White Paper Contact 3.0 2006

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<p>About ViVOtechViVOtech is the market leader in contactless payment software, readers, cards, fobs and transaction management systems. These solutions allow consumers to make contactless payments with radio frequency-enabled credit cards, debit cards, key fobs, and NFC enabled mobile phones. With more than 155,000 units shipped, ViVOtech's products are being used by movie theaters, fast food restaurants (QSR), casual dining establishments, convenience stores, gas stations, drug stores, grocery and vending machine locations enabling them to accept contactless payments. ViVOtech is headquartered in Santa Clara, California, with offices in Europe and Asia. In 2005, ViVOtech received the prestigious Frost &amp; Sullivan technology award for its role in transforming the contactless payment industry as well as the Electronic Transactions Association first annual Technology Innovation Award. For more information, please visit the ViVOtech website at www.vivotech.com.</p> <p>2</p> <p>Copyright 2006, ViVOtech, Inc. All rights reserved. ViVOtech, Inc. 451 El Camino Real Santa Clara, CA 95050 Phone: (408) 248-7001 Written and designed at ViVOtech, Inc. This paper, as well as the software and hardware described in it, is furnished under license and may be used or copied online in accordance with the terms of such license. The content of this paper is furnished for information use only, is subject to change without notice, and should not be construed as a commitment by ViVOtech, Inc. ViVOtech, Inc assumes no responsibility or liability for any errors or inaccuracies that may appear in this document. Except as permitted by such license, no part of this publication may be reproduced or transmitted by electronic, mechanical, recording, or otherwise, or translated into any language form without the express written consent of ViVOtech, Inc. ViVOtech, ViVOwallet, ViVOcard, ViVOfob, ViVOpay, ViVOplatform, Dynamic Strip, ViVOnfc, ViVOfob, ViVOdine and ViVOsmartcable are trademarks or registered trademarks of ViVOtech, Inc. All other products or name brands are trademarks of their respective holders.</p> <p>3</p> <p>ABOUT VIVOTECH ................................................................................................................................... 2 INTRODUCTION ........................................................................................................................................ 5 RF-BASED CONTACTLESS PAYMENTS: HOW DO THEY WORK?............................................... 6 CREDIT CARD CONTACTLESS PAYMENT PROGRAMS ............................................................................... 6 Contactless payment process and existing infrastructure .................................................................... 7 CONTACTLESS CREDIT AND DEBIT CARDS ARE NOW ACCEPTED AT LEADING NATIONAL RETAILERS ... 8 CARD ASSOCIATIONS AND ISSUERS PROMOTE CONTACTLESS ON THEIR WEBSITES AND IN ADVERTISING .............................................................................................................................................. 9 CONTACTLESS CREDIT CARD PROGRAMS .............................................................................................. 10 MASTERCARD PAYPASS .......................................................................................................................... 10 EXPRESSPAY FROM AMERICAN EXPRESSSM ........................................................................................... 10 VISA CONTACTLESS ................................................................................................................................. 11 EXXONMOBIL SPEEDPASS ....................................................................................................................... 12 RETAIL APPLICATIONS AND RF-BASED CONTACTLESS TRANSACTION ............................ 13 RETAIL APPLICATIONS AND RF-BASED CONTACTLESS TRANSACTION ............................ 13 TRADITIONAL CREDIT AND DEBIT CARD PAYMENT ................................................................................. 13 LOYALTY PROGRAMS AND PREPAID/GIFT CARDS .................................................................................. 15 RETAILER PRIVATE LABEL PAYMENT CARDS .......................................................................................... 16 CO-BRANDED MULTI-APPLICATION CREDIT CARDS ................................................................................ 17 RETAILER IMPLEMENTATION AND BENEFITS OF CONTACTLESS PAYMENT.................. 17 OPPORTUNITIES FOR ACQUIRERS AND ISOS ............................................................................... 18 RF-BASED PAYMENT TECHNOLOGIES ........................................................................................... 19 ISO 14443-COMPLIANT RF CONTACTLESS SMART CARD TECHNOLOGY ............................................. 19 RFID TOKEN-BASED SOLUTIONS ............................................................................................................ 19 SONY FELICA ........................................................................................................................................... 20 NFC.......................................................................................................................................................... 20 POS SOLUTION OPTIONS: ....................................................................................................................... 22 TABLE 3: CONTACTLESS READER INTERFACE TECHNOLOGIES .............................................................. 22 THE VIVOTECH RF CONTACTLESS PAYMENT SOLUTION ....................................................... 23 VIVOPAY .................................................................................................................................................. 23 ViVOpay 4000 Easy Mount Solution: .......................................................................................... 24 ViVOpay 3000 RF Countertop: ..................................................................................................... 25 ViVOpay 5000 EMV Contactless: ................................................................................................. 25 ViVOpay DT Drive-Thru .................................................................................................................. 25 ViVOpay OEM: .................................................................................................................................. 25 ViVOpay iClass: ............................................................................................................................... 25 VIVOPLATFORM ....................................................................................................................................... 26 VIVOFOB / VIVOCARD ............................................................................................................................. 27 VIVONFC SOFTWARE SUITE .................................................................................................................... 28 SUMMARY ................................................................................................................................................. 30 CONCLUSION........................................................................................................................................... 31 REFERENCES ........................................................................................................................................... 32</p> <p>4</p> <p>IntroductionContactless Payments are a reality already in the hands of millions of consumers, in the checkout lane of thousands of merchants and in innumerous prime time advertising spots by leading financial institutions. Backed by some of the most important players in the Banking, Payments and Retail sectors contactless has been growing at an astounding pace replacing cash as the most convenient method of payment. These cards, key fobs and mobile phones allow consumers to quickly and easily pay for transactions with a tap or a wave. The RF-based contactless payment devices are easy to use; consumers like the increased speed and control of transactions and are increasingly using the devices instead of cash. Retailers are seeing better revenues as consumers spend more per transaction and purchase more frequently.</p> <p>American Express, MasterCard and Visa have launched initiatives to offer contactless payment devices to card Issuers, Acquirers and National Retailers. Financial and retail industries recognize that RF-based contactless payments are a means to increase credit and debit card transactions in traditional cash-only retail segments, provide improved views of customer buying behavior, and enable new customer-facing programs and services. In environments where speed and convenience is important, or where handing over cash or a traditional payment instrument is difficult, contactless payments can add demonstrable value. In fact, The TowerGroup in a January report predicted that, by 2009, the total market for contactless micro payments--those worth less than $5--in the United States will reach $11.5 billion, with almost $5 billion of that transacted via mobile phones. This white paper provides a comprehensive description of RFbased contactless payment including: RF-Based Contactless Payment: How Does It Work? Retail Applications and RF-Based Contactless Transaction Retailer Implementation and Benefits of Contactless Payment Opportunities for Acquirers and Independent Sales Organizations ( ISOs) RF-Based Payment Technologies The ViVOtech RF Contactless Payment Solution</p> <p>5</p> <p>Contactless Payment Cards, Key Fobs and Phones</p> <p>RF-Based Contactless Payments: How Do They Work?RF-based contactless payments are straightforward for both consumers and retailers. Consumers use a payment card or a key fob that is equipped with a chip and antenna that securely communicates consumer account information via radio frequency to the retailers payment terminal. The payment terminal then connects to the appropriate financial networks or other back-end processing systems to authorize the transaction. Once authorized, the consumer completes the transaction in a fraction of the time required by cash, traditional credit, or debit transactions that require a card to be swiped through a reader.</p> <p>Credit Card Contactless Payment Programs</p> <p>To date, all major card associations have started their own contactless payment programs. In 2003, American Express began a pilot for ExpressPay in Phoenix, AZ, New York and Singapore, issuing over 25,000 key fobs and enabling hundreds of merchant locations. The success of these pilots led to the national launch of Blue from American Express with the ExpressPay feature in June 2005. Also in 2003, MasterCard started its PayPass trial in Dallas, Orlando and New York, issuing an initial 16,000 RF-enabled cards and enabling several merchant locations. In the 4th quarter of 2005 Visa announced their Visa Contactless strategy. Discover is expected to announce its entry into contactless payments in second half of 2006. . Significantly, JPMorgan Chase issued approximately 1 million contactless credit cards per market in Atlanta, Denver, Orlando, Boston, Philadelphia and New York in 2005 and 1st quarter of 2006. They are expecting to continue issuing contactless cards throughout 2006 in top DMAs. Other Issuers have also adopted a contactless strategy with MBNA, Citibank, HSBC, KeyBank and Citizens Bank issuing contactless credit and debit cards to their cardholders in 2006 and more major Issuers are expecting to do the same.</p> <p>6</p> <p>To accelerate deployment of this new payment method, all card associations have designed their programs to work within the existing financial infrastructure, requiring minimal retailer investment and allowing retailers to quickly start accepting contactless transactions. American Express, MasterCard, and Visa have created a universal contactless indicator hoping that the industry will adopt this as a general contactless payment identifier:</p> <p>They also use the same technology standards for contactless payments to guarantee future interoperability. Usage of the cards/devices is similar between the different programs: Consumers are issued a contactless credit card that includes a contactless interface to an on-card chip and a magnetic stripe. Track 1 (T1) and/or Track 2 (T2) magnetic stripe data (cardholder name, card number, and expiration date) and other security information is stored in the chip. Retailers connect the radio frequency-based reader devices to existing POS terminals, ECRs and PC-based systems. The consumer holds the contactless card/device in close proximity to a specially equipped terminal. The card communicates payment account information wirelessly to the terminal via radio frequency, providing the information needed to complete the transaction and eliminating the need for the cardholder to hand a card to the merchant to swipe. The terminal processes the payment as it would a traditional magnetic stripe credit card transaction, sending the account information and transaction amount to the appropriate acquiring processor for authorization. No changes are required of the retailer or acquirer systems for authorization and settlement. Upon transaction authorization, the consumer receives payment confirmation and completes the transaction. For many low cost retail purchases (e.g., fast food, theater tickets or parking), a signature may not be required, making the checkout process even faster.</p> <p>Contactless payment process and existing infrastructure</p> <p>7</p> <p>Contactless Credit and Debit Cards Are Now Accepted at Leading National RetailersAs of April 2006 there are over 25,000 merchant locations representing over 150,000 POS locations that accept contactless credit cards in the United States with thousands more in Canada and South East Asia</p> <p>Retail acceptance points for contactless credit cards</p> <p>POS Branding At retail locations consumers recognize contactless-enabled POS systems by the presence of the universal contactless indicator followed by the logos of ExpressPay from American Express, MasterCard PayPass and Visa contactless:</p> <p>8</p> <p>Card Associations and Issuers Promote Contactless on Their Websites and in AdvertisingThe launch of RF-enabled credit cards has seen unprecedented support from card associations and issuers. MasterCard started running national television advertising in late 2005 and continues to run contactless acceptance commercials using their famous Priceless format. JPMorgan Chase is supporting its issuing efforts by running multimedia advertising in a market by market strategy. In addition to television commercials for their blink contactless card product they are deploying billboards, transit boards, bus shelter and newspaper advertising. Below is a shot of their...</p>

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