchers • 11% of consumers in 2012 plan to switch FIs

– 25% of Citibank customers; 21% of BoA customers

• Maintain 30% more deposits than consumers who do not plan to switch – Represent $675B in deposits

• Willing to pay $92M in fees – Money orders; cashier’s checks, safe deposit boxes, and

mobile remote deposit.

• Place a premium on personal finance and simplicity (Javelin Strategy & Research)

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“201

2 O

nlin

e B

anki

ng a

nd B

ill-P

aym

ent

Fore

cast

:: H

ow to

Boo

st P

rofit

abili

ty W

hen

Faci

ng F

lat-L

inin

g A

dopt

ion”

; Aug

ust 2

012

“Generations impact the economy.” John Augustine, CFA Chief Market Strategist Fifth Third Bank

Gen Y.1 Gen Y.2

18-24 25-34

PFM Demand by Age

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“21s

t-Cen

tury

PFM

for a

Mas

s A

udie

nce:

H

ow to

Bui

ld E

very

day

Onl

ine

and

Mob

ile P

FM’;

Febr

uary

201

3

PFM Demand by Income

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“21s

t-Cen

tury

PFM

for a

Mas

s A

udie

nce:

H

ow to

Bui

ld E

very

day

Onl

ine

and

Mob

ile P

FM’;

Febr

uary

201

3

PFM or FPM?

SOURCE: Ron Shevlin’s Snarketing 2.0 Blog; “PFM is Dead, Long Live FPM”; http://snarketing2dot0.com/2012/09/24/pfm-is-dead-long-live-fpm/

• Monthly fees

Costs Benefits

• Penalties

• Service fees

• Interest earned

• Rewards redeemed

• Savings generated

TBO: Total Benefits of Ownership


“Account aggregation and budget creation/tracking is great, but unless it changes behavior…then the potential impact of PFM is unfulfilled. Too many consumer advocates focus on financial literacy. Knowledge without action, or change in behavior, is useless.”

SOURCE: Ron Shevlin; Snarketing 2.0; “Finance Dot Data Dot Gov”; http://snarketing2dot0.com/2012/09/28/finance-dot-data-dot-gov/

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“21s

t-Cen

tury

PFM

for a

Mas

s A

udie

nce:

H

ow to

Bui

ld E

very

day

Onl

ine

and

Mob

ile P

FM’;

Febr

uary

201

3

Moneyhawks and Gen Y.2 More Likely to Use Non-Bank PFM

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“21s

t-Cen

tury

PFM

for a

Mas

s A

udie

nce:

H

ow to

Bui

ld E

very

day

Onl

ine

and

Mob

ile P

FM’;

Febr

uary

201

3

16%20%

21%23%

29%29%30%30%31%31%

34%36%37%38%38%38%

49%

0% 10% 20% 30% 40% 50% 60%

Social-network shopping recommendations Archive business expenses

Investment toolsMotivational alerts

Automatic budget categorizationFinancial plannning tools

Cash-flow estimatorGPS-based merchant discountsCard-reward recommendations

Record cash purchasesPrice-change alerts

View finances on a calendar Comparison pricing

Personal finance alertsRewards reminders

Earn points or enter sweepstakes View all account balances

Percent of consumersQ17: Please indicate your likelihood of using the following products or services if they were available to you. Q18: Please indicate your likelihood of using the following products or services if they were available to you. Q19: New applications and services are becoming available, Please indicate your likelihood of using the following products or services if they were available to you.

August 2012, n = 3,000Base: All consumers.

© 2013 Javelin Strategy & Research

Tier 1

Q17: Please indicate your likelihood of using the following products or services if they were available to you. Q18: Please indicate your likelihood of using the following products or services if they were available to you. Q19: New applications and services are becoming available, Please indicate your likelihood of using the following products or services if they were available to you.



Tier 4

Tier 3

Tier 2

Most Desireable PFM Features

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“21s

t-Cen

tury

PFM

for a

Mas

s A

udie

nce:

H

ow to

Bui

ld E

very

day

Onl

ine

and

Mob

ile P

FM’;

Febr

uary

201

3

49%

54%

54%

56%

57%

57%

57%

58%

62%

0% 10% 20% 30% 40% 50% 60% 70%

All consumers

Smartphone owners

$75,000 - $99,999

$150,000 or more

$100,000 - $149,999

Online Banking Loyalists

Tablet owners

Mobile bankers

Moneyhawks

Percent of consumers

Q18A: Please indicate your likelihood of using the following products or services if they were available to you: View all your account balances in one place. A: Probably would use/Definitely would use.

August 2012, n varies: 324 - 3,000Base: Moneyhawks; Mobile bankers in the past 90 days;

Tablet owners; Online banking loyalist; Consumers by income; Smartphone owners; All consumers.


Who Wants It All in One Place?

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“21s

t-Cen

tury

PFM

for a

Mas

s A

udie

nce:

H

ow to

Bui

ld E

very

day

Onl

ine

and

Mob

ile P

FM’;

Febr

uary

201

3

38

50

52

58

0 10 20 30 40 50 60 70

Plan

Buy

Shop

Spend

Points (100-point scale)

Q21: Please rank the categories based on your likelihood of using the types of products and services included under them.



Spend, Shop, Buy, Plan PFM Features Ranked by Financial Chores

SOURCE: Javelin Strategy & Research; “21st-Century PFM for a Mass Audience: How to Build Everyday Online and Mobile PFM’; February 2013

Spend, Shop, Buy, Plan

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“21s

t-Cen

tury

PFM

for a

Mas

s A

udie

nce:

H

ow to

Bui

ld E

very

day

Onl

ine

and

Mob

ile P

FM’;

Febr

uary

201

3

38%44%44%45%

51%50%

53%51%

52%53%54%56%56%57%

56%57%

62%

0% 20% 40% 60% 80%

Social-network shopping recommendations Archive business expenses

Investment toolsMotivational alerts

Automatic budget categorizationFinancial plannning tools

Cash-flow estimatorGPS-based merchant discountsCard-reward recommendations

Record cash purchasesPrice-change alerts

View finances on a calendar Comparison pricing

Personal finance alertsRewards reminders

Earn points or enter sweepstakes View all account balances

Percent of consumers

Moneyhawks

Gen Y.2

$100,000 - $149,999

All consumers

Tier 1

Tier 2

Tier 3

Tier 4

Q17: Please indicate your likelihood of using the following products or services if they were available to you. Q18: Please indicate your likelihood of using the following products or services if they were available to you. Q19: New applications and services are becoming available, Please indicate your likelihood of using the following products or services if they were available to you.

August 2012, n varies: 548 - 3,000Base: Moneyhawks; Consumers aged 25 - 34;

Consumers a household income of $100,000 -$149,999; All consumers.


Moneyhawks: Highest PFM Interest

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“21s

t-Cen

tury

PFM

for a

Mas

s A

udie

nce:

H

ow to

Bui

ld E

very

day

Onl

ine

and

Mob

ile P

FM’;

Febr

uary

201

3

Post-Durbin Payments

IMAGE SOURCE: www.shutterstock.com

Lemons and Lemonade

• The Lemons – Dodd-Frank increases regulatory burden – Recession raises unemployment – Durbin amendment shifts power to merchants – Non-FI 3rd parties lead mobile payments evolution

• The Lemonade – Dodd-Frank targets biggest FIs – Unemployment creates churn in banking – Durbin creates competitive carve-out for FIs under $10B – Consumers prefer primary FI for mobile wallets/payments

IMAGE SOURCE: www.shutterstock.com

Interchange Wars: Drivers

• Interchange Lawsuit Settlement – A clear win for MasterCard and Visa networks

• Prevents future legal action against the 2 networks

• Enables merchant surcharging at the POS in 40 states where allowed

– Likely to deter further legal regulatory action – Merchants must address interchange expense

management in the marketplace

• Shifts in consumer and merchant behaviors – Movement to digital channel and mobile payments – Creates a conduit for new competitive entry at the POS

SO

UR

CE

: Aite

; “Tr

ends

in R

etai

l Ban

king

”; R

on S

hevl

in; M

arch

201

3

Interchange Wars: Outcomes

• Alternative payment acceptance providers gain traction in retail locations

• Merchants drop the surcharge banter

• Merchant MCX network formed

• Merchants will try to take control of the digital wallet environment

SO

UR

CE

: Aite

; “Tr

ends

in R

etai

l Ban

king

”; R

on S

hevl

in; M

arch

201

3

Payments Revenue

SO

UR

CE

: FD

IC =

Com

mer

cial

Ban

king

; Fi

rm P

aym

ents

Map

= P

aym

ents

; B

EA

= A

gric

ultu

re, H

otel

s, A

irlin

es, I

T, F

ilm/M

usic

1 Payments revenues are from 2011

Consumer DDA Profit Margins Down

SO

UR

CE

: McK

inse

y U

S P

aym

ents

Map

, Q3-

11 re

leas

e, B

ase

Cas

e sc

enar

io

Regs Cut $120B in Revenue thru 2016

1 Lost revenue assumes pre-regulatory interchange rates and NSF/OD occurrences

SO

UR

CE

: McK

inse

y U

S P

aym

ents

Map

, Rel

ease

Q1

2012

; Bas

e C

ase

scen

ario

Can’t Close Rev Gap w/ Tweaks SOURCE: McKinsey US Payments Map, Release Q1 2012; Base Case scenario

How much have exempt banks lost in debit fee income?

Debit Interchange Rates After Durbin

SOURCE: Oliver Wyman/PULSE 2012 Debit Issuer Study

Consumer Debit Card Usage/Spend Consumer Debit Card Usage and Annual Spend, 2010 and 2011

SO

UR

CE

: Oliv

er W

yman

/PU

LSE

201

2 D

ebit

Issu

er S

tudy

Debit Growth in 2012


Biggest Opportunities: Exempt Issuers


Prepaid & Gift Cards Grow Rapidly

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch:

“5th

Ann

ual O

nlin

e R

etai

l Pay

men

ts F

orec

ast 2

012–

2017

: M

obile

and

Alte

rnat

ive

Pay

men

ts A

re C

hang

ing

the

Gam

e”;

Nov

embe

r 201

2

Comparative Card Revenue Source Credit Debit Prepaid Basic Fees • Annual • N/A (most fees tied to

linked checking account) • Activation • Monthly

Other Fees • Sin (overdraft, late payment, returned payment)

• Int’l transx • Cash W/D

• Foreign ATM • ATM W/D • Load • Inquiry • Bill Payment • Card replacement

Interest • 0-35%+ (rate increases w/ delinquency)

• N/A • N/A

Interchange • Varies by type and volume

• ≈2% + $0.10/trx

• $0.21 + .05% (unless exempt, then ≈ 1.65% + $0.15/trx

• Varies by type (unless bill pay offered then same as debit)

• ≈1.5% + $0.20/trx

Other • N/A • Float (for linked checking account)

• Float • Break (≈8%)

Annual Revenue

• $175-$250 • $4.50-$5.00 • $100-$125

SOU

RC

E: N

ACH

A’s

The

Paym

ents

Inst

itutie

; “C

redi

t Car

ds v

s D

ebit

Car

ds v

s

Prep

aid

Car

ds”;

July

15-

18 2

012;

Uni

vers

ity o

f Tex

as a

t Aus

tin, T

X

Exemption Spawns Innovation

What class of payments networks were specifically exempted from Durbin?

Name the three companies who’ve made the biggest headlines in payments innovation in recent months.

• Visa’s PIN-Authenticated Visa Debit (PAVD) • Fixed Acquirer Network Fees (FANF) • EMV • Credit Card Surcharging • $7B “Swipe Fee” Settlement • Merchant Customer Exchange (MCX) • PayPal at the POS (via Discover partnership) • Discover in the News

– Offer Checking Accounts? – Discover Signature Debit Cards for FIs

Headwinds and Wildcards

Mobile Payments?

So some think the big question is…

Swipe, Dip, Tap

How to reduce “time suck”?

Time Suck?

Coffees, Burgers & Dongles, Oh My!


Evolution and The End Game

Mobile Banking

Mobile Payments

Mobile Marketing

Things We Know

Mobile Bankers Open to Mobile Wallets

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“Bat

tle fo

r Con

trol o

f the

Mob

ile W

alle

t”; S

epte

mbe

r 201

2

10%

25%

21%

38%

31%

27%

14%

6%

24%

4%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

All mobile consumers

Mobile bankers past

90 days

Percent of Mobile Consumers

Very likely Somewhat Likely Neutral (neither unlikely nor likely) Somewhat Unlikely Very unlikely

Q29_B: If a mobile wallet were made available to you, how likely would you be to adopt this technology in the next twelve months?

June 2012, n= 872, 3,492.Base: A consumers who have mobile banked in

the past 90 days, all mobile phone owners.©2012 Javelin Strategy & Research

Mobile Buys of Physical Goods Triples

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“Bat

tle fo

r Con

trol o

f the

Mob

ile W

alle

t”; S

epte

mbe

r 201

2

Purchasing Pattern on Mobile Devices

Mobile POS to Grow 25% Annually

SO

UR

CE

: Jav

elin

Stra

tegy

& R

esea

rch;

“Bat

tle fo

r Con

trol o

f the

Mob

ile W

alle

t”; S

epte

mbe

r 201

2 Mobile POS Purchase Dollar Volume Forecast, 2011–2017

Financial, mobile, and retail ecosystems are converging…

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Note: The trust, innovation, and privacy scores for Isis were derived from averaging the scores for the three mobile network operators involved in the project, AT&T, T-Mobile and Verizon.

Biometrics converging with payments…

Speak & Pay

“Nina”

Face and Voice Authentication

April 17, 2013 85


What Voice Means for Payments

• Better design of User Interface/Experience

– Removing the need for the keyboard frees up more of the screen to display information

– You can speak and see simultaneously

• Voiceprints for biometric authentication

– Harder for thieves to grab voices than PINs


86

Physical and virtual worlds are converging…

Mobile Converges Physical & Virtual

Physical Virtual

Physical & Virtual Collide!

Physical Virtual

Preference for Wallet Providers

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1%1%1%

2%2%

3%3%3%3%

4%4%4%

5%5%

6%6%

8%9%

13%15%

0% 10% 20%

FacebookCitibank

MicrosoftWal-MartU.S. Bank

AmazonDiscover

GoogleSprint

T-MobileApple

American ExpressWells FargoMasterCard

Bank of AmericaChaseAT&T

VerizonPayPal

Visa

All Mobile Phone Owners

Q29_A: If you were choosing a mobile wallet provider, which of the following would you be most likely to choose?

June 2012, n=3,492.Base: All mobile phone owners.

©2012 Javelin Strategy & Research

Consumer Use of PayPal Grows

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47%

52%

0% 10% 20% 30% 40% 50% 60%

2010

2011

Percent of Consumers

Q38. Which of the following types of alternative payments have you used for an online purchase? PayPal

August 2011, n=2,304, 4,998.Base: All consumers.

©2012 Javelin Strategy & Research

Things We Don’t Know

Which mobile payments techs, channels, and functions will prevail?

Bank’s Role in Mobile POS

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FIs Play Different Roles in Different NFC Solutions

PROBLEM 1: Most likely NFC models

do not put banks in control.

PROBLEM 2: Complexity of NFC

models forestall their adoption.

NFC Requires Complex Collaboration

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© 2012 Javelin Strategy & Research 4

Secure Element(Credentialing)

NFC Chip(SIM or

Embedded)

Wallet(Rewards, Loyalty, Payments, Keys,

Tickets)

Merchant POS

Payment Networks

Issuer TSM

Secure Element

TSM


NFC (SIM or Embedded) Model

Transact

Load

Acquiring Bank

Issuing Bank

PROBLEM 3: So what to do

before/while/if NFC arrives?

Mobile Wallet Tech Trajectory

Cloud NFC

The

BIG Question

Who will control and monetize mobile marketing of payments data?

Isis Wallet

Google Wallet

How much is at stake?

$1 Trillion

SOU

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Mobile Wallet Demand Weak…

Source: Aite Group survey of 1,115 US consumers, Q2 2012

Discover

Facebook

American Express

Apple

Google

MasterCard

PayPal

Visa

Amazon

Very interested Somewhat interested

Q. How interested are you in having a mobile wallet from the following companies?

18%

18%

16%

15%

14%

12%

11%

11%

10%

21%

22%

22%

19%

19%

15%

16%

16%

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…But Mobile Shopping Demand Strong

Source: Aite Group survey of 1,115 US consumers, Q2 2012

Q. Which of the following mobile shopping capabilities are important to you?

Connects to social networks

Offered by my primary bank

Shows product reviews

Offered by company I know/trust

Offered by stores I shop at

Offered by company I know/trust

Provides very steep discounts

Finds the lowest price 72%

72%

70%

70%

67%

62%

50%

34%

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• 33% of all households and 50 percent of smartphone users are aware of e-wallet products.

• 25% of households hold positive views of e-wallets, 33% are neutral, the remainder are negative — generally due to concerns about e-wallet security.

• 20% of households that were previously aware of the products and 25% of existing smartphone users would use a digital wallet.

• More than 75% of interested users would prefer e-wallet services from their primary financial institution.

Digital Wallet Stats

109

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Source: Study: Customers want their banks to offer e-wallets Mobile Payments Today

Big Data?

Big Data? No, FI Data!

• FIs must begin to understand their own data. – That’s where the value is.

• Transaction data can tell an FI... – …what other financials institutions customers use. – …what financial products/services they use. – …how much they pay to use other financial services. – …where they shop, how often, and how much they

spend.

• Behavioral analysis is already necessary to bolster security, why not tap the same analysis to better understand and serve customers/members?

Beware what happens to your

data.

Google Wallet: Merchant of Record SOURCE: Citi GPS: Global Perspectives & Solutions; “UPWARDLY MOBILE II A

Long and Winding Roadfor Mobile Payments – Eight Crucial Questions,

Answered”; November 2012

PayPal: Merchant of Record

SOURCE: Citi GPS: Global Perspectives & Solutions; “UPWARDLY MOBILE II A

Long and Winding Roadfor Mobile Payments – Eight Crucial Questions,

Answered”; November 2012

Your data uniquely enables you to provide value with

integrity…

…integrity

wins the race…

Who Wins the Mobile/Data Wars?

• Google? – “Here’s a business who sells what you’re looking for.”

• Amazon? – “Buy whatever you’re looking for from us.”

• Merchants? – “Buy, Buy, Buy!!!”

• Financial Institutions? – “We’ll help you decide whether, when, and where it

makes sense to buy the stuff you want…in real time.”

119


“Help Me Decide”

“Account aggregation and budget creation/tracking is great, but unless it changes behavior…then the potential impact of PFM is unfulfilled. Too many consumer advocates focus on financial literacy. Knowledge without action, or change in behavior, is useless.”

SOURCE: Ron Shevlin; Snarketing 2.0; “Finance Dot Data Dot Gov”; http://snarketing2dot0.com/2012/09/28/finance-dot-data-dot-gov/

Lee Wetherington, AAP [email protected] http://discover.profitstars.com/leewetherington

http://twitter.com/leewetherington

http://www.linkedin.com/in/leewetherington

Documents

Payments from the Future Backwards - Sitemason from the...• Mobile Payments ... Forecast of U.S. Adults’ Mobile Banking Adoption, 2009–2017 . ... © 2013 Javelin Strategy & Research