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Contactless Payments

Wendy Humphrey February 25, 2009

Copyright 2008, First Data Corporation. All Rights Reserved. Summary Findings from First Data Market Research* • Large national and regional merchants understand contactless payments, but many are waiting for the market to further evolve before investing in acceptance • Small- and mid-sized merchant familiarity with contactless payments is mixed • Consumer demand greatly influences merchant decision to accept contactless payments • Merchants are waiting for market validation before implementing contactless payments • Merchants are concerned about the cost of required hardware • Merchants need to identify financial benefits from accepting contactless payments before implementing • Contactless reader subsidies could increase merchant willingness to implement contactless payments • There are several areas where merchants would benefit from further education: - Cost-benefit case for accepting contactless payments - Integration with existing POS infrastructure - General overview of how contactless payments work - Long-term prospects for contactless payments

*First Data sales interviews + Online merchant survey, September 2007; Based on responses from 84 small- and mid-size merchants The Keys Success

Financial Application MasterCard Visa payWave The Value of First Data PayPass®

• Speed to market Customer Care Personalization • Economies of scale Seamless integration Fraud & Device • Risk Fulfillment Support • Program differentiation Key Managemen • Drive activation Program and usage Setup t Services

Card/ Device Authorizations Vendor Relationships

• Contactless cards and devices - Contactless devices include: cards, key fobs, watches, cell phones, etc. - Current chip personalization support: • MasterCard PayPass® Mag Stripe • VISA payWave • Personalized cards and key fobs with a proprietary financial application Contactless Advantages - Security Options ► Faster transaction time • MasterCard PayPass® dynamic CVC3 ► Increased number of transactions • VISA Contactless dCVV ► Increased revenue per transaction • Card Shields ► Enhanced customer loyalty - Mobile NFC payment ► Better customer information ► Enhanced brand loyalty ► Competitive differentiation

• Personalization of cardholder specific information • Key management services utilizing state of the art cryptopgrahy technology • Contactless application support for all bankcard associations including MasterCard® PaypassTM and Visa payWave • Customer correspondence that is customized and targeted to your individual customers • Existing infrastructure with vendors and bankcard associations • Procurement of contactless payment devices from a variety of manufacturers

• Actively supporting the roll-out of association-branded contactless cards since 2005

• Actively promoting contactless payment acceptance to its merchant base since 2005

• Launching a new GO-Tag product – a contactless prepaid sticker that will act as a bridge to NFC payments

• Selectively participating in NFC payment trials around the world (focus on activities to help key stakeholders understand how to move the market forward)

• Building a commercial TSM platform with plans to launch in 2009, with allowances for evolving market conditions

Copyright 2008, First Data Corporation. All Rights Reserved. 6 Introducing the GO-Tag™ Solution A bridge product, incenting all parties in the value chain to adopt contactless technology, leading to a greater demand for phones with NFC capability

Provides a new, convenient way for customers to pay - Preferred form factors include stickers to support migration to mobility Enables placement of a payment type on any personal item • Mobile handset, mp3 player, employee badge or other Different form factors can be used for customized branding

Consumer buys Consumer attaches Consumer uses the At any point, the prepaid gift/spending sticker to phone (or personal device to consumer can register card with GO-Tag™ other personal item) make purchases at their GO-Tag prepaid sticker at gift card and stores the card in the retailer sticker online and can mall or FI branch their wallet or at home enroll for automatic for safe-keeping reload

Pre-Paid: Reload Automation from Credit/Debit today…ACH Soon

FI sends cardholders Consumer attaches Consumer uses the a replacement (or sticker to phone (or personal device to complementary) GO- other personal item) make purchases at Tag™ Sticker. and stores the card in retailers. their wallet.

From Wallet-to-Phone gives Financial Institutions premium brand placement and consumers ultimate convenience

Reader Overlays

Delegate and media communication Pin Design GO-Tag Affixed to back of pin

(*)Artwork and branding are for illustration purposes only

Initial attitudes and potential usage of GO-Tag™ prepaid stickers*

Nearly two-thirds (65%) of consumers surveyed are extremely, Consumers surveyed expect to make very frequent very or somewhat interested in learning more about Prepaid purchases with a Prepaid Sticker and expect to Stickers (GO-Tag™ stickers) reload regularly Interest spans across all demographic groups, but is especially Nearly one-third (29%) indicated they would visit a appealing to consumers who are heavy purchasers and users of merchant more frequently because of the ability to prepaid cards use the Prepaid Sticker

After reading about Prepaid Stickers, how would you rate How frequently might you use your Prepaid Sticker to make purchases at retailers you visit? (select one) your level of interest in learning more about this concept? How often do you think you might reload your Prepaid Sticker? (select one) 35% 30 %

30% 25 %

20 % 25%

15 % 20%

10 % 15% 5% 10% 0% / / / h t ar ily h on n a es es

5% eek ow o ever D ni m m i i eek w N ont a ye kn t w e m 3 t 3 t c ce a 2- 2- n ce a m n No opi

0% O n Don' O Extremely Very Interested Somewhat Slightly Not at all O Interested Interested Interested Interested How fre que nt ly us e d How of te n re loade d

• Nearly half (47%) of consumers • Consumers surveyed expect to surveyed have an extremely or make very frequent purchases somewhat positive reaction to with a Prepaid Sticker and expect GO-Tag prepaid stickers to reload regularly

After reading the above description, what is How frequently might you use your Prepaid your first reaction to this concept? Sticker to make purchases at retailers you visit?

29% 32% 27% 19% 19% 16% 15% 15% 12%

7% 7% 2%

Extremely Somewhat Neutral Somewhat Extremely Daily 2-3 times Once a 2-3 times Once a Once every Don't know positive positive negative negative per week week per month month 2-3 / No months opinion *First Data GO-Tag Contactless Prepaid Sticker Consumer Research, January, 2008

• The majority (64%) of those who will • 15% plan to reload a Prepaid Sticker reload, anticipate reloading $21 to $100 at least once each week • 36% would reload their Prepaid Sticker • 50% plan to reload a Prepaid Sticker with $21 to $50 at least once each month

If you were to reload your Prepaid Sticker How often do you think you might reload locations you make frequent purchases, how your Prepaid Sticker? much would you reload on each occasion?

36%

25% 28% 21%

17% 12% 10% 9% 9% 7% 6% 7% 7% 4% 3%

Never 2-3 Once a 2-3 Once a Once 2-3 Once Don't $1-$10 $11-$20 $21-$50 $51-$100 Over $100 Don't know times week times month every 2- times per year know *First Data GO-Tag Contactless Prepaid Sticker Consumer Research, January, 2008 per per 3 per year week month months

Sample Tier I Merchants # of Stores McDonalds 13k 7-Eleven 5k CVS/Pharmacy 6k Total US Merchants Meijer’s Stores (incl. gas station) 320 200 Duane Reade 254 Total U.S. Jack-in-Box 2k Merchant Locations Arby’s 1k Kentucky Fried Chicken 300 51,000 Sheetz (incl. gas station) 580 Total Readers in Walgreen's 257 Market WaWa (incl. gas station) 679 360,000 Taxi Cabs 250 Vending Machines 1k NYC Transit Authority Pilot

• Major Sporting Arenas Added in 2007 • National Hockey League American • National Basketball Association • Already deployed at over 20 professional baseball and football stadiums - U.S. Vending Machine Companies • Top six U.S. Companies • 5000 Machines Enabled • Major U.S. Cities - Bottling Companies • Coca-Cola Enterprises – 7,500 machines enabled in several markets • Cadbury Schweppes – 1,000 machines enabled in major cities

• Mass Transit • New York City Subway Pilot • Utah Transit Authority - Trial on buses that transport skiers and employees to four of the state’s ski resorts - Taxi Adoption • New York Taxicabs – June 2007 - Airport Parking Lots • More than 20 installations at the nation’s busiest airports • Includes Atlanta, Chicago, Philadelphia and Dallas. - Tollways • Ohio Turnpike

Wendy Humphrey [email protected] Office 910-235-4555 Mobile 954-494-6388