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Emerging Technologies In Payments
Welcome to the MAG!
Wednesday, February 12, 2014
Technology Got You Down?
John MacAllister
(Dorado Industries)
Got a Headache Yet?
Feel Better Now?
Technology Driver Model –Demand Side
QkR
Address Unique Vertical Market
Needs
PCI Avoidance
5
Zoosh!
Eliminate Check Out Lines and POS
Technology Driver Model – Supply Side
Fill A Need
Lots of Young People
Too Much Money
Who doesn’t believe that today’s payments
system needs to be tweaked?
Lots of hotshot entrepreneurs. Can’t these guys just get a
job?
One third of payments conference attendees are VC and PE touts.
2014: Control of the Customer Relationship Trumps Everything
Address Unique Vertical Market
Needs
PCI Avoidance
Eliminate Check Out Lines and POS
Win The Customer
Relationship Battle!
Technology Outlook
Merge to the Middle: E-commerce and physical commerce providers will invade each other’s space.
Mobile clutter: Dongles, sheaths, tablet stands, and tags will contribute to accelerated adoption of the mobile form factor.
Beacon roll-out: Others will join current incumbents to offer robust communications between consumers and merchants.
Bitcoin: Or a reasonable facsimile.
Payments and Loyalty Hardware
Mobile Wallets
Mobile Payments
Merchant Dashboard
Mobile Authentication
Merchant Acquiring
Experience
Payments Networks
Retailer Cash Handling
M-commerce and Loyalty
Loyalty and Payments Network
Technology Showcase
Win The Customer
Relationship Battle!
10
Moving From Business Plan to Business
39 merchants representing 70 brands have invested
11
Representative Sample of Brands
110,000 locations
> $1.2T in Payments
5M Employees >450M Weekly Engagements
12
BROAD PAYMENT CHOICES Multiple options at launch with expanded offerings fast following
Centralization of best offers, digitization of loyalty and receipts
PERSONALIZED BENEFITS
110,000+ locations, all sectors and purchase occasions of retail
WIDE ACCEPTANCE
Cloud-based platform & tokenized customer data
CREDIBLE SECURITY
MCX’s value proposition addresses customers’ four key needs
13
Announcement: Major Expansion in QSR
6,500+ Locations
$2.5B in Revenues
40,000+ Employees
14
Announcement: Exciting New Technology Partnership
Payment Capabilities
Core Wallet Platform
Value-Added Services
Retailer’s Own Mobile Wallet
Chris Gardner, Paydiant, Inc.
February 12, 2014 – 8:35am
• There will be no “One Wallet App to Rule The All”
• The mobile “wallet” is a MARKETING platform – not a payments platform
• Most mobile payments providers separate retailers from their customers (and their data)
• Data (and thus marketing) will become the economic underpinnings of the payments ecosystem
• Payment credentials belong in the cloud, not spread across millions of phones and retailers
What we believe
17
“Meta” Wallets
Branded/White-label Retail Wallets
Few, if any of these will get traction…
But, these will proliferate… Retailer-friendly “meta” wallets too.
MCX, eventually banks
• Data
– The wallet is a MARKETING platform and no one should be willing to concede it
– The economics of payments are shifting to a data-based economy
• Brand
– Payment is the culmination of the in-store experience
– Check-in >> Offers >> Shop >> Loyalty >> Check-out (payment) >> Receipts
• Customer
– Loyalty is core to retailers mobile efforts
– Mobile turns anonymous users into KNOWN users
• Fees
– Interchange
– Liability
Why so many wallets?
18
• Part 1 – Ads, Offers and Loyalty
– Marketing, not payment fees will drive the economics of the mobile
– Lets retailers profit from their own data
– Most meta-wallets are after the data, ads and offers opportunity
• Part 2 – Tender Steering
– The issuer of the “wallet” can encourage the use of friendly tender types
– The Durbin Amendment and dramatically lower debit fees makes this even more compelling
– NEWS FLASH: Will the recent Durbin “reversal” kill ACH…again?
The Mobile Wallet Economy
19
Fuel • Locator • Pay-at-pump • Pay-in-store • Fuel perks • Loyalty
Dining • Reservations • Pay-at-table • Loyalty • Payment
Quick Service • Ordering • Delivery • Loyalty • Coupons • Payment
Payment is the least interesting part of the equation!
20
Retail • mCommerce • Messaging • Loyalty • Coupons • Payment
• Sharing our card credentials with hundreds of merchants is insecure, costly and obsolete
– Besides, merchants have had it with PCI
• Account credentials should not be on the phone
• Reusable, high-value tokens should not be on the phone
• Mobile provides an opportunity to do much better — and we should
– Fully tokenized
– Cloud-based
– Multi-factor authenticated
– Software-only
A word about mobile payment security
21
• Business Model Challenges
– Too many mouths to feed in NFC ecosystem
– Data sharing agreements…YUCK!
• Hardware based approaches are expensive!
– NFC/EMV requires new POS hardware AND new phones.
– Some QR code models require handheld scanners
• Software models require integration with POS
– Very fragmented space
– Frequently ancient POS systems
• Analysis paralysis
– Retailers waiting to see “who’s going to win”
– Large players and hundreds of startups knocking on the door
Where is the friction?
22
• It is your customer, your brand, your data and your app
– The mobile wallet MUST be part of your existing mobile efforts
• Mobile is Marketing, so don’t wait
– Get moving now, even on a small scale
• It’s not just payments
– Users will not come if it is only payments
– Swipe still works!
• Avoid a hardware-centric approach
– Too expensive and too long to wait
• Be safe…leverage the cloud
What’s the path forward?
23
• The mobile DEVICE is the new wallet and like today, there will be options
• Retailers will aggressively take control of their own mobile wallets to:
– Protect their data
– Extend their mobile marketing efforts
– Preserve brand equity
– Get better economics
• Account credentials belong in the cloud, not on the phone
– Sharing card numbers with retailers is obsolete and insecure
Closing Thoughts
24
My Mobile “Wallet”
• Your brand, your customers, your mobile wallet
– Mobile payments, loyalty, offers and cash access at ATMs
• ~$40M in venture funding
– 3rd payments company for founding team
• Many key partnerships
– Retail: MCX, Subway, Harris Teeter, Orange Leaf
– Financial: Barclaycard, Capital One, Bank of America, Vantiv, Pulse
– Technology: FIS, Diebold
• 20+ point-of-sale platform integrations and counting
• Track record of innovation
– Mobile Payments patent issued Feb. 2013
– Mobile ATM Cash Access patent issued Jan. 2014
Paydiant Summary
25
Networks Panel (replaced PayPal)
Amy Parasons (Discover)
Karen Czack (AMEX)
Eduardo Perez (Visa)
Dan Kramer (Shazam)
Networking Break 9:40 a.m. – 10:10 a.m.
Upcoming MAG Webinars
March Alternative Routing
May Payroll & Prepaid eCards June Mobile – What’s the Latest News?
July Legal Update
AnyWhereMobile Reducing Interchange by 50%
Jeff Chen – Vice President Business Development
Wednesday, February 12th, 2014 10:10 am EST
Proprietary and Confidential
Who is MShift? 15 Years of Mobile Banking and Innovation
AnyWhereMobile Closed Beta We want to get merchants excited about the AnyWhereMobile Closed Beta.
… will reduce debit interchange rates by 50%. … integrates with merchant loyalty and reward programs. … is a new payment network built on modern mobile infrastructure. … is not affiliated with legacy networks and associations.
Mobile Solutions for Financial Institutions For 15 years, MShift has been building consumer facing mobile solutions for banks and credit unions. Our customers stretch across the entire US, including Hawaii and Alaska.
Proprietary and Confidential
Mobile Payments
MOBILE END TO END
Proprietary and Confidential Proprietary and Confidential
Mobile Payments
What Do Merchants Really Need?
2. Integration with Your Reward and Loyalty Programs
1. Reduced Interchange Fees
Proprietary and Confidential Proprietary and Confidential
Mobile Payments
… but what’s at the Core?
Mobile at POS!
Coupons!
Security!
Rewards!
Loyalty!
Big Data!
Hmm… sounds great…
What Mobile Payment Solutions Are Being Offered Today?
Proprietary and Confidential Proprietary and Confidential
Mobile Payments
H i g h C o s t s S e c u r i t y I s s u e s
POS Network Issuing FI Processor Processor
Mobile Payments as a Wrapper Architecture for Today’s Payment Networks…
D
u
a
l
A
u
t
h
L o w C o s t
Issuing FI
Network
POS
Mobile
… can be re-imagined!
Proprietary and Confidential Proprietary and Confidential
Mobile Payments
Security: Static Card Numbers are Dangerous
Payment Tokenization
Device
Network & “Cloud” Database
POS
Wrapper AnyWhereMobile
POS Transaction
Security
Network Security
Feature Set
Payment Tokenization Payment Tokenization
Static card numbers identify the payment vehicle and can be easily compromised through countless channels.
No card numbers needed throughout the entire payment ecosystem. Phone, location, and PIN data required for all transactions.
Proprietary and Confidential Proprietary and Confidential
Mobile Payments
Cost: Network and Middleman Fees are Expensive
POS Network Issuing FI Processor Processor
Wrapper Architecture High Cost
AnyWhereMobile Architecture
Issuing FI
Network
POS
Mobile
Low Cost
Proprietary and Confidential
Mobile Payments
Debit Interchange Pricing Schedule
Durbin Regulated: $0.12 / tx
Non-Regulated: $0.21 / tx
Proprietary and Confidential Proprietary and Confidential
Mobile Payments Deadlock Big Banks, Consumers, and Merchants
Question: Why has adoption of mobile payments been so slow in the US?
Stakeholder Mobile Payments
Business Objective
Mega Banks Payment Networks
Maintain status quo Preserve interchange revenue streams
Merchants Reduced transaction cost
Consumers Best rewards / offers programs
Answer: Misaligned business objectives!
Proprietary and Confidential Proprietary and Confidential
A New Era of Issuance The Emerging Role of Local Banks and Credit Unions
Good News! There’s a fourth stakeholder with the infrastructure to replace the mega banks.
Stakeholder Mobile Payments
Business Objective
Mega Banks Payment Networks
Maintain status quo Preserve interchange revenue streams
Community Banks Credit Unions
Abandon high cost plastic Offer competitive transaction processing
Merchants Reduced transaction cost
Consumers Best rewards / offers programs
Let’s build this partnership! Fun Fact: There are over 14,000 FIs in the US!
Proprietary and Confidential Proprietary and Confidential
A New Era of Issuance The Emerging Role of Local Banks and Credit Unions
Debit Card Margins are Shrinking for Local Banks and Credit Unions
Plastic is Expensive
- Lack economies of scale - High fraud costs
- Thin profit margins
Durbin
- Exemption not effective - Price pressure driving
down revenue
A New Infrastructure is Needed
o Leverage mobile technology to reduce fraud o Maintain net margin per debit transaction o 50% reduction in interchange fees o Merchant controlled rewards, offers, and coupons
Proprietary and Confidential Proprietary and Confidential
National Outlook Market Opportunity of AnyWhereMobile
Total Debit Interchange – 2011 Q4 Analysis of debit card transactions across Regulated and Non-Regulated Issuers.
Data taken from: Board of Governors of the Federal Reserve System 2011 Interchange Fee Revenue, Covered Issuer Costs, and Covered Issuer and Merchant Fraud Losses Related to Debit Card Transactions. March 5, 2013.
Durbin-Regulated Non-Regulated
- 131 largest financial institutions - Over $10 billion in Assets
- 14,000 regional and community focused banks and credit unions
7.81 (64%)
4.33 (36%) Durbin-Regulated Non-Regulated
$1.84 (50%) $1.83 (50%)
Durbin-Regulated Non-Regulated
Proprietary and Confidential
Mobile Payments
Demo
Proprietary and Confidential
Mobile Payments
AnyWhereMobile API Deployment
ABC FI
123 Retail
ABC FI
123 Retail
123 Retail
Order Summary Gadget: Gizmo: Whatsit Total: Payment Options
$43.00 $12.00 $11.00 $66.00
123 Gift Card AWM (ABC FI) VISA MasterCard
In App Mobile Payment
Work Flow 1. 123 Retail & ABC
FI Apps are installed.
2. AWM API is used at checkout to detect AWM enabled Apps.
3. AWM payment option is presented as a tender choice.
Work Flow 1. 123 Retail & ABC
FI Apps are installed.
2. AWM API is used at checkout to detect AWM enabled Apps.
3. Customer scans QR code at register.
In Store Mobile Payment
ABC FI
123 Retail
ABC FI
123 Retail
123 Retail
Scan the AWM QR Code at the Register
Proprietary and Confidential
Fill Out the Survey to Win an iPad!
Thanks for Listening!
The Cash Room of the Future
Lee Jurgens (Ralph Lauren)
Keith Romano (Tellermate)
• Invented weight-based currency counting technology
• In business for over 30 years
• Leader in the industry
• Tellermate systems process over $2B daily in over 20 currencies across 30 countries
About Tellermate
CURRENT STATE OF CASH
Currency in Circulation
Currency Trivia
1. 2.
?
The UnBanked?
8.0% 21.4% 22.2% 22.5% 28.2% 20.1% 17.4%
Of all US Households African American Non-Citizens Unemployed Low Income (under $15k) Unmarried Female Family Hispanics
Of the unbanked households half do so by choice.
HOW PEOPLE ARE USING CASH?
How people buy stuff
Source: Federal Reserve Bank Boston (2010)
Transactions by Payment Type
THE COST OF HANDLING CASH
What are the Touch Points?
Banks
CIT
Cash Office Point of Sale/
Service
Corporate HQ
Cash Data
• Count Change Safe
• Reconcile Previous Day Takings
• Prepare Start banks
• Prepare Deposit
• Prepare Change/Supplies Order
• LP Audits
What are the Touch Points?
Cash Office
1-6 hours per day
What are the Touch Points?
Point of Sale/ Service
• Verify Start Banks
• Skims
• Closeout
15-40 minutes per shift per POS
What are the Touch Points?
Corporate HQ
• Reconcile POS to Deposit
• Reconcile Deposit to Vault
Multiple FTE’s
How to Gain Efficiencies
Banks
CIT
Cash Office Point of Sale/
Service
Corporate HQ
Cash Data
WHAT’S HOT? & WHAT’S NOT
• Labor Optimization
• Reducing Cash Shrink
• Increasing Accuracy
• Actionable Information
Drivers
• Enterprise View
• Increased accuracy
• Strong traceability
Connectivity & Deposit Tracking
Cash Recycler (POS)
• Secure • Bill Validation • Strong information • Great Promise • Speed? • Reliability? • ROI?
Cash Recycler (Back Office)
• Operator Accountability
• Highly Accurate
• Strong information
• Low labor requirement
• Reliability?
• ROI?
Smart Safes
• POS or Back Office
• Bill Validation
• Connected
• Accountability
• Reliable (newer generation)
• Fast
• Accurate
• Reliable (no moving parts)
• Counts Bills and Coins
• Portable
• Can be Connected
Weight based cash counting
What’s Not Hot
Unsafe Safes Coin Sorters&
Counters Friction
Counters
ONE MORE THING…..
• Intelligent Cash Drawer
• Calculates a balance every time the drawer is closed.
Introducing T-ice
You will never have to count your cash drawer again!
• Coin Ordering
• Electronic Pick-Up Scheduling
• Provisional Credit
The Cash Room of the Future
THANK YOU
Keith Romano Tellermate [email protected]
How Merchants are taking Advantage of the Mobile Wallet to Engage the
Mobile-Centric Consumer
Brian Corbett, Director of Strategic Partnerships, Isis
February 12, 2014
262 Stores UT, ID, WYO, NV, AZ, CO, WA, MT, OR, NE
Confidential and Proprietary. Do Not Copy or Distribute.
18% of
Consumers
Choose
Retail
Fueling
Locations
because of
Loyalty
Cards
-2014 NACS Consumer Fuels Report
Confidential and Proprietary. Do Not Copy or Distribute.
Maverik Adventure Club Rewards
Loyalty card linked to ACH debit
• Instant 6¢ Fuel Discount. Every gallon, every day.
• Competitive Price Match. 6¢ Fuel Discount or Price Match –
whichever saves you more!
• 2X Trail Points. Points used to Win Stuff, Buy Stuff, or
Give Stuff.
Standalone loyalty card
• Instant 2¢ Fuel Discount. Every gallon, every day.
• Trail Points. Points used to Win Stuff, Buy Stuff, or
Give Stuff.
Confidential and Proprietary. Do Not Copy or Distribute.
Maverik’s Adventure Club
Rewards is a success because it:
encourages use of a preferred
tender type
diverts interchange cost savings
back to consumers
develops affinity for the Maverik
brand instead of another brand
Over 42K Black Card members
Over 161K Chrome Card members Over 50K Black Card members
Over 300K Chrome Card members
Confidential and Proprietary. Do Not Copy or Distribute.
Maverik has partnered with Isis to expand its presence beyond plastic
As their consumer
become more reliant on
their mobile devices…
… the Isis platform can
allow their users to access
their loyalty cards, with an
always present device,
using 2D barcodes or NFC.
Confidential and Proprietary. Do Not Copy or Distribute. 78
Company Overview
Isis is a joint venture created by AT&T, T-Mobile and Verizon. Our goal is to build a nationwide mobile commerce platform and that will transform the way consumers shop, pay & save.
Our partners are 200 million customers strong.
Confidential and Proprietary. Do Not Copy or Distribute.
Isis National Launch: November 2013
Confidential and Proprietary. Do Not Copy or Distribute. 80
Enhanced Consumer Experience
• New version of the Isis Mobile Wallet • 20,000 carrier stores
• 56 smartphones • 4 major US issuers • Issuer and merchant offers • Thousands of merchant locations
Contactless indicator is property of EMVCo, LLC.
Confidential and Proprietary. Do Not Copy or Distribute.
Jamba Juice 1 Million Free Smoothie Offer
• Close to 700 locations today • Venus Williams TV appearances and media
tour to support launch • Media, digital & social push with fitness
magazines, celebrity online sites, local store events and television talk shows
27% week over week growth
Weekly free smoothie redemptions (not cumulative)
Confidential and Proprietary. Do Not Copy or Distribute. 82
Isis Guiding Principles
Choice. Consumers choose how they pay.
Privacy. We don’t collect what the consumer purchases.
Security. Safer than a physical wallet.
Confidential and Proprietary. Do Not Copy or Distribute.
A Few Thoughts On Security
NFC Wallets are EMV Contactless ready; why should users settle for Chip & PIN?
EMV is a security methodology
NFC Mobile Wallets are EMV capable:
but, will people stop swiping? Chip & PIN is one option for EMV
Smart Card Alliance white paper: EMV and NFC: Complementary Technologies that Deliver Secure
Payments and Value-Added Functionality Publication Date: October 2012
THANK YOU
"Isis, Isis Mobile Wallet and the associated logos are trademarks of JVL Ventures, LLC. [Contactless marks are property of EMVCo, LLC.] Third party marks are property of their respective owners. (c) 2014 JVL Ventures, LLC. All rights reserved."
Upcoming Agenda
1:15 p.m. Panel: Innovation at the PoS 2:15 p.m. Why Dynamic Innovation is
Right Now!
2:45 p.m. Networking Break
Networking Lunch 12:00 p.m. – 1:00 p.m.
Innovation at POS
Steven Statler – Qualcomm Retail Solutions
George Wallner – LoopPay, Inc.
Mimi Hart – MagTek (Moderator)
Wednesday February 12, from 1:15 pm to 2:15 pm EST
Mimi Hart MagTek, Inc. - President & CEO
Steven Statler Sr. Director, Solutions Management, Qualcomm Retail Solutions
George Wallner LoopPay, Inc. - Co-founder – Heading up Technology Innovation
Share your business card for a chance to win a Qualcomm Toq Smart watch
Winner selected at the start of the Innovation at the Point of Sale session
The Qualcomm® Toq™ smartwatch for Android, the revolutionary smartwatch with a Qualcomm® Mirasol™ color touchscreen display that looks different because it is different. Unlike other smartwatches, Toq leverages the light around it so your screen is visible even in bright sunlight.
Innovation at POS
Consumer Experience
Utility
Efficiency
Security Mobility
Ubiquity
HOLISTIC PAYMENT SECURITY
Protecting the whole transaction, not just cardholder data.
To that end we need the be able to Authenticate (validate as genuine)
The payment instrument (a physical token: a card, currency, fob, phone, etc.) The account data carried on the payment instrument The payment terminal (the POS device) The payment authorization host (and any intermediaries) The payment maker (knowledge or biometric data) The payment details (amount, timing, conditions, payee, etc.)
Payment Instrument
Payment Account
Data
Payment Terminal
Payment Authorization
Host
Payment Maker
Payment Details
Endpoint Authentication
Prevent
Detect
Alert
Deprive
Dissuade
Evolve
Fraud Philosophy
Genuine
Inclusive
Consensus
Built
Voluntary
Non-Punitive
Non-Profit
Industry Standards
“Dynamic payment card data technology has potential to eliminate
the need for PCI DSS.”
September 2009 - PwC
Consumer First Mentality Cooperation Authentication Technology Determination
Innovation at the Point of Sale
Steven Statler, Qualcomm
• Delivered first widely deployed app store
• Enabler for wireless e-Reader market
• Powered mobile banking for large FI’s
• Supplier of wallet technologies
Innovators in Service Delivery
• Financial stability
2013
o Revenue $25B
o $5B in annual R&D spend
o Cash and marketable securities $22B
o Operating income of $6.8B
o Market capitalization of over $120B
Global Leader in Wireless Technology
The Gimbal™ Context Aware Platform
Proximity Geofence Interest Sensing Communicate
Context SDK | Web-based Console | Privacy Tools | Rest API
Mobile Payments – The Easy Way
George Wallner, LoopPay
LoopPay.com
Feb 12, 1:30 PM
• Is Mobile Payments worth upgrading the POS?
– The slow roll-out of NFC is a strong indication
• Every retail check-out has a Magstripe Reader
• A vast MSR infrastructure in place and paid for.
Est. 100,000,000 MS readers world wide
• The magstripe reader is a sensitive magnetic
receiver: Allows contactless payments
POS Infrastructure today
• The MSR head will pick up magnetic pulses with F2F encoding and standard magstripe format.
• Distance: 2 to 3 inches
• No hardware or software change to POS
• Substantial security can be added!
How it works ?
Decoder Circuit
Driver and SE
Inductor Head
Magstripe Reader
POS Terminal Loop Transmitter
• Magnetic Pulses Transmitted
• Data formatted as Track 1 and Track 2
• Card Data stored in Secure Hardware
• Head picks up Pulses
• Data is Decoded as Normal Swipe
• Decoding Logic Rejects Errors
Card Command
LOOP Magnetic Transmission
Security
• Magnetic stripe CARD data is static:
Copying -- Counterfeit and Replay
• Magstripe Data from Smart-Phone
– Can be dynamic and Secure
– Can support dynamic CVV (dCVV) like NFC
– Remains compatible with existing retail systems
• Fast-Track to a more secure POS
Modes of Operation
• Static Mode: Magstripe data static, as on card
• Partial Tokenization: Dynamic CVV
• EMV Emulation: Essentially PayWave via the magstripe reader.
• Security Mode: On a per BIN basis
Original Track 2 Data
SS 1
PAN 15
FS 1
EXP 4
SVC 3
PVV 5
CVV 3
5
2
ES 1
Transmitted Track 2 Data with Dynamic CVV
SS 1
PAN 15
FS 1
EXP 4
SVC 3
PVV 5
dCVV 3
SEQ No 5
FLAG 2
ES 1
Adding Security to Magstripe Data
dCVV Algorithm KEY From Issuer
SEQ No.
Form Factors
Integrated into Handsets
Fob Charge Case: Loop + Battery Coming Dec 2014
Accessories
Loop’s Advantages for Merchants ① Mobile Payment
via existing retail
infrastructure
③ Add Security:
dCVV or EMV emulation
⑤ Simple and Fast Card Loading: Card holder reader
or OTA loading
④ Wide range of cards: Payment, Retail, Pre-paid
② NFC Like Experience
without the need
to upgrade
Mimi Hart
MagTek, Inc. - President & CEO
Steven Statler
Sr. Director, Solutions Management, Qualcomm Retail Solutions
George Wallner
LoopPay, Inc. - Co-founder – Heading up Technology Innovation
Why Dynamic Authentication is Right Now!
Wade Edwards
(Mobile Authentication Corporation)
Discussion Points
• Time to Change the Game
• What is Dynamic Authentication (DA)?
• Existing Fraud Tools
• How does DA help Merchants with Current Fraud Concerns?
• Why Now?
113
113
Time to Change the Game
21st Century Solution to 21st Century Fraud! – Let’s face it, consumers know that the bad guys are out there hard at
work and “stuff” is happening. The payments industry should provide consumers with a tool that gets them involved in fighting off fraud attacks.*
* http://www.dailyfinance.com/on/hacking-wave-identity-theft-credit-card-fraud-no-fear/?ncid=edlinkusdail00000001&icid=maing-grid7%7Chtmlws-main-bb%7Cdl29%7Csec1_lnk3%26pLid%3D432988
– We underestimate consumer’s desire to participate in the security payment process and protect their own funds and identity.
– Since consumers originate payment transactions, let’s introduce a tool that includes them in the Verification! 1
14
What is Dynamic Authentication?
Active Account Management • Authenticates the Person initiating the
payment.
• Creates Payment Awareness - the immediate awareness of any activity to personal funds.
• Gives the account owner full control of account management for any payments activity.
• Helps all stakeholders fight fraud real-time.
• Integrates with any platform or combination of fraud tools.
115
115
How does Dynamic Authentication work?
• Two step process – All cardholders are enrolled using the same type of validation
process and systems that validate your identity for a banking relationship.
116
– When a qualified cardholder initiates a payment transaction in any vertical, they are sent a One-Time Password on their mobile phone to verify themselves.
What can you not live without ?
Consumer Adoption
Mobile technology consultant Tomi Ahonen analyzed a study commissioned by Nokia and in a 16 hour day:
• Mobile users can't leave their phone alone for six (6) minutes and check it up to 150 times a day.
• People make, receive or avoid 22 phone calls every day and send or receive messages 23 times a day.
• Check the clock 18 times.
• Setting the alarm, playing games, changing songs, taking pictures and plugging and unplugging phone all added to phone views.
• A person just using a phone with basic functions will rack up dozens of uses a day.
• Getting hooked on a mobile phone is similar to other addictions, such as compulsive buying.
http://www.dailymail.co.uk/news/article-2276752/Mobile-users-leave-phone-minutes-check-150-times-day.html
117
117
Existing Fraud Tools
• Provide No Authentication!
• They are “post approved transaction” focused! – Negative Files
– PIN / Signature
– Neural networks
– MC & Visa online solutions
– Encryption/Tokenization
– Chip Technology w/Magnetic Stripe
– CSI Systems
• Fraud Migration
118
Results from Fraud Study Information from the LexisNexis 2012 Cost of Fraud Report
Merchant Concerns:
• Merchants are paying nearly ten times fraud losses due to unauthorized transactions and fees/interest associated with chargebacks. Factoring in the additional cost of lost/stolen merchandise, U.S. retail merchants are suffering a total industry-wide fraud loss of $191 billion.
• One in five merchants experienced an increase in unauthorized transactions associated with identity fraud. Forty percent (40%) of large e-commerce retailers saw an upsurge.
• Friendly fraud accounts for more than one-third of the total fraud for online-accepting merchants.
• Retail merchants seek more education & improved industry standards to battle the cost of fraud.
• Emphasizing and improving automated fraud detection capabilities is a top priority for 55% of the merchants surveyed.
Recommendations: • Solution needs to be simple for all and the implementation and educational components. • Changing consumer payment methods requires a dynamic fraud management strategy.
119
Benefits of Dynamic Authentication
• Shrinks fraud losses – Immediate denial if no OTP or wrong OTP
• Shrinks fraud for all stakeholders - consumers, merchants and financial institutions
• Shrinks friendly fraud transactions
• Shrinks chargebacks
• Significantly lower costs to integrate
• Significantly lower costs to process
• No major infrastructure overhaul
• Allows all Regional and National Networks to participate
• Requires no changes in routing tables
• Causes no delays to settlement
• Consumer education is easy
• Deters fraudster from entering your locations 120
Why Dynamic Authentication - Right Now!
• Stops fraud on the front end of the process, not after it’s in the payment system
• Works in all of the payments verticals
• Consumers are ready
• Merchants are definitely ready
• Major Banks already use this
• Blends into mobile consumer habits
• Complements the growth of mobile payments – the emerging purchasing channel
121
Mobile Authentication Corporation (MAC)
Wade Edwards
SVP Strategic Initiatives
www.mobileauthcorp.com
122
Upcoming Agenda
3:25 p.m. Big Data…What your credit card processing company should be telling you about your customers
4:00 p.m. Are We There Yet?
4:30 p.m. Mobile Is The Magic Wand
Networking Break 2:45 p.m. – 3:25 p.m.
Are We There Yet?
Kenneth Douglas
(SEQR USA, Inc.)
What did they do wrong? • GPS Devices
• Movie Rentals
• Cameras / Video
• Music
• Clocks and Alarm Clocks
• Calculators
• Coupons / Offers
Consumed by the Smartphone GPS Devices
Movie Rentals
Camera / Video
Music
Clock and Alarm Clock
Calculator
Coupons / Offers
Music and Media • Yesterday
– Records – Vinyl • 45 and 33’s Records • 8 Track, Reel to Reel • Cassette Tape to CD to MP3
• Today – Pandora and YouTube – iPod and iTunes – Social Media
• Facebook, Twitter, Instagram, Foursquare, LinkedIn
Coupons and Offers • Yesterday
– S&H Green Stamps – Daily Newspapers – Coupon Books – Junk Mail Coupons – Daily Deals
• Groupon and LivingSocial • Digital Coupons and Offers
• Today – Geo-Fencing
• Longitude and Latitude (GPS) • Targeted Digital Data / Information
– Beaconing Technology • LEB (Low Energy Bluetooth) • GPS for inside
– Qualcomm, Estimote, Apple iBeacon
Point of Sale - POS • Cash Box • Cash Register
– NCR (National Cash Register)
• Credit Card Terminal & PIN Pad – VeriFone, HyperCom, Ingenico
• Dial-up Modem • LAN/WAN – EtherNet
• Integrated POS Systems – MICROS, NCR, IBM, Radiant, Aloha
• Front Office and Back Office • Inventory Mgmt, Pricing, Catalog, SKU • Proprietary Technology – H/W and S/W
• SaaS and POS 2.0 – Revel Systems, Square, Vend, Clover
• In the Cloud (aka Internet) • H/W Independent – Internet Connection • Table, Handheld Devices and Smartphones
1994
1995
2000 70 m consumers
connected to Internet world
wide
2002 BlackBerry 5810 & Palm One Treo 580
released
1997 1999
1998
1991 World wide web
goes public
2003
2004
2005 2008
1996 The ‘first’ smartphone
(Nokia 9000 communicator)
e-Commerce Web Master Shopping Carts Payment Gateways CNP (Card Not Present)
m-Commerce Mobile App Developers In-App Purchases Geo-Fence Location Based Real-Time Offers/Coupons
e-Commerce to m-Commerce
2007
2001
2012 2010
45% of adult US population use a
smartphone
2011 100 m US
smartphones
2013 1 bn smartphone
users, 6 bn mobile devices worldwide
2014
Changing Consumer Behavior • Habits and Behavior • 90/10 Rule
– Technology = 10% – Sociology = 90%
• Consumers Daily Routines – Everyday Spend Categories
• C-Stores and Petroleum • Grocery • QSR and Sit Down Dining • Pharmacy • Transportation • Parking
• Born 1960 vs. 1990 – PC vs. Tablet/Smartphone – Car Phone vs. Smartphone – Print Media vs. Social Media – Walkman vs. iPod – Pager vs. Facebook, Twitter and Instagram – Cash/Check vs. Credit/Debit and Stored Value
What is the One thing if you leave it, you will go back for?
Solving for the “Last Foot” Improve Merchant-Customer Interaction and Loyalty Prioritize Lower Cost of Tender Almost as Convenient as a Card Swipe • Still Evolving – No Standards Yet… • Retail/Card Present Environment
– Customer Facing POS PIN Pad • VeriFone and Ingenico • Intelligent Devices • Consumer Perceived Convenience
• Last Chance to Change the Consumers Behavior – Mr. Douglas, how would you like to pay today?
• Cash, Credit or Mobile
Logical that the phone will be used for payments
Are We There Yet? Technology is Ready? Hype and VCs Money $ is Flowing Pined Up Demand – 2+ Years
– Merchants and Consumers
• Is mCommerce a Solution Looking for a Problem? – Is something broken with the way payments work today? – Will mCommerce be less expensive? – What investment do I need to make in h/w and s/w? – Where do I get started and with what partner(s)?
• Consumer Behavior Change is KEY – Progress Not Perfection – How do you eat an Elephant? One Pilot at a time….
• At the End of the Day – We are ALL Consumers so ASK yourself the following Question: – What will make ME change my behavior?
The Discovery of Water was not made by a Fish…..
Doesn’t it just seem Logical that the phone
will be used for payments?
Mobile Is The Magic Wand
Adam Frisch
(Buy It Mobility Networks)
The mobile opportunity is real
• 56% of Americans own a smart phone - double digit growth rate expected to continue through 2016 as market matures
• Average amount of traffic per smartphone grew at 50% in 2013, this trend will continue as smartphone usage becomes ingrained in our everyday activities
A look at smartphone users at the grocery store today: • 47% make grocery lists • 45% access grocery coupons • 39% look up recipes • 30% compare prices • 18% product research • Only 22% say they do not use their smartphone while grocery shopping Today’s smartphone users (age 18-34) and dining: • 70% look up restaurant locations and get directions • 35% have placed takeout/delivery orders • 25% find nutrition information • 43% would use a smartphone payment option if available
Sources: Pew Research Center’s Internet and American Life Project Tracking Survey, May 2013. Placed Insights, December 2013. Loyalty360.org, October 28, 2013.
But, adoption of mobile payments is lagging behind expectations
Source: eMarketer October 2012, July 2013.
0
10
20
30
40
50
60
70
2011 2012 2013 2014 2015 2016
October 2012 Forecast
July 2013 Forecast
Why???
US Proximity Mobile Payments Forecasts ($ Billions)
Why isn’t mobile happening?
• Technology is not ubiquitous…yet • Certain phones only work in some places via specific technology that
may or may not work • Communication between POS equipment and phones is choppy at best • NFC, barcode, QR, beacon, iBeacon, Mobeam, etc.
• Consumers
• Don’t see real value or need to use it • Most are confused about where it works and where it doesn’t
• Merchants
• Also don’t see a compelling value proposition • Most are also confused by the technology
This is all VERY encouraging to us!!!
Recent headlines should help and hurt mobile adoption
• Target • 110m consumer credit/debit cards, names,
addresses, phone numbers hacked • Will cost FIs $30m+ to reissue cards and
related customer service
• Neiman Marcus • 1.1m credit/debit cards exposed over a 4
month period (Jul-Oct 2013) through malicious software installed in POS
• Michael’s
• Arts & Crafts chain of 1,000 US store investigating security breach involving customers’ credit card info
• FBI warned retailers last week to prepare for more
cyber attacks in the future
• There is no personally identifiable information (e.g., banking info) stored on our servers, on the phone, or on the POS
• If a phone with a payment app is lost, it could not
be used to make a transaction without the owner’s private PIN
• Each authorization barcode is only good for a specific purchase at a specific location at a specific time – if someone were to copy the code, they could not use it in the future
• Processor/guarantor monitors purchases to check against fraudulent or unusual purchase patterns
Recent Publicity on Payments Security Security Advantages of Mobile Payments
Key Trends in mobile • Merchants Being Told “You Have to do Mobile” …but why?
• Non-compelling value proposition for merchants and consumers • Mobile for the sake of mobile?
• Merchants Wondering How to Launch a Mobile Strategy
• Inadequate in-house resources • Unsure about how the mobile technology landscape is developing, will a winner emerge? • Not sure how to tie mobile with a better consumer experience
• Emerging payments are still “emerging”
• Bitcoin, ACH, loyalty points, etc. • Merchants want to lower processing costs and these may prove worthwhile • Consumers know that mobile payments are an option, but still do not make them
• Gap between consumer awareness and adoption
• 41% of consumers are aware that their smartphone can be used as a payment device, while on 16% have used smartphone as a payment device
• Consumers can be incentivized to make mobile payments, and once they do so, they are much more likely to become converts
• Consumers are concerned about the security, privacy, convenience and value of using their phones to make payments
Source: Accenture Consumer Mobile Payments Survey, 2013
What Merchants Want
• Have a sound business case – i.e., lower costs and increase revenue • Avoid cost increases (CNP interchange rates) • Drive new consumers, increase loyalty, frequency, cross-sell, up-sell • Tie consumer benefits to the behaviors that add value to merchants
• “Test the waters” without risking it all
• Ensure low integration cost and effort • Align mobile with existing financial, operational, x-channel procedures • Take a staggered approach, and evolve over time
• Control the consumer-brand experience
• Keep merchant brand front-and-center • Augment consumer data/loyalty with mobile, without giving up control
• Appear to be “tech savvy” and have a “cool factor”
• Want to be seen as keeping up with the times • Be able to relate to a broader consumer demographic mix
STRICTLY CONFIDENTIAL © 2014 Buy It Mobility Networks Inc. 141
What We Have Learned About Mobile Offerings from Merchants
Merchant App
Loyalty Payments Offers
• General Observations on Mobile Apps • Only a few merchants “solved” mobile • Most are confused, under-resourced, making
decisions “by committee”, and risk-averse
• Loyalty • Critical for knowing the consumer • Should be part of an app launch
• Offers/Promotions
• Critical for driving interest and usage • Should be part of an app launch
• Payments
• Most accept credit cards only • Pre-paid model to reduce transactions fees • Should be part of an app launch
We believe merchants need to offer all three when the app is being downloaded because the consumer is in the “info giving” mode
A look at the Mobile Payments Marketplace
Generic Mobile Wallet • Higher transaction costs • Other brands come between the merchant and their consumers
• Questionable consumer experience improvement
Merchant-Branded Mobile App. • Merchant brand stays “front and center”
• Lower transaction costs • Better consumer experience
Merchant/ Brand
Consumer
Merchant/ Brand Consumer
What Consumers Want
Value Convenience Security Fun
• Personalized Offers
• Coupons • Loyalty
programs
• Reservations • Pre-Order • Avoid lines • Maps &
Directions • Paper-free
receipts • History
• Merchant Brand Equity
• No personal or financial information store on phone/POS
• Entertainment • Exclusive
Content • Cool-factor
1STRICTLY CONFIDENTIAL 145 © 2014 Buy It Mobility Networks Inc.
$ Merchant $” Solutions
• Branded Tender • Quicker Check-out • Pre-ordering • Reservations • Express Pick-Up • Loyalty/Rewards • Personalized Offers • Store locater • Order history/receipts
Consumer Pain Points
• Long Ordering Lines • Serving Wait Time • Cost / Price • Finding Location • Poor Customer Service • Non-target/generic
communications • Secure Payment
Tangible Results
• More Revs • Faster Thru-Put • Lower Costs • Higher Profits • Increased Customer
Acquisition, Frequency and Retention
• Happier Customers
Tying Solutions to a low cost tender
Who is BIM?
Edgar Bronfman Jr.* Lawrence J. Blanford Arthur Martinez James McTaggart Robert Nardelli Thomas Neff Stephen Sadove
James Kelly Adam Frisch Michael Reidenbach Paul Voulas Aydin Kadaster
CEO
President
CIO
CTO, Head of Product
COO
Former President & COO of Global Payments, Inc. Founder FusionLoop; Former Analyst at UBS and Morgan Stanley Former EVP & Worldwide CIO of Global Payments, Inc. Former CIO Novell, Asia-Pacific; Serial Entrepreneur Former Principal at Marakon & Manager at Google; Angel Investor
Board of Directors, Investors, Advisors (Selected)
GP, Accretive LLC; Chair, Endeavor; Former CEO of Warner Music Group and Seagram Former President & CEO of TC Global, Inc. (Green Mountain Coffee Roasters, Inc.) Former Chair/CEO, Sears; on boards of AIG, IAC/Interactive, Fifth & Pacific, HSN Retired Founding Partner of Marakon; experience on public and private boards Former Chairman & CEO of Home Depot and Chrysler Chairman of Spencer Stuart, on boards of ACE Limited and several private companies Chairman of NRF, Former Chairman and CEO of Saks Fifth Avenue
BIM draws upon the collaboration of seasoned executives with credentials in technology, payment processing, retail, advertising, financial services, and entertainment
Management
Learn More About BIM:
Visit: www.bimnetworks.com Watch: https://vimeo.com/57114443
Email: [email protected] Call: (646) 926-4265
5:30p.m. – 6:30 p.m. Social & Networking Sponsored by
6:30 p.m. – 7:30 p.m. Dinner
7:30 p.m. – 9:30 p.m. The Brandy Brothers Sponsored by
Evening Agenda