Uberizaon of Payments

Smart Card Alliance Payments Summit April 2016

Steve Mo Principal-BeerBuyDesign

1 What it All Means for the Payments Ecosystem

1. The role and form of payments in transacng is changing forever 2. The search for consumer value in mobile payments connues 3. Technology choices stymie—rather than enable—the market 4. Transparent, embedded payments wash over a muddled marketplace

2 1. Payments are Changing, Forever

3 Big Players in Exisng Payments Cut Costs

4 Chase Pushes ‘Pay- ments’ into a New Realm

5 P2P Moves into the Mainstream

6 The Faster Payments Movement Grows

7 Bitcoin Technology (Distributed Ledgers) Takes Hold

8 All Paths Lead to Digital IDs—But Whose?

9 2. The Search for Value in Mobile Payments

10 First-Gen Mobile Wallets Grow Slowly

U.S. banks lower Appeals to other half of MST could enable New payment Paydiant-based, One- Key interchange to play; smartphone market not 80-90% of POS opons, aggregated Touch re-launch aspects iOS users are 44% of using iOS terminals without merchant spending, aspires to re-boot smartphones, but 65% SmartTap takes over Merchant changes cross-loyalty Offer to ‘take-in’ MCX of total spend where Isis le off No fees (yet) Device agnosc doesn’t fly Control and direct Insinuate itself into Hold on Apple in Provide consumer Become Switzerland Business ‘walled garden’ of every mobile the U.S., while beang choices for merchant- of arbitraged Model prime customers transacon possible, them in the rest of the friendly payments payments/ commerce Use exisng payments direct ads to beer world Facilitate merchant- enablement for system to China targets directed commerce merchants

Card-loading fraud Only 12% of handsets U.S. isn’t Korea Deployment process Wanted MCX, but Chal- exposes deficiencies in use latest version Many changes being issues (e.g., avail- didn’t get it lenges card payment system Trying to accommodate implemented in great ability of apps, 25 big merchants Merchant acceptance 270+ operang systems rush (e.g., full NFC) Gemalto vs. Paydiant) integrated, but lile and recepvity lag Lower-income Slow buy-in so far by and management flux usage Story lines reveal lots of demographic merchants; Ability to afford long- Lile love lost in rest learning sll to do Issuers on the fence term parcipaon of industry for them Volume building slowly Deal with Visa and HCE Potenal appeal to End-to-end retailing Management changes Prospects as shininess wears off accommodaon could well-heeled transactors customer experience help patch potholes Apple watch and foster more adopon; with fancy handsets choice/integraon Plaorm improve- browser-based in-app 80% global handset Resources and business were supposed to be ments coming; play seem so-so share fuels strategy model big plusses differenators a juggernaut Movie to PL, Loyalty, 1st HCE implementaon 500,000 users signed Columbus “test” Omni-channel play Roll-out Discover in 2.0; going live (with top 10 up before 9/28 official moves slowly; offered as paradigm news Slow roll in U.K. bank) launch ChasePay, Walmart for push on Big NFC target: China Many banks signing up Rest of market not sold Pay opons puzzling merchant outreach

11 Mobile Adopon at POS Adopon Lags

12 But Provider Expectaons Remain High

13 Meanwhile, Merchant Soluons Hold Sway

14 Adopon Rate: A Long Tail

15 Consumers’ Chief Concern: Sll Security

16 Key Queson Remains: Who Will Consumers Ulmately Trust?

Phoenix Markeng

71%$ Any$Bank$(Net)$ 72%$

65%$ Primary$Card$Issuer$ 69%$

55%$ PayPal$ 41%$

30%$ MNO$(Net)$ 37%$

33%$ Amazon$ 33%$

29%$ Apple$ 9/14 22%$ 8/13

21%$ Google$ 17%$

17 3. Technology Choices Appear to Stymie— Rather than Enable—the Market

18 NFC Connues to Get Nudge, but to What End?

19 EMV Rides in to Save the Day!*

Source: Strawhecker 20 What’s Not so Funny About EMV Deployment…

• A flood of charge-backs that have nothing to do with EMV deployment, but represent an opportunity for less-than-competent (or worse…) issuers to take advantage of marketplace disarray • For some merchants, these bogus charge-backs are in 7 figures—triggering at least one law-suit (and perhaps more…) • Some operaonal “accommodaons” are nothing short of ridiculous (e.g., taking a signature on a terminal twice—taking 60 seconds in total • Consumers are opng to pay with old mag-stripe cards or cash 21 Tokens, Tokens, Every- where …, But Whose Will Make the Link?

22 Acquirer Soluons: More com- prehensive; More Effecve?

Page 23 PayPal And First Data: A Separate Path For Tokens At POS?

Page 24 PAR –Characteriscs and Requirements

§ Needs to be a consistent length across all enes (Not 16 digits like PAN) Characteriscs § Method of generaon does not need o be consistent

§ Can be read at the terminal before transacon ( ideally without any hardware terminal upgrades)

§ Must be unique to the PAN, not the cardholder § Must be unique across and within Network enes Requirements § Must exist outside the TSP environment and not be dependent on it § Cannot be reverse engineered to obtain PAN

§ Fixed 29 characters, uppercase, Roman, alphanumeric value (4+25) Format § 4 character, uppercase, Roman, alphanumeric network idenfier value (assigned by EMVCo), followed by unique 25 character value.

Q 1-3 Z 2 8 R K A 1 E B L 4 7 0 G 9 X Y G 9 0 R 5 D 3 E Unique 25 character value for each PAN Network Idenfier Source: Visa (assigned by EMVCo) 25 Why Banks Are Dragging Their Feet

26 4. Transparent, Embedded Payments Wash Their Way over a Convoluted and Confused Marketplace

27 Uber Pushes the Envelope Again, Tesng Real-me Payments to Drivers

28 Amazon: Probes Built-in Brand Loyalty Online…

29 …and Anywhere Else Customers Want to Transact Without Being

30 31 Internet of Things (IoT) Pushes Payment ‘Actual- izaon’ Beyond Current Limits

32 How Do We Authen- cate Smart Appli- ances (and Every- thing Else)?

33 U2F (FIDO) & Yubikey: A Portable, Two-Factor Authencaon Token for Digital Transacng

34 Steve Mo’s Contact Info

0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 Steve Mo 0 1 0 1 0 1 0 1 0 1 0 BeerBuyDesign 1 0 1 0 1 0 1 0 1 0 1 1386 Long Ridge Road 0 1 0 1 0 1 0 1 0 1 0 Stamford, CT 06903 1 0 1 0 1 0 1 0 1 0 1 and 1214 Querida Drive Colorado Springs, CO 80909 0 1 0 1 0 1 0 1 0 1 0 (o) 203.968.1967 1 0 1 0 1 0 1 0 1 0 1 (c) 203.536.0588 0 1 0 1 0 1 0 1 0 1 0 email: [email protected] 1 0 1 0 1 0 1 0 1 0 1 website:www.betterbuydesign.com 0 1 0 1 0 1 0 1 0 1 0

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