An Exit Strategy

M.B.A. Capstone Project

AUGUST 5, 2016 CSU SAN MARCOS

Prepared by: Michelle Svoboda

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Table of Contents Executive Summary ...... 4 The Project & Objectives...... 5 Methods ...... 6 About ItsPayd ...... 7 About TewYu ...... 9 ItsPayd’s Value Proposition ...... 9 What customers are the target market? ...... 10 What are they (businesses) dissatisfied with? What is the current alternative to your service? ..... 11 What is the product? Why is it innovative? ...... 11 It provides a solution to what problem? What are the specific (measurable) benefits? ...... 12 Situational Analysis ...... 14 Mobile Phones, M-Commerce & Internet-of-Things ...... 16 Disruptive Technologies ...... 18 Competition in Payment Processing & Business Tools Space ...... 19 Subscription Based Businesses ...... 21 Sales Channel Assessment ...... 22 Direct vs. Indirect Sales Channels ...... 22 Sales Channel for ItsPayd ...... 23 Implementation of Partner Program ...... 24 Growth Model ...... 26 Gartner Hype Curve ...... 26 Disruptive Technologies & Growth ...... 29 SaaS ...... 29 Salesforce & CRM Services ...... 31 Twilio ...... 31 MailChimp ...... 32 FinTech: Payments & Growth ...... 32 Square ...... 33 Stripe ...... 34 PayPal ...... 35 Apple Pay ...... 36 Google Wallet ...... 36 P a g e | 3

A Simple Formula for Sustainable Growth ...... 38 Core Product Value ...... 38 Valuation & Acquirers ...... 39 Acquirers ...... 39 Venmo & TewYu ...... 41 Recommendation ...... 42 Industries ...... 42 Automobile Insurance ...... 43 Cell Phone Companies ...... 43 Utilities ...... 44 Conclusion ...... 44 Organic Growth ...... 45 Search Engine Optimization ...... 45 Search Engine Marketing ...... 45 Social Media Presence/Marketing ...... 45 A/B Testing ...... 45 Affiliate Marketing & Indirect Sales Channels ...... 46 Aggressive Growth ...... 46 Acquisition or Partnership ...... 46 Funding ...... 47 References ...... 48 Appendices ...... 56 Appendix A ...... 56 Appendix B ...... 59 Appendix C ...... 60 Appendix D ...... 62 Appendix E ...... 63 Appendix F ...... 64

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Executive Summary

Businesses have been forced to restructure and evolve their operations because of disruptive technologies and the growth of FinTech. Along with this there has been a growing number of successful firms that are offering subscription as a service (or SaaS) software rather than purchasing a traditional license. ItsPayd has the potential to be in a prime position to make the company a viable target for an acquisition by a bank, credit union, or financial technology firm such as PayPal.

The paper examines businesses in the industries of e-commerce, disruptive technologies, and SaaS to gain an understanding of their growth rates, transaction volume and related acquisitions. Then the project moves on to recommend a hybrid sales channel approach for ItsPayd and how to implement a partnership program for the indirect sales channel.

Also included is a representation of growth in related industries by looking at Gartner hype curves as well as an examination of disruptive technologies and their growth. The paper further dives into financial technology companies and breaks down their expansion in the marketplace. With that there is also investigation of FinTech acquisitions in an attempt to understand the potential value of ItsPayd.

ItsPayd also recently launched a peer-to-peer lending platform called TewYu and the paper provides a short comparison of TewYu with Venmo. To conclude, the research considers recommendation of potential industries ItsPayd could offer their services to, with suggestions for organic and aggressive growth. P a g e | 5

The Project & Objectives

The ultimate goal of this capstone project is to create an exit strategy for ItsPayd. The strategy will strive to determine how ItsPayd can become a viable target for an acquisition focusing on their platform that offers payment solutions for businesses by sending invoices and statements via test and email. This will be achieved by meeting specific objectives that have been agreed upon by CEO and owner of ItsPayd Ken Green, California State University of San Marcos project advisor David Grooms and myself, Michelle Svoboda. The current challenges for the firm are how can they increase their customer retention? As well as benchmarks of growth for similar services? The report will determine a sales channel assessment that may be suitable for ItsPayd as well as examining competitive service platforms. The comparison of the competitive platforms will provide a brief description of their service, amount of funding received, information regarding the amount of users and transactions (when applicable), and related acquisitions. Further diving into the acquisition segment, the paper will describe the major acquirers in the sector of e-commerce, mobile payments, etc. This analysis of acquisitions in the related space of ItsPayd will help to determine a potential value for the firm, given a successful growth rate. However, this valuation is stated with a caveat that they have an additional service called TewYu. To provide the company with a frame of context on growth, the research will attempt to display a benchmark of said growth by examining the rise of successful services considered “disruptive technologies” as well as some competitive FinTech platforms. As a majority of this research will pertain to the original platform and service released by ItsPayd but there will also be a comparative analysis between TewYu and Venmo. The analysis will provide information on transaction volume, transaction information, user information, and acquisition information.

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Methods

This report employed the use of white papers, surveys, interviews, CSUSM lectures, news articles, case studies, journals, and other credible sources. The project will analyze competitors and how their services may differ from ItsPayd and look at the competitor’s user base. This aspect of investigation may include some methods and components that are similar to a marketing strategy.

Another crucial aspect to the analysis is the insights that can be gained by examining acquisitions that are similar to the end goal of the firm. Exploring the types of firms that are being acquired or merging while coupling that with an understanding of how their technology operates, the customer base, presence of reoccurring payments, pricing, and volume of transactions, will help to identify major corporate players participating in this space. That information will provide ItsPayd with insight on the type of growth needed to make them a suitable target for an acquisition. Additionally the project will investigate how subscription based businesses are adapting to the usage of disruptive technologies in conjunction with understanding how e-commerce and the internet of things has effected businesses.

Next the report will attempt to benchmark growth of similar services wish the emphasis on understanding the amount of subscribers and transaction volume that are needed for a sales acquisition. Companies that will be researched are disruptive technologies, SaaS, FinTech and competitive mobile payment processing platforms.

Lastly, as stated previously, the valuation will be given with the caveat that there is also an additional new service and platform that ItsPayd recently launched, which is their TewYu venture. There will be research included on Venmo to equip ItsPayd with a better framework of the current usage of the peer-to-peer lending application.

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About ItsPayd

ItsPayd is a simple to use automated platform for business owners to send statements and invoices to customers via smartphone, tablet or PC. Customers can simultaneously receive a text and email with the billing details and pay that invoice within three easy steps. The business sending the invoice can offer their customer various payment options, for example a customer can opt to pay the invoice in full, split the payment over x months, or even weekly. The company can also include a service charge (no greater than 10%) for customer that chooses to split up their payments over a given payment plan. Customers can pay their bills using a credit card, electronic check or ACH and there is also an automated follow up. No longer does a company need to use their resources making phone calls to agree on terms, mail out hardcopy invoices, or wonder if their customers have even received the electronic copy of their statement because all of this can be taken care of by the platform. ItsPayd offers their users the ability to see if a customer has opened the email with their invoice or clicked the link sent via text to pay their bill. It gives the business owner the capabilities to identify potential issues with customer information fast and quickly rather than the customer inadvertently going into past due status because they did not receive their invoices.

Invoices and statements are personalized to the Payee’s business which includes their logo. As a business owner when logging onto your ItsPayd account you can track and review customer payment behaviors and performance. This tracking can help the owner identify seasonal patterns or payment patterns better equipping them to make decisions about present and future business actions. Invoices and statements can be sent within minutes while customers can also pay their bills with more flexibility and ease, through which a business can improve customer attrition, customer satisfaction and develop stronger customer loyalty to your businesses brand.

Because it is not generally cost effective for a business to go after small dollar amounts on their invoices if it goes into past due and remains uncollected it is eventually written off to bad debt. This means that a company has lost that revenue, however, over time those small amounts can P a g e | 8 total a far greater number. The type of technology that ItsPayd is offering business could eventually eliminate the need for writing off bad debt and even collection services. Not only does it protect a firm’s at risk monthly revenue but it improves your customer retention while overall increasing the lifetime value of the customer.

Table 1: Benefits of ItsPayd

Benefits for Business Owner: Benefits for Customer: Verify customers opening emails and text Receive invoice via smartphone, tablet or PC Simplicity : Easy to create and send invoices Ability to pay invoice via text and or email Track payment patterns Simplicity : Can pay in 3 steps Capability for QuickBooks integration Flexibility : Payment plan options Improved customer attrition Various methods of payment accepted No need for collections Automatic follow-ups Protection of at risk monthly revenue

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About TewYu

A majority of this project will focus on the original service offered by ItsPayd, as described previously. However the report will also include a brief comparison of TewYu with another peer to peer lending platform known as Venmo. For the reader to understand the comparative analysis this section will give background of the service, its capabilities, and the founder’s future vision for the application.

ItsPayd2u, also known as TewYu, is a peer to peer lending application that allows user to advance small amounts of money to friends and family. What is rather distinct about this particular application is that when an amount is loaned there is an automatic repayment process back to the lender, repayment terms are agreed upon by the sender and receiver of the loan. This automatization of the repayment alleviates any worry on the sender’s part about not receiving back the loaned amounts. Payments can be made on a weekly or monthly basis, again, whatever has been agreed upon by the two parties. Another unique feature the application has to offer is their credit rating system. Individuals have the ability to rate the payer’s ability to repay the loan amount given the terms of their agreement as well as their satisfaction with the repayments. Users are given a credit score using real time feedback and data (TewYu.com, 2016).

The developers of the application intend for this innovative technology to be adopted within the community, businesses, and non-profit organizations to change the traditional mindset and rules that are often associated with the lending of money. There is the hope it may cultivate less of a dependency on costly cash advances and actually develop stronger bonds between those within our inner circles because it fosters greater trust with one another.

ItsPayd’s Value Proposition

The subscription service that ItsPayd offers allows businesses to conveniently send their customers invoices via text and email with automated follow ups. Then, a customer can quickly pay their invoice in full or an agreed upon payment plan thus making it easier for both parties to collect and pay, all in three P a g e | 10 steps and less. Firms no longer need to use resources and time on collecting payment and they have an opportunity to increase customer satisfaction and loyalty, overall improving the lifetime value of their customer. They are an advantageous tool that can help businesses to easily adapt with the disruptive technology wave that is altering user experience, customer engagement and ultimately forcing businesses to change how they operate.

As ItsPayd is still a young company in the beginning phases of growth, some of their value proposition is still being developed as they work to acquire more customers and increase their enterprise. Specifically in terms of what industries and target customers they are working to reach, this report addresses a few possible opportunities of industries that would be profitable for ItsPayd to market their service to. But again, it is in the early stages of growth and there is the chance that their target customer may be subject to change and expand, adapting to their growth strategy. When addressing the question of target market, to build their value proposition, the response offers example of industries that could potentially make ItsPayd highly profitable and have a specific need (the business/potential customer) that their platform could address.

To develop a value proposition for ItsPayd, the framework used was based a series of standard questions commonly addressed by businesses, derived from an article on Entrprenuer.com (Skok, 2013). The questions focus on the goals, service, objective and overall mission of ItsPayd.

What customers are the target market?

Because the aim of the report is to develop a strategy that makes the company and viable target for an acquisition, businesses that offer subscription services could offer the highest valuation and benefit for ItsPayd and a potential buyer. This is due to the fact that the enterprise would receive recurring monthly revenue (RMR). Examples of industries that are adopting mobile payments and technology to save time and resources on collecting payment are, for example, medical and healthcare fields (e.g. SwervePay), small businesses (adopting services of Invoice2Go), mobile phones (e.g. P a g e | 11

text payment reminders on Verizon), construction and construction supplies (high volume of bad debt and receivables). Businesses in all sectors are not only implementing new technologies to reduce costs and amount of resources used but are also adapting to the new wave of business operations. Changes have been facilitated by smart-mobile devices, disruptive technologies and the internet of things, to empower the consumer at a new level. Businesses that cannot keep their customers engaged and satisfied, risk losing them, as a result they must adapt.

What are they (businesses) dissatisfied with? What is the current alternative to your service?

 High customer attrition rates.  Cost of resources on collecting payment.  Cost of time on collecting payment.  Cost of accounts receiving departments and collection services.  Being forced to write off small amounts of payment owed which can accumulate to large amounts of lost revenue.  Lack of customer loyalty, poor B2C relations.  Alternatives include: brick and mortar banking, hardcopy invoicing, paper currency, variations of competitive services (e.g. Invoice2Go, Square, PayPal, etc.) accounts receivables departments and collection agencies.

What is the product? Why is it innovative?

ItsPayd is a B2B software-as-a-service for enterprises to gain more lifetime value from their customers. This is done by offering simple and flexible payment options for a business’s invoicing of their customers. Invoices can be received by customers via text and/or email while offering various payment plans (determined by the business) (weekly and monthly) for their customers. Invoices and payments can be easily generated and sent with minimal effort on part of the business and the customer. Business can quickly upload their QuickBooks information and excel spreadsheets with their customer’s P a g e | 12

information. Then a user can automate when a customer receives invoices and also have access to check that the invoice was received by the customer. ItsPayd offers their users real-time updates of funds received for the business, as opposed to depositing money into a traditional bank account, where a transaction could have a two to three day processing fee. Another feature to highlight is that each step can be done in three steps or less, a business owner can send their invoices in three steps or less. A user can pay their bill in three steps or less. ItsPayd values that their services and tools are durable for different businesses and that each process is straightforward and maneuverable for their users.

The service has the potential to drastically alter the way a business operates by supplementing and eventually eliminating the need for use of collection agencies as well as accounts receivables departments. The simplicity and flexibility of the ItsPayd service can minimize customer attrition, enhance customer satisfaction, promote customer loyalty, and overall increasing the lifetime value of that customer.

It provides a solution to what problem? What are the specific (measurable) benefits?

With 68% of Americans owning smartphones (Mediata, 2015) businesses are evolving their operations to attract and retain consumers by offering various ways to shop online, browse coupons, conveniently join loyalty programs and pay for goods and services, all from a handheld device. If an organization cannot adapt with disruptive technologies and the internet-of-things they are likely to dissolve from the market. ItsPayd offers an easy solution for businesses to reshape their operations in order to keep pace with the new norm of our tech-ecosystem.

ItsPayd can offer a business’s measurable results with each their subscription plans depending on the size of a business. A firm can easily calculate their savings on the process of collecting on their customer’s statements and measuring the increasing the amount that is being received from customers. As retrieved from their websites, P a g e | 13

ItsPayd.com, the firm provides a clear and easy to follow cost-benefit analysis of their services. An example of the calculation can be seen in Figure 1 (ItsPayd.com, 2016).

Figure 1: Cost Benefit Analysis using ItsPayd

Another way a business can measure the benefits of a service such as ItsPayd is by analyzing the amount of money that is written off in their accounts receivables. To explain this more simply, a business may invoice a customer for a small amount, for example five dollars, and for whatever reason the customer as not paid the bill. Maybe the invoice was misplaced, or the customer didn’t realize that there was even a balance owed, because the amount is rather small, an organization will likely write it off rather than spend time and resources (which tend to be costlier than the amount of the balance owed). By performing write-offs, a firm is essentially cancelling revenue they are owed. Although it seems like a small amount at the time, these write-offs can quickly add up and the amount of revenue lost may be startling to business owners.

Enterprises may also monitor their customer’s average days to pay, their customer attrition rates, and even customer satisfaction, depending on the type of metrics they choose to use in order to calculate the benefits of a service such as ItsPayd.

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Situational Analysis

A situational analysis of ItsPayd in the current market environment examines the company’s strengths, weaknesses, opportunities and threats. Identifying these factors can aid the firm in developing a strategic plan to grow their customer base given their position in the market.

Strengths:

 Simplicity: the ease with which a user can create an account, invoice, statement and for their customers to pay.  Flexible monthly payment options.  Receive invoice via text and email simultaneously.  Business ability to see which customers viewed invoice.  Ability to track payment patterns and consumer behavior.  Can be deployed by various businesses in various industries.  Low rates

Weaknesses:

 Small customer base.  Low traction rate.  Not developed for particular industry  Difficulty targeting and obtaining customers. Opportunities:

 Increase customer loyalty.  Increase customer lifetime value.  Create more brand awareness.  FinTech & SaaS adoption  Improved customer attrition. Threats:

 Invisibility, low brand awareness.  Competing platforms and applications. P a g e | 15

 Traditional banking, collections and accounts receiving departments. P a g e | 16

Mobile Phones, M-Commerce & Internet-of-Things

Mobile commerce, also known as m-commerce, is the buying and selling of goods or services via a smartphone, or handheld device. Mobile phone usage has forced companies to change how they traditionally run their business. In 2012, 4 out of 5 consumers were using their smartphones to shop (comScore, 2012) (Nakache & Carter, 2015) and according to Gartner, in 2012 Worldwide payment transactions exceeded $171.5 billion. Taking into account these figures it is only likely that the numbers will continue to grow. In order for companies to retain their customers satisfaction, technology is forcing them to give consumers more convenient options to shop and pay from their mobile devices. Companies are forced to develop new and innovative methods in order to keep their consumers happy and loyal to their brands. Especially given the wave of different types of business that cut out the need for a middle man giving more power to the consumer, firm’s need to be competitive with how they will keep their customers happy. Consumers are shopping for homes, retail products, vacations, groceries, subscription services, and virtually every type of service that was once done without smartphones and even computers.

Consumers now want to be able to access a business’s promotions, coupons, loyalty programs, with the ease of a platform or application. In the current day and age it is expected by the user to have access to these features. An individual wants to be able to pay their cable bill, credit card statement, and electricity bill online. Companies have now even begun to offer their customers to split payments, an example of this would be SDG&E. Another indication of the mobile commerce is the transition of hardcopy statements and invoices to digital delivery or even a text reminder about an invoice amount. Citibank and SDG&E are leading the way with this, sending customers alerts when bills exceed a certain amount, and reminders of when to pay their bill. Companies are doing this with the foresight that soon all business will be forced to offer these options because all smartphone users will be more compelled to stay with the brands that can deliver these types of options. Mobile commerce paved the way for disruptive technologies, such as companies like Uber and Pinterest. These innovative technologies have caught the attention of P a g e | 17 venture capital investors and according to an article in TechCrunch “A recent report by Digi- Capital estimates that VCs invested $4.2 billion in m-commerce from Q3 2013 to Q3 2014, far surpassing the $1.2 billion invested in 2013 and the $829 million invested in the previous two years combined...it has also continued to fuel an explosion of m-commerce startups, including several in new subcategories (Nakache & Carter, 2015).” Firm’s offering their services through mobile application and smartphones must address certain challenges in order to meet customer needs and demands. Companies need to make sure that a customer’s payment information is secure through proper encryption. For example, customers that use Apple Pay will receive an encrypted token that is then sent to your merchant certificate and then another encryption with the identifier. To protect the privacy and information of the customer base, firm’s need to ensure the safety of that information (Apple, 2016). If the information is hacked a business may lose their customers and have trouble rebuilding their brand image. Another challenge mobile commerce can present is in regards to the ease of checkout for users. The simpler it is for a consumer to put in their information or retrieve their store information, the more likely they will remain using that companies services. For example, Amazon has trademarked this process through their “1- Click Buy” process which allows customers to easily find the product they are looking for and purchase it within a matter of seconds. This simplicity and ease of purchase are focal points behind ItsPayd model for the consumer receiving their email or text statements. An individual can receive their bill, put in their information or retrieved stored information, and pay all within three quick steps. These innovative technologies and services are further propelled by the “internet-of-things.” The internet of things coupled with mobile commerce has allowed an individual to hail a ride, book a vacation, pay an electric bill, open their garage, and watch over their house, all from their mobile devices. Companies that do not acknowledge and change with the demands of their consumers will become obsolete. As stated in an article on “the maturation of mobile payment services combined with the proliferation of IoT-capable devices has created a perfect storm of innovation that's seeing our money going places it never could, both securely and conveniently… the Internet of Things is moving from pure connectivity, to all-out functionality (Mastercard, 2016).” P a g e | 18

Disruptive Technologies

When analyzing innovative technologies and services that are considered to be “disruptive” one must first understand what the term “disruptive technology” implies in the business world. According to an article from Harvard Business Review, “’disruption describes a process whereby a smaller company with fewer resources is able to successfully challenge established incumbent businesses. Specifically, as incumbents focus on improving their products and services for their most demanding customers, they exceed the needs of some segments and ignore the needs of others (Chistensen, Raynor, & McDonald, 2015).” It goes on to further state that entrants into these markets are focusing on the divisions that have been overlooked by established incumbents and generally are offering those segments services that are more functional and at a lower price. As the entrants have gained a foothold in that market segment they gradually move up the market and begin to acquire and deliver services to more mainstream customers. As more of the mainstream customer begin to adopt the service or technology that is when disruption has taken place. As visual model of disruptive innovations and their current market can be seen in Figure 3. Digitalization of services and meeting consumer demands has further transformed businesses, forcing organizations to rethink their competitive strategies. A company needs to structure their businesses to be adaptable to the rapid change that is being stimulated by Big Data, cloud services, and mobile technology. According to white paper written by SAP, there are four drivers that are causing “disruption” in our current market place. The first driver being the empowerment of the end users, and to survive a company needs to have the capability to meet the demands of the consumer. Mobile technology has enabled consumers to expect rapid responses and instant answers, also setting that expectation from businesses worldwide. Essentially, a customer’s value proposition has been increasing, and services like ItsPayd, focus on helping businesses retain those customers over the lifetime of the business. Another growth driver identified in the SAP white paper was digital proficiency, which is an individual’s ability to harness technology and categorized it into one of five categories on how they have adopted digitalization. The third driver which is also closely connected with disruptive technology, cloud services and mobile phones is the development of Big Data. Enterprises have the ability to collect vast amounts of data that was unfathomable P a g e | 19 ten years ago, in order to conduct predictive analytics and determine future needs of the consumer in the rapidly changing market. Firms will need to leverage these types of analysis to effectively make business decisions that will most likely dictate their survival. The last driver identified, which is closely tied to what has been previously mentioned, is the changes businesses are experiencing in their processes and operations. There is a strong emphasis in today’s market on efficiency, innovation and customer retention (customer satisfaction and empowerment). A profound example of what is referred to as a “digital disruptor” was the impact of the application WhatsApp which was purchased by Facebook for $22 billion. WhatsApp offers users the ability to send text messages to other users of the application for free. WhatsApp has approximately 800 million users and according to the global center for digital Business transformation report, Facebook’s purchase of WhatsApp has poised them in the market to start offering peer-to-peer lending via Facebook Messenger. WhatsApp is considered a disruptive technology because of how it challenges the established incumbent of the global text messaging market that is a $100 billion dollar industry. The report goes on to state that “WhatsApp and other over-the-top (OTT) services are projected to drain the global telecommunications companies of $386 billion in revenue between 2012 and 2018 from the use of OTT mobile voice calling alone (Bradely, Loucks, McAuley, Noronha, & Wade, 2015).

Competition in Payment Processing & Business Tools Space

As determined in the scope of work, ItsPayd desired an examination of acquisitions and growth within the area of disruptive technology. The research presented on the types of companies presented Appendix a do not all fit a different idea of what ItsPayd may view as competition. It seems pertinent to include the following companies in the Appendix A because it is likely that until brand equity is established, consumers may view the service of ItsPayd as an e-invoicing tool, with little understanding of accounts receivables, disruptive technologies or FinTech. Although the creators of the ItsPayd platform may not view themselves as related to certain companies because their offering is unique, a consumer may have difficulty differentiating them among some of the competition listed in the figure. While conducting research, I spoke with a few businesses owners, from various industries, about tools they use to invoice P a g e | 20 customers and collect payments. The applications and tools they use have been placed in the table. Because a consumer is a vital aspect of generating profit, it seemed that it would be relevant to include in understanding their user volume, funding, and transaction volume.automa P a g e | 21

Subscription Based Businesses

Subscription billing services have begun to permeate all industries, from beauty box services to Industrial equipment and manufacturing. The rise of subscription and consumption models has largely been driven by B2B, according to Forrester Research Subscription Billing Platforms report, and it is partially due to the fact that the B2B environment is supportive of account hierarchies. An example of an account hierarchy is how ItsPayd offers consumers a basic plan of 20 invoices a month for $49.99 as well as an unlimited package for $299.99. There are various factors that have driven businesses to restructure and repackage how they offer their products. One significant variable is the “adoption of the cloud itself and open-source software (Gartner, 2015).” Cloud services are closely associated with subscription services. This has enabled its users to always have the up to date version of the software and done away with the former traditional one-time licensing models. Users and businesses can also adjust their service based on their needs, there is the freedom to scale up or down given the business. Subscription service models are also explain by the changes in a consumers purchasing behavior. There is more emphasis on customer flexibility, by incorporating a business model that is conducive to those needs of the customer, it fosters greater loyalty to the brand or business. There is potential to increase a customer’s value significantly more than from the former one-time purchase model. A benefit for the provider of the subscription service is the ability to track and measure their monthly recurring revenue (MRR). As stated in Entrepreneur, “this consistency in revenue also allows subscription-based companies to easily calculate the lifetime value of a customer, manage inventory, offers simple pricing and many other business benefits.”

This is particularly beneficial in determining the value of a company. When a firm has access to measure their future revenue without worrying about seasonal sales, for example, it can help a firm access greater funding through venture capitals or determine the value of their organization for an acquisition. It is guaranteed future revenue and that can be particularly appealing to an acquirer. This information is especially applicable to ItsPayd and their exit strategy since the organizations end goal is to be a target for acquisition. Based on the P a g e | 22 profitability, prevalence and flexibility of the subscription based models it would be most beneficial for ItsPayd to market their service to other business that are in that spectrum. Figure 6, from a Forrester Research on subscription billing platforms, shows services that are leading in the adoption of complex subscription models. Almost no business is immune to this, and as can be seen there are a variety of subscription models that vary in complexity but spread across multiple industries types. The challenge for ItsPayd is to determine which industry or industries to target with their service.

Sales Channel Assessment

Direct vs. Indirect Sales Channels

The sales channel assessment focused on two distribution channels, direct and indirect selling. Typically in direct selling the producer of the product or service gets it to the consumer without intermediaries. Intermediaries could be a distributor or the retailer. The internet has enabled the direct selling channel because it gives the producers the ability to directly sell their goods to the consumer. In terms of the distribution of the product, direct distribution channels are managed solely by the firm and do not use the services of non-affiliated third party selling systems (indirect distribution). Direct selling allows the producer to better connect with the consumer and manage those relationships, however, if a company experiences rapid growth, direct selling can be a difficult model to follow when effectively managing customer relationships. Also it should be noted that with the direct selling model the manufacturer has control over the retail price of the product whereas with indirect selling, the service is sold at a wholesale price to the channel which allows them to mark up your offering and make a profit as well. Along with controlling the retail price in the direct sales model, the firm must also maintain the cost of a salesforce and, depending on their size, this may be expensive for the enterprise.

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With an indirect sales model, the producer relies on intermediaries to sell the service or goods. This third party can either be an affiliate or a partner of the producer and generally entails additional steps for the goods reach the consumer. Advantages of this model is that it allows for the firm to increase their sales without increasing and maintaining their sales staff. When leveraged efficiently it can yield quicker sales, but the cons that accompany that are it may reduce a firm’s brand control because they are no longer directly bringing that product to the users. Also there is risk of poorer customer service because of the indirect management of their goods.

Sales Channel for ItsPayd

Based on these two sales channels it may benefit ItsPayd to use a blend of these two strategies, also known as dual distribution. Due to the infancy of the firm and the fact that it is not yet focused on a specific industry it would not behoove them to completely eliminate direct sales because they are still determining the best industry for their service. This is especially true because much of their emphasis is on customer value and enhancing the lifetime value of a customer for businesses, until they have more traction direct selling should be incorporated into their strategy. However, the firm may be able to increase their sales by using intermediaries or developing different channel partners and/or distributors. The firm would benefit by continuing to offer their API and as a white label then focus with their partners and on the end-to-end experience of the consumer. Although there are other companies that offer a white label API service ItsPayd has the differentiating factors that allow customers to use their mobile device and quickly pay a bill through an invoice sent by a text and even having the option to pay bill in multiple payments as well as automated follow-ups. By working with an intermediary, they could actively help their partners manage their service for greater efficiency. Additionally it would be ideal for their partners to provide their clients with software-as-a- service because it will generate more recurring revenue for both parties. Because customer traction has been a challenge for ItsPayd, by partnering with an established enterprise that already has a customer base, it could be a more beneficial approach to obtaining more sales. It may give them an opportunity to leverage the brand equity of an already established firm and P a g e | 24 then couple that with direct selling methods they can actively work on developing their own brand awareness. The indirect sales model would save the firm from heavily investment in building their brand, which can be a costly venture. This hybrid sales model would allow them to develop brand awareness while generating revenue from the indirect sales approach. Examples of potentially profitable partners could be companies that offer enterprise resource planning or customer relationship management services, these types of resources are used by multiple types of industries creating more opportunity to reach various markets, whether it be finance, construction, or medical.

Implementation of Partner Program

Given the recommendation of incorporating an indirect sales channel for ItsPayd, the following diagram will give a brief discussion on the steps for integration. This outline can be used as a framework to reach out to potential partners (Company X) and promote discussion followed by implementation of the service.

Marketing Strategy  Discussion of overall marketing approach.  Build a timeline for the marketing activities.

Marketing Tools  Email newsletters  Can include webinar, seminars, or user groups  Direct Support and Customer Services.

Support Material  Setting up partnership with Company X.  Creating a partner guide, lines of communication as well as a support plan.  Creating an online application.  Initiate and create a plan for the design of online landing page.

Training  Provide thorough training on Company X Portal. P a g e | 25

 Provide and train ItsPayd team with training on the partnership specifics, implementation and Company X service.

Partner Relationship Management  Schedule monthly and/or quarterly review sessions between partners.  Manage and follow up regarding specific issues within timely manner.  Adapt and modify marketing plan when and if necessary.  Coordinate with partner in creating new solutions of service based on consumer needs.

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Growth Model

McKinsey recently conducted research on what capabilities and investments enabled businesses to grow faster. The research consisted of 15,000 employees over 140 different global organizations that were in B2B and B2B2C sectors. The results of their research indicated that companies that had revenue growth also invested in their marketing and sales departments. The findings also indicated that those who were investing in these capabilities had 30% greater revenue growth when compared with other enterprises in the same industry. “That means in an industry growing at 4 percent annually, a company in the top quartile of marketing and sales capabilities typically grows by around 5.3 percent (Delmulle, Grehan, & Sagar, 2015).” A diagram of their findings can be seen in Figure 8.

Gartner Hype Curve

The Gartner Hype Curve is a tool for individuals to understand where emerging technologies are in their growth, and to differentiate if they are “hype” or a potentially significant driver in the tech industry. It can be used to assess risk as well as opportunities by identifying the maturity and adoption of a particular technological tool, service, or application. As can be seen in the figure about there are five phases on the visual representation of the Gartner Curve (Gartner, 2016) and it is important to note what each phase represents in the growth period to properly use the hype cycle.

1. Technology Trigger: This is the period where the initial idea and concept is circulating. Often times there are no examples of the existing product/service/idea.

2. Peak of Inflated Expectations: As the name sounds, it is a phase in which there are success stories of successful implementation of the product but often times there is also a plethora of unsuccessful attempts as well. Often the publicity focuses on the attempts that had the more favorable outcome.

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3. Trough of Disillusionment: During this time the product or service has not experienced much successful implementation and “Investments continue only if the surviving providers improve their products to the satisfaction of early adopters. (Gartner, 2016).”

4. Slope of Enlightenment: This phase is characterized by a more clear benefit and understanding of the tool to the firm’s. Businesses are more likely to fund their own pilots and trials of the product but more conservative investors and firms still remain cautious. 5. Plateau of Productivity: The last period is when adoption of the tool has become mainstream. “Criteria for assessing provider viability are more clearly defined. The technology's broad market applicability and relevance are clearly paying off (Gartner, 2016). “

Now that the reader has an understanding of how to use the Gartner method, let us examine what cycles may be of relevance for ItsPayd. As with disruptive technologies and even FinTech services, determining a specific category in which they can be defined by is challenging and even inaccurate. This is because that the technology can span over various industries, but we will examine a few of the key “buzz” words that are affiliated with the ItsPayd platform.

After evaluating Gartner’s list of hype cycles, among the relevant cycles, they will be divided into five categories: Banking, CRM & SaaS, Commerce, Mobile, and Payments. Within each category will be a topics of relevance to ItsPayd, and then the topics will further drill down to pertinent technologies and where they lie on the hype curve. The full tables can be found in the appendix.

Table 3 and 4 are a condensed representation after an analysis of various Gartner’s hype curves. The hype curves that were analyzed were from multiple sectors, banking, CRM, SaaS, IoT, commerce, mobile, and payments. Given the information below, there is still development to be done in each of these segments because online payment gateways has reached the plateau of productivity.

Table 2: Condensed Gartner Charts with Relevant Technology Types for ItsPayd P a g e | 28

Where on Type of Hype Cycle the Hype Cycle Digital Banking Digital Banking SaaS Digital Transformation Commerce Technology Trigger -- -IoT for Banking -Finance & -- -Digital Payment Accounting Advisor BPaas -Blockchain/Distributed Ledgers Peak of Inflated -- -- -Cloud-Based -Mobile Expectation Backup Services Commerce -Subscription Billing -Internet of Things Trough of -Remote Commerce - Tablet Apps -- -E-Invoicing Disillusionment -Emulation Payment Digital Wallets -Knowledge Systems Management for -Tablet Apps Customer -Digital Wallets Service -Enterprise Feedback Mgmt Slope of -Mobile-Originated -Mobile-Originated P2P -Digital -Cloud/Web Enlightenment P2P Payment Payment Solutions (for Commerce SaaS Platforms Solutions (for mature mature payment -Digital payment markets) markets) Commerce SaaS -Smartphone -Smartphone Banking Banking (for non- (for non-mature mature payment payment Markets Markets Plateau of ------E-payment Productivity Gateway Mobile POS Table 3: Continued Condensed Gartner Charts with Relevant Technology Types for ItsPayd

Where on Type of Hype the Hype Cycle Cycle E-Commerce Future of Money Financial Services Payment Innovations Payment Systems Technology -Subscription -Mobile Digital -Bump P2P Payment -Money and Payment Trigger Management for Payment Advisor Systems Clouds E-Commerce -Peer-to-Peer -Alternative Payment foreign exchange Origination Systems. marketplace -Application PaaS for Payments -P2P Foreign Exchange Marketplace Peak of Inflated -E-invoicing -- -Trusted Service for -P2P Foreign Exchange Expectation Virtual Assistants NFC-Enabled Mobile Marketplace Payment Systems Trough of -Personal -Digital Wallet -Digital Wallet -Digital Wallet Disillusionment Subscriptions Solutions Solutions Solutions P a g e | 29

Where on Type of Hype the Hype Cycle Cycle -Cloud/Web -Transaction Banking -Transaction Banking Platforms 2.0 (Payments) 2.0 (Payments) -E-Commerce -Alternative Card SaaS Networks -Social Network Payment Systems -Mobile Originated P2p Solutions (mature marketplace) -Enterprise mobile financial services solutions -Near-Real-Time-Low- Value Payment Systems

Slope of -- -- -OTA Mobile Phone -- Enlightenment Payment Systems ( India & S.E. Asia) Plateau of -E-Payment ------Productivity Gateway -E-Commerce Payment Processor Disruptive Technologies & Growth

SaaS

According to Gartner analysts, the SaaS market in the U.S. will reach $244 billion by 2017 and it will only continue to grow. The U.S. is still the dominant market for the technology but analyst are expecting a compound annual growth rate of 8.14% worldwide (Finance Online, 2016). As stated on Index.Co there were 69 acquisitions of SaaS firms average $150.2M. In 2016 some of the major firms acquiring SaaS technologies are Oracle, Cisco and Insight Partners, ranking in the top 7 acquisitions as of July 2016 (Index.co, 2016). For an overview of the number of acquisitions and average price refer to Figure 5. Since 2011 there has been a fluctuation in the price paid, however 2016 is superseding all of the previous years and it is only six months into the year. It can also be noted that the number of firms being acquired has significantly increasing, almost six fold since 2011. Figure 6 contains a breakdown of the percentile for the price of the acquisitions in the years 2015 and 2014 (Index.Co, 2016). Given the data of recent P a g e | 30 acquisitions and money invested into acquiring SaaS technologies, it suggests that there will continue to be an upward trend in not only the purchasing of the technologies but likely also the adoption of these services by enterprises worldwide. Table 4: Number of SaaS Acquisitions

Year 2016 (as of 2015 2014 2013 2012 2011 July) No. of SaaS 71 69 36 26 18 13 Acquisitions Average $1.8B $150.2M $54.8M $10.3M $916.1M $108.5M Amount

Table 5: Percentile of amount paid in SaaS Acquisitions

Percentiles Y2015 Y2014

25% $10M $4.5M

50% $30M $9M

75% $139M $29.8M

Table 6: Major Acquisitions of SaaS Companies

Company Service Acquired Price Revenue Annual Gross Net By Paid Growth Margin Income Rate Margin OPower Tools for Oracle $552M $149M 16% 62% -30% energy based decisions Textura Platform for Oracle $683M $92M 35% 82% -16% construction industry Qlik Business Thoma $2.8B $226M 85% 85% -5% intelligence Bravo firm Demandware Business e- Salesforce $2.8B $237M 43% 71% -17% commerce solutions Marketo Marketing VistaEquity $1.79B $631M 38% 66% -32% automation Partners

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Salesforce & CRM Services

In 2015 Salesforce had 19.7% of the market share in CRM services with revenue in the range of $5 billion for the same year. The number of Salesforce.com customers increased from around 13,900 in 2004 to around 68,000 by 2009, registering an annual average growth rate of 37% (Trefis, 2011). However, the company went live with their service in 1999 and didn’t start to see the upward trend in their subscribers, revenue and market share until approximately 2003 or 2004. Salesforce is by far the largest market share in the CRM market but we can see in Figure 12 that the compound annual growth rate (2010-2015) for CRM services and ERP are both in at around 15%. This upward trend is expected to continue to increase because cloud based CRM services from 2013 to 2018 have a CAGR of approximately 17% (Columbus, 2015). The article continues to state that salesforce will continue to dominate the CRM services, further solidifying itself as the market leader. Salesforce has also been actively acquiring SaaS companies and in June announced acquisitions totaling almost $3 billion.

Twilio

Twilio went live with their cloud based software in 2009 which allows developers to use tools to develop SMS and VoIP apps. The enterprise received $233.7M in funding, another example of a SaaS enterprise that has experienced exponential growth in the recent years. The enterprise recently reached 1 million developers with a little over 28,000 active customers (Yeung, 2016)(Twilio.com, 2016). However that reach took them some time to achieve, as can be seen below.  5.5 years to reach their first 100,000 developers,  another year to reach 200,000  And an additional year to reach 400,000.

In 2016 they took the business public with a $1 billion valuation and sold 10 million shares to raise $150 million. Twilio depends on Facebook’s WhatsApp for approximately 15% of its revenue in 2015 (Huston, 2016) but overall they are experiencing growing revenue their sales of the last three years are as follows: P a g e | 32

 2013 - $49.9M  2014 - $88.8M  2015 - $166/9M

MailChimp

MailChimp was founded in 2001 as a tool that helped enterprises send out marketing emails, newsletters, campaigns, and automated messages. One unique aspect of MailChimp is that it was not funded by any venture capital funds. The firm saw a great deal of success by going “freemium,” meaning in 2009 with 85,000 users they decided to offer their services for free. The enterprise experienced a lot of momentum after this transition. After about a year after the announcement of free services they had grown their user base by 5 times, at 450,000 users (MailChimp.com, 2010). A clear valuation of MailChimp is unavailable but given the large volume of customers it could be said that it is quite significant and similar to some of the other top SaaS enterprises.

 2009 – 85,000 paying customers (Quora, 2016)  2010 - 450,000 users &700 million emails per month (MailChimp.com, 2010)  2011 – 900,000+ users (Finch, 2011)  2014 – 5 million users (Schreiber, 2014)  2015 - 8 million users & 15 billion emails per month (Zipkin, 2015)

FinTech: Payments & Growth “FinTech (or financial technology) is changing the way we spend, save, sell, invest, and lend. From crowdfunding to personal finance, this $707B industry is growing, both in size and in scope. Peer-to-peer mobile payments are still a relatively modest $28B sector within this industry, but we believe they are on the cusp of mainstream adoption (MBLM, 2016).” P a g e | 33

One aspect that has heavily supported the growth of financial technology is the growing usage of smartphones. For purposes of this report, it will only discuss smartphone usage in the United States. According to a PEW research study released in 2015, 64% of adults own a smartphone and 15% of young adults between the ages of 18-29 are heavily dependent on their phones for online access. These figures are only expected to grow so this has spurred companies to work on creating applications and platforms that promote access to their services via the mobile phone. The study also stated that 57% of smartphone owners have used their device to do online banking, as a result of this the FinTech industry has been working to change their relationship with e-commerce. Some of the enterprises that have been very successful can be seen in Figure 17 displaying their recent valuations in the billions (NY Times, 2016). The next portion of the paper will exam the growth of a few of the mentioned firms in Figure 19.

Square

Square was founded in 2009 and went public in 2015, as a mobile payment company and service aggregator that aims to simplify payments and transactions with the use of technology (Crunchbase, 2016). They have expanded some of their services into subscription based model and have branched out their services into Square Capital and Square Cash. Below are some figures regarding their enterprise.

 They are valued at over 5 billion dollars  $590.5M in funding, 8 rounds.  2014 their service processed $23 billion in payments  $446 million in individual payments from 144 million cards

An article on TechCrunch.com breaks down what Square was processing in previous years and compares that with their valuation. Here are those figures:

Table 7: Square Transaction Volume & Valuation P a g e | 34

Processing Valuation at Funding Intervals 2011 2009 March $1M per day December $45M April $2M per day 2011 June $4M per day January $240M 2012 June $1.6B March $4B (annualized 2012 rate) April $5B (annualized September $3.25B rate)

Unlike some of the other competitors in this space, Square has seen extremely rapid growth in comparison. There transaction volume has an upward positive trend and as that increased, their valuation and funding did as well. Some of the factors that attributed to their success was their early traction, however, there is little information available as to what facilitated their success gaining customers. Dorsey (the CEO of Square) states that one reason for their success was because of the need for it, he had gotten the idea when he was trying to sell a product abroad but was unable to because he had no way of accepting a credit card. Later he had gotten the idea that there should be a technology available to accept cards with the use of your mobile phone (Taylor, 2012). The first advantage coupled with a clear value proposition are some the factors Dorsey attributes to their success.

Stripe

Stripe, founded in 2010, is essentially a gateway that provides tools and APIs that allows business to accept and manage online payments (Crunchbase, 20160). They have received $290 million in funding over 7 rounds and are currently valued at $5 billion. Their pricing model is a pay as you go with monthly services fees, according to their website it is transparency pricing. They charge a transaction fee of 2.9% + 30 cents per charge and as long as the transactions the user is doing are under $1 million in volume there is no increase cost to the consumer. This differs from PayPal whose base fee increases as the volume of transactions P a g e | 35 increases, starting at $3,000 (Memberful, 2016). Currently Stripe can accept payments in 139 currencies and is available in 25 countries (Stripe.com, 2016). In terms of their transaction volume, for 2013, “analysts estimate that they had processed $1.5 billion in transactions (Sramanamitra, 2015).” Their valuation also rose drastically with their funding rounds in 2014:

 January 2014 raised $80M and valued at $1.75B,  December 2014 raised $70M and valued at $3.5B.

One of their major competitors is PayPal (recently acquired Braintree) who in 2014 had a revenue of $7.9B with a valuation of $50B (Borison, 2015). Some of Stripes well known users are Lyft and Shopify, and they recently partnered with Apple Pay and Twitter but information regarding the volume of their customer base seems to be undisclosed.

PayPal

PayPal may be considered one of the giants and leaders in the FinTech space, dominating online payments as well as mobile payments. Recently they have been making rather calculated acquisitions that could indicate they are looking to maintain dominance in the financial technology industry. Although PayPal is dominating this market they are being challenged by others entering the market like Apple, Samsung and even Stripe. The company has been working to increase growth by expanding their services to more merchants, but they have been seeing a lot of growth in their peer-to-peer lending platform, Venmo (Medhora, 2016). In Table 9 there is a listing of some recent and important acquisitions from PayPal as the brace themselves for the competing firms in the FinTech industry.

Table 8: PayPal Acquisitions

Company Service Acquisition Amount Xoom Secure money transfer $890M worldwide. Braintree/Venmo Payment platform allowing $800M users to receive funds. Venmo is P2P lending P a g e | 36

Company Service Acquisition Amount Bill Me Later Customers can purchase goods $945M (acquired by Ebay) without a credit card. Zong Mobile payment processors $240M (acquired by Ebay) that allows users to send small payments via social networks and gaming. Paydiant White label platform for mobile $280 M payments, transfers and ACH Card.io Mobile application to scan Unknowns credit cards.

Apple Pay

Apple Pay’s mobile wallet went live in October of 2014 and as can be seen in Figure 21 they are reporting positive growth. Apple is reporting approximately one million new users a week along with transaction volume up five times to what is previous was (Meola, 2016). One of the major barriers that Apple Pay has been facing is acceptance of the technology, although they are experiencing growth, they reported that consumers were hesitant to use the service. As of now Apple Pay is available in China, Australia, The U.K., Singapore and Canada and hope that the international availability will aid in their growth. Apple is also reporting of expanding into the P2P segment, hoping to spur more Apple loyalists to use the service.

Google Wallet Google wallet as has been live since 2011 but Google will not release figures on how many users it has. With the Google Wallet individuals can tap a screen and use their phone to pay using what is called near field communication, or NFC. As sated, Google will not release numbers on the amount of users but analyst have determined some figures by analyzing the download archives of the platform.

 August 2012 downloads reached 1 million.  March 2013 downloads reached 5 million  October 2013 downloads surpassed 10 million. Android Pay P a g e | 37

It is early to determine which of the big players will become the dominant company in mobile payments. Samsung recently purchased a company called LoopPay allows a Samsung galaxy phone to mimic the magnetic stripe on credit card so hypothetically an individual can pay even without the terminals that are required for say Apple Pay. Google is also working on a hands free service that would give users the ability to pay using voice commands (Nazarian, 2016). Although these are established competitors, it seems they are only scratching the surface of opportunity in this sector of mobile payments and FinTech.

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A Simple Formula for Sustainable Growth

Table 9: Growth Formula Breakdown

Top of the Funnel Website Traffic, Impression, Conversion Rates

“Magic Moment” The compelling early experience of the user in relation to your services Core Product Value Address what problem you are solving

This growth model was adapted from an article on Greylock Partners (McCann, 2013) and discusses a simple framework that companies can follow. In regards to ItsPayd much of the core focus and recommendations are working at the top of the funnel. Many of the suggestions focus on how to bringing more customers, generate leads, and overall to try and create brand awareness. All of the research regarding e-commerce, mobile payments, and SaaS technologies clearly indicates that we are aimed towards a revolution on how people interact with their money. That being said, mobile payments, P2P lending will only expand and evolve, not disappear, ItsPayd offerings undoubtedly has value and address the needs of the market. At this point in the company’s development, there should be more focus on conversion and website traffic. Once they have a significant level of brand awareness, it should naturally flow through the funnel of sustainable growth. The challenge is determining how long this first aspect could take, when examining other companies it seems that it can take anywhere between 2 years (Square) or 6 years (Twilio). However, that period of time to gain traction for companies could also have been attributed to user adoption and the growth of smartphones and mobile banking. Also, there is more of a focus on dollar amount of transactions as opposed to how many customers a company has. Of course the number of users is also a significant factor but the value is in how much capital is passed through the platforms. That seems to be more of a significant telling of potential value. P a g e | 39

Valuation & Acquirers Generally, valuations are done using an enterprises financial records and can be done using multiple methods. Such as, EBITDA, Discounted Cash Flow analysis, comparison with another company, comparing transaction volume with a competitor, examining asset accumulation, assessing acquisition of debt or a liquidation value. In the case of ItsPayd, because they are a young company, valuing their worth based on these measurements would be difficult due to the absence of financial data. In an attempt to create a benchmark of needed growth in order to be considered valuable for an acquisition, the research primarily focused on competing FinTech and disruptive platforms growth as well as the top acquirers of financial technology. It is important to note however that when comparing platforms with ItsPayd, the information regarding another company may be incomplete (For example a company called SwervePay offers a similar service with text invoicing for auto and healthcare industry but there is no information available on their transaction volume or customer base) or share only a few comparable features (e.g. Invoice2Go offers small business an easy and simple way to invoice their customers with QuickBooks integration but doesn’t give users the options to pay that invoice using the same service so the businesses must utilize a platform like Square to collect payment) with ItsPayd. It must be noted that, ItsPayd offers an additional service of P2P lending and because this technology is in the very early stages of development, it is very difficult to value it at this time. When referencing recent SaaS acquisitions, acquirers are interested in healthy growth rates (over 35%) and high gross margins. ItsPayd service differs from Stripe and Square but when using their transaction volume as a comparison, the firm should strive to process over a million dollars in transactions monthly, eventually growing this figure, in turn the value of their firm could be valued in the millions given they also have sustainable growth.

Acquirers

Small startups in the FinTech realm have forced incumbents like big banks to participate in this realm of innovation. There are major companies that are investing and acquiring these startups like PayPal, Square, Vantiv and First Data, but credit unions and banks like Chase and Bank of P a g e | 40

America are choosing to acquire and partner with these startups as well. That is because technology has forced change in the way individuals bank and in order to remain active in this space they must adapt. A way for them to do this is through acquisitions of the innovative technology. International banks are also participating in these acquisitions like the Commonwealth Bank of Australia purchasing Tyme or the Spanish bank BBVA purchasing Holvi and Simple. In Figure 22, we can see banks feel they are forced to adapt because of the pressure on their margins and their loss of market share.

Not only are there a lot of acquisitions in the space but according to a Nilson Report, there is also a heavy amount on investment and funding going into this sector. In Figure 26 there is a breakdown of investments for just February of 2015 and it is clear that there is a massive amount of capital going into these developing businesses. In a report on CB insights, it revealed that there are six major banks that are purchasing and investing heavy capital into FinTech companies, these were the banks:

1. Goldman Sachs 2. JPMorgan 3. Wells Fargo 4. Morgan Stanley 5. Bank of America 6. Citigroup

A visual representation can be seen in Figure 25. Index.co also contains a list of FinTech acquisitions for 2016, some of the major purchases have been made by firms like Oracle, Apollo Global Management, Avante, Workday, MasterCard, and Siris Capital Group, to name a few.

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Venmo & TewYu

Venmo has challenged incumbents in the financial industry as a disruptive technology that enables peer-to-peer transactions with no cost to the individual. Founded in 2009 and acquired by Braintree in 2012 (Braintree was acquired by PayPal in 2013) (Crunchbase, 2016) the startup’s usage and volume of transactions has been steadily growing since its launch. According to the white paper “Millennials and Future of Finance,” the companies “value proposition to customers rests squarely on the social graph” (McAuley, CFA, Weiner, & Wharton FinTech, 2015), meaning the social network of friends a user has created with the application is the dominant appeal of the application. An individual had the capability to send money to their friends and family via the internet through PayPal but with Venmo a user could easily find their friends, and as simple as it is to find an individual in your address book, choose who you want to send money to and in a few clicks complete the entire transaction. A diagram of how Venmo transactions work for the end user can be seen in Figure 27. Users can also send notes to their friends in the description as well as the ever popular emoji, it gives users a novel experience and the ability for one to leverage their social network. Financial technologies such as Venmo have transformed the way people interact and think about their money, evidence states this is particularly true for Millennials (McAuley, CFA, Weiner, & Wharton FinTech, 2015). Although information regarding the number of users on Venmo has not been disclosed, the CEO of PayPal, Dan Schulman, stated “the average PayPal customer users the service 2-3 times per month…the average Venmo user makes 3-4 transactions per week (Gara, 2015)” and in three months users transferred over $1.6 billion on the platform. Venmo only operates in the United States, they have not expanded their services internationally. In terms of a valuation of Venmo, it is difficult to determine because Venmo is owned by Braintree, which is owned by PayPal. Some speculate that the value of PayPal is in the $50-$60 billion range but an agreed upon valuation has been difficult to determine because of their recent separation with EBay (Borison, 2015) (Kumar & Saito, 2015). Due to the success of the Venmo application, naturally competitors have entered the market as well. According to Investopedia, a few of the top competitors in the space are Google Wallet, Apple Pay, Popmoney, Snapcash, Square, and P a g e | 42

Facebooks launch of money transfer capabilities through Facebook Messenger. With an understanding of how Venmo operates let us examine how the TewYu, peer-to-peer lending platform by ItsPayd, differs. With TewYu, the lender and lendee will establish repayment terms before the actual transaction takes place. For example, if I were to borrow $100 from a friend and our terms were that I were to repay them $50 each month, for two months. The lender and I would have to agree to the terms of that transaction before I would actually receive the loan of $100. When the due date of my repayment approaches, it is automatically taken from my TewYu account. This feature is not offered on Venmo which makes TewYu unique. Another differentiating aspect of the TewYu lending application is that upon completion of the transaction, each user is given the option to rate one another in regards to the transaction, like a credit score. The notion behind this is that users within your circle will have a better gauge of how well you can abide by the terms of the loan, ideally earning a high score, making lenders more comfortable and willing to help their friends or family by lending them said amount.

Determining the potential value of TewYu is difficult, just as determining the net worth of Venmo is challenging. Utilizing the information on the growth of Venmo could be resourceful for ItsPayd in determining a successful benchmark of growth for the application.

Recommendation

The recommendations to proceed primarily address the issue of customer retention and methods to promote more potential leads into converted customers for the firm.

Industries This section will focus on recommended industries for ItsPayd to pursue in terms of customers, based on examining industries with high attrition rates, where cost of acquitting a customer is high, high volume of write-offs, high volume of bad debt and or industries adopting FinTech. In Figure 28 it provides a breakdown of customer turnover given a specific industry in 2014. These industries too could offer some insight into potential customers for ItsPayd. The recommendations will examine a few of these possibilities and what may be a good fit for the firm to pursue as a customer. P a g e | 43

Automobile Insurance

In the insurance industry the cost to acquire a customer is seven to nine times higher than it is in other fields. Also, if a customer is referred there is a 25% higher retention rate within the first three years and if the insurance company can increase their retention by 5% they can double their profits within five years (Thomas, 2016). Given some of these figures, ItsPayd may have a successful partnership with an insurance company and because of the multiple types of insurance, auto, homeowners, life, and numerous companies offering the service, there may be an opportunity for ItsPayd. If ItsPayd can leverage their value proposition of developing customer loyalty and improving attrition, it could potentially be a very profitable partnership. Also, with insurance, payments on a policy is generally an option for their customers and there are recurring payments from customers (higher valuation). A user may find it extremely convenient to receive their payment notice (invoice) in a text message and then have an opportunity to pay in a few quick simple steps. Although it may be hard to initially go after the large players like Geico, State Farm, and Allstate, there are many smaller players in this arena as well and it may be easier to develop a relationship with the small firms and eventually build up the brand awareness. Even though automobile insurance is a rather mature industry, according to IBIS World there will be steady growth in that sector.

Cell Phone Companies

According to a recent report on Kantar US Insights, “44% of feature phone owners planning to get a smartphone are at the very least considering switching current carriers (Kantar, 2014).” Given this information, a partnership with a company offering cell phone services could be a beneficial industry for ItsPayd. Again, harnessing the value proposition, putting forward that using the service can increase customer loyalty, offering the convenience of text billing, automated follow ups and payment options for cell phone owners then coupling that with the recurring monthly revenue could be a very sensible collaboration for ItsPayd.

Below are some figures retrieved from IBIS world on the telecommunications carrier services. As can be seen in Figure 28, the number of internet connections and services being conducted P a g e | 44 online has been steadily increasing. Also retrieved from IBIS world is information regarding revenue growth and the market share of the major competitors within the industry. If a company such as ItsPayd could penetrate the market through any one of the providers the revenue and value of the company could be extremely significant.

Utilities

In terms of electricity and gas utilities in San Diego the market is monopolized by SDG&E and would prove to be a difficult company to partner with. However, in other states such as Texas, there are multiple providers of these services and as a result customer loyalty is more of a problem, as a result these utility companies must offer promotions and more incentives to attract and retain their customers. Shelton’s Group found that 29% of utility customers showed interest in leaving their current providers and 36% would switch if they could. This means that these utility firms are forced to come up with ways to try and keep their attrition rates down, what better service to offer their customers, to improve those churn rates, then the ItsPayd service. The article goes on to state that although customers are satisfied with their utility provider they do not necessarily feel loyal to them. It suggests to increase that customer loyalty, make it easier to do business with them (the utility provider). ItsPayd could leverage this aspect because it is a part of their core competency, and they could market that feature to potential utility firms.

Conclusion

The mentioned industries are just a few that hold potential for ItsPayd to partner with. These markets may prove challenging to penetrate but if able to secure a contract with any one of them it could prove to be extremely profitable. Both of the industries will experience a positive growth, in the terms of auto insurance it may be rather small, but because of the nature of how consumers pay for their insurance (recurring revenue and often allowed to make payments on a policy) it may be easier for such types of businesses to adapt to the ItsPayd service.

Further research into the recommended industry and others may prove to be more insightful for the company allowing them to further drill down on a specific industry market. P a g e | 45

Organic Growth

Search Engine Optimization

This may give the company an opportunity to harness more awareness and drive traffic to the website. By making sure your website is structured in a way that includes key phrasing, it may enhance clicks and impressions. That in turn may generate possible leads or sales. If a customer enters the website and then chooses to leave there is also capabilities to include a pop up asking why they have chosen to leave the site with a short survey about the reasoning for departure. This would enable the firm to start tracking conversion rates in order to develop their own metrics of growth. In order to do this, the organization would have to determine key phrases and words that their ideal consumer may be searching.

Search Engine Marketing

Target market leading blogs and see if a connection can be made with the author. Then ask about advertisements on their blog and offer to exchange the favor or small payment to do so.

Google AdWords is one of the largest advertising tools online. They offer a free trial and it shows related and suggested advertisements that are related keys words for what is being searched in the search bar.

Social Media Presence/Marketing

 Cross promotion through social media platforms.  Also utilize free tools like Twitter analytics to understand traffic and impressions.  Engage social media for backup/funding.  Collaboration with other businesses on social media in promotion and marketing.  Offering Incentives to consumers through social media.  Advertising on social networks.

A/B Testing

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The firm could hold an A/b test of the layout of their text and email invoicing. Determine if the customers have any preference or issues with the layout. It may offer some insight in ways to change the layout that will meet the needs of the customer. A test could also be held regarding how a customer likes or dislikes the dashboard when they are on their account login. This testing could also be extended into a Q&A. The firm could encourage existing customers by offering a promotional incentive or a shorter version of the A/B testing could be held at a trade show ItsPayd participates in.

Affiliate Marketing & Indirect Sales Channels

As stated in the section regarding the sales channel assessment, ItsPayd may benefit from developing a partner relationship with another company that could indirectly sell their service. This process would entail promotion of the service or product on an affiliates (someone within the firm’s network) to promote the brand. When they can generate a lead or a sale for ItsPayd the affiliate would be awarded in some way. This marketing could cross over with other listed recommendations, possible through blog targeting or affiliate’s promoting the service through their social media platforms. Considering the reach of the affiliate’s network, it may generate more views and intrigue towards the ItsPayd service.

Aggressive Growth

Acquisition or Partnership

A more aggressive method of customer retention is to purchase a company, possibly one that provides business management tools through cloud or an application, and acquire a customer base. If this was a route the firm was interested in they could finance it in multiple ways such as Senior A debt, Senior B Debt, Convertible debt, PIKS, Mezzanine or with equity. The firm could also consider a leveraged buyout of a firm. P a g e | 47

Another option is a partnership or merger with an existing company. Although this would not necessarily build brand equity the increased customer could generate more revenue and allow the firm to invest more heavily in other areas.

Funding Seeking funding from an investor or venture capitalist may alleviate pressure of generating profit by having the capital to invest more in marketing, gaining customers, and building brand awareness. Funding could be acquired through Angel investments, early stage venture capitals, personal funding, crowd-sourcing, strategic partnerships and alliances, or corporate investors.

P a g e | 48

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Appendices

Appendix A

Company Description Of Funding User/Service Acquisitions Service Info Square Merchant $590.5M, 8 $170B annually in 10 Acquisitions: services rounds. transaction  Storehouse aggregator as Went public 2015.Also have  Framed well as a mobile 2015 SqureCash where Data payment users send and  Fastbite processor receive money for  Kili free.  Caviar P a g e | 57

Company Description Of Funding User/Service Acquisitions Service Info  BookFresh  Evenly  Viewfinder  80/20  Catapult Mediaworks Braintree Platform to $69M, 2 $12B in Acquired 2013 by accept online & rounds. transactions PayPal for $800M mobile payment. annually when acquired. Stripe API to enable $290M, 7 B2B & B2C N/A businesses to rounds. provider. $1.5B in accept online transactions payment annually. In 2015 valuation of $3.5B Balanced Payment system $3.4M, 3 $370M in N/A [Closed] enabling rounds transactions businesses to annually collect fees via ACH and C.C. Xoom Digital money $93.23, 4 Gross sending Acquired 2015 by transfer with rounds. volume $1.06B PayPal for $15M security. and customers 841,819 BluePay Payment Undisclosed, $11B processed Acquired processing 1 round. annually and Billhighway, CDI gateway. 42,000 business Technology, & utilize service Caledon SwervePay Payment $11.6M, 2 N/A N/A solutions for rounds. healthcare and automobile industry. Paydiant White label $34.6M, 3 Acquired 2015 by mobile wallet rounds PayPal for $280M platform. Vantiv Online payment N/A—Went 11.4 billion ATM Acquired: processing and public 2012. and POS -Mercury Payment strategies NYSE: VNTV transactions and Systems nearly $400 billion -Litle & Co in debit and credit -TNB Card Services sales volume -National Processing annually Company PaySimple SaaS online $16M, 1 Allows e-invoicing, No. payment round ACH, mobile platform that payment, POS, enables CRM integration. businesses payment P a g e | 58

Company Description Of Funding User/Service Acquisitions Service Info solutions and integration ChargeOver SaaS automating N/A Unavailable. No. invoicing and recurring billing solutions Invoice IT SaaS for N/A 60 customers at Acquired by automating sales time of acquisition Steelbrick (quotes & (according to profitability) and Steelbrick). billing integrating into firm’s CRM Stripe API to enable $290M, 7 $1.5B in 2014 in Acquired TOTEMS & business to rounds transaction Kickoff for accept and volume undisclosed amount. manage online payments Dwolla Free online $32.45M, 5 Flat price No. platform that rounds regardless of allows users to transaction send, receive volume. Average and request transaction is $500 funds. Authorize.Net Payment portal N/A Process $88B in Acquired by for businesses to transactions CyberSource 2007 accept electronic annually. for $565M checks and CC CyberSource E-commerce Undisclosed, processed 2.5 Acquired by Visa management 2 rounds. billion 2010 for $2B that automates Went public transactions in payment in 1999 2009 for 295,000 processing for businesses businesses Adyen Provide end-to- $266M, 3 Service 4,500 No. end rounds businesses infrastructure for includes companies to companies like accept Facebook and international Uber. $25B in payment. 2014 & $50B in 2015 payment transaction volum WePay Online payment $74.15M, 6 1,000 partner No. service provider rounds using API, 500,000 in the U.S. merchants. $1.5B Payment API in transactions platforms for since inception. small businesses, First provider to P a g e | 59

Company Description Of Funding User/Service Acquisitions Service Info cloud services, integrate Google crowdfunding. Wallet InvoiceASAP Mobile $696.33K, 1 Small to medium No. application that round. sized businesses. allows TechDisrupt businesses to finalist. 2012 send and pay 5,500 registrants invoices via and host 5M phone or a invoices. tablet. Integrates with Quickbooks and Xero. Invoice2Go Mobile $50, 3 200,000 business No. application with rounds users. businesses 1M invoices a operations tools. month at $1B in E-invoicing, volume. Recently partnered with Stripe to collect online payments & automatic deposits. Pricing: $10 to $150 a year. Appendix B Gartner’s: Banking Hype Cycles

Bank Operations Innovation Digital Banking Transformation Digital Banking Technology ▪ Managementless Banking ▪ Programmable Business ▪ Programmable Business Model Trigger Organization Model for Banking for Banking ▪ Business Ecosystem ▪ Smart Contracts ▪ Smart Contracts Modeling ▪ Business Ecosystem ▪ Business Ecosystem Modeling ▪ Employee Apps Modeling ▪ Digital Wallet Consumer Hub ▪ Hybrid Investment Data ▪ Digital Wallet Consumer Hub ▪ IoT for Banking Management ▪ IoT for Banking ▪ Digital Payment Advisor Solutions ▪ Digital Payment Advisor ▪ Open Bank Systems ▪ Agile Bank Management ▪ Open Bank Systems ▪ Geolocation Products and ▪ Core Banking BPO ▪ Geolocation Products and Services ▪ Internal Hackathons Services ▪ Public Cloud for Core Banking ▪ Customer Co-development ▪ Public Cloud for Core ▪ Digital Personal Financial Products and Banking Advisor Services Banking ▪ Digital Personal Financial ▪ Blockchain/Distributed ▪ Open-Source Banking Advisor Ledgers Systems ▪ Blockchain/Distributed ▪ Mobile Imaging for Bank Staff ▪ Vendor App Stores for Ledgers ▪ Open-Source Banking Systems Banking ▪ Mobile Imaging for Bank ▪ Wearable Banking Apps ▪ Enterprise App Store for Staff Advanced Analytics Banking ▪ Open-Source Banking ▪ Design Thinking in Banking Systems ▪ Internal APIs ▪ Wearable Banking Apps P a g e | 60

Bank Operations Innovation Digital Banking Transformation Digital Banking Prescriptive Analytics Advanced Analytics Peak of Inflated ▪ Vendor-Supplied Market ▪ Biometric Mobile Banking  Biometric Mobile Expectation Data APIs Authentication Banking Authentication ▪ Business Capability ▪ Mobile Imaging for Bank  Mobile Imaging for Bank Modeling Customers Customers ▪ Community Cloud ▪ Open Unified Digital Banking  Open Unified Digital ▪ Enterprise Architecture Solutions Banking Solutions Governance ▪ Hybrid Cloud  Hybrid Cloud ▪ Cloud-Driven Business and ▪ Open Banking  Open Banking IT Services Public Cloud  Public Cloud ▪ Intelligent Bank Operations ▪ Logical Data Warehouse Financial Services Industry Architecture Frameworks Trough of ▪ Big Data Management ▪ Logical Data Warehouse  Logical Data Warehouse Disillusionment ▪ Enterprise Data ▪ Remote Commerce  Remote Commerce Governance Emulation Payment Emulation Payment ▪ Predictive Analytics Systems Systems ▪ Open Development ▪ In-Branch and ATM Video  In-Branch and ATM Banking Platforms ▪ Cloud-Driven Business and IT Video ▪ BIAN Standards Services  Cloud-Driven Business ▪ Component-Based ▪ Social Messaging App Wallet and IT Services Financial Services ▪ Tablet Apps  Social Messaging App Solutions ▪ Digital Wallets Wallet ▪ Private Cloud Computing ▪ Big Data Management  Tablet Apps ▪ SOA Backplane ▪ BIAN Standards  Digital Wallets ▪ Innovation Management ▪ Intelligent Bank Operations  Big Data Management

Complex-Event Processing ▪ Private Cloud Computing  BIAN Standards Software Platforms ▪ Mobile-Originated Proximity  Intelligent Bank Payment Systems Operations Near-Real-Time Low-Value  Private Cloud Payment Systems Computing  Mobile-Originated Proximity Payment Systems  Near-Real-Time Low- Value Payment Systems

Slope of  IT Infrastructure ▪ Mobile-Originated P2P ▪ Mobile-Originated P2P Enlightenment Utility Payment Solutions Payment Solutions (for (for Mature Payment Mature Payment Markets) Markets) ▪ Smartphone Banking ▪ Smartphone Banking Mobile Wireless Payment Mobile Wireless Payment Systems (for Nonmature Systems (for Nonmature Payment Payment Markets) Markets) Plateau of N/A N/A N/A Productivity Appendix C Gartner’s: CRM, Saas, IoT Hype Cycles P a g e | 61

CRM Customer Service & Internet of Things (IoT) Software as a Service (SaaS) Engagement Technology ▪ Information Valuation and ▪ Internet of Things ▪ Subtenancy Trigger Infonomics Authentication ▪ Finance and Accounting ▪ Voice-Driven Customer Service ▪ Digital Security BPaaS Apps ▪ Licensing and Entitlement ▪ Cloud ERP for the Public ▪ Customer Engagement Hub Management Sector ▪ Augmented Reality for ▪ Energy Harvesting Cloud-Based CAD Customer Support ▪ IoT-Enabled ERP ▪ Collaborative Customer ▪ IoT Business Solutions Interfaces ▪ Things as Customers ▪ Customer Journey Analytics ▪ Wearable User Interface in ▪ Social Co-Browsing Logistics Video Chat for Customer Service ▪ Operational Intelligence Platforms ▪ Connected Home ▪ IoT Platform Real-Time Analytics Peak of ▪ Emotion ▪ Embedded Software and ▪ SaaS Platform Security Inflated Detection/Recognition Systems Security Management Expectation ▪ MDM and Social Data ▪ Wide-Area IoT Networks ▪ Cloud-Based Backup ▪ Mobile Customer Service ▪ Event Stream Processing Services Applications ▪ IoT Architecture ▪ Cloud Office ▪ Big Data Analytics for ▪ Quantified Self ▪ Customer Management Customer Intelligence ▪ IT/OT Integration BPaaS ▪ Expertise Location and ▪ iBeacons and Bluetooth Enterprise Integration PaaS Management Beacons (iPaaS) ▪ Intent-Driven Customer ▪ Internet of Things Systems ▪ Predictive Analytics ▪ Voice of the Customer ▪ Smart Transportation ▪ Customer-Centric Web and ▪ Wearables Mobile Technologies ▪ Low-Cost Development Boards ▪ BPM for Customer Service and ▪ Home Energy Support Management/Consumer ▪ Customer Engagement Center Energy Management Interaction Analytics IT/OT Alignment ▪ Customer Management BPaaS Recorded Video Customer Service Trough of ▪ Mobile Field Service ▪ Automobile IP Nodes ▪ Cloud-Based PLM Disillusionment Management ▪ Cloud MOM Services Applications ▪ Virtual Customer Assistants ▪ Personal Health Management ▪ Cloud ERP for Large ▪ Social for CRM: Social Tools Enterprises Feedback Management ▪ Operational Technology ▪ SaaS Supply Chain Planning ▪ Knowledge Management for Platform Convergence ▪ Disaster Recovery as a Customer Service ▪ Operational Technology Service ▪ Speech Analytics Security ▪ Application PaaS (aPaaS) ▪ Cloud-Based CEC ▪ Big Data ▪ Customization Brokerage ▪ Enterprise Feedback ▪ High-Performance Message ▪ MRM SaaS Management Infrastructure SaaS Archiving of Messaging ▪ Augmented Reality Managed Machine-to-Machine Data ▪ Customer Engagement Center Communication Services Workforce Optimization ▪ Customer Engagement Center Performance Management P a g e | 62

CRM Customer Service & Internet of Things (IoT) Software as a Service (SaaS) Engagement IoT Intelligent Monitoring and Management Slope of ▪ On-Premises CEC Enterprise Manufacturing ▪ Digital Commerce SaaS Enlightenment ▪ Customer-Best-Next Action Intelligence ▪ HRMS via SaaS ▪ External Peer-to-Peer ▪ Application Security as a Communities Service ▪ Field Service Workforce ▪ Financial Management Optimization Applications SaaS ▪ MDM of Customer Data SaaS Supply Chain Execution ▪ Work at Home — CM BPO ▪ Comprehensive CM BPO ▪ Social Media Engagement Applications Plateau of Customer Engagement Center N/A Sales Force Automation SaaS Productivity Workforce Management

Appendix D Gartner’s: Commerce Hype Cycles

Digital Commerce E-Commerce Future of Money Technology Trigger ▪ IMC-Enabled, Packaged ▪ Customer Engagement Hub ▪ Quantum Money CRM Applications ▪ Augmented Reality ▪ MailChimp ▪ Customer Engagement Applications ▪ Money and Payment Hub ▪ Cross-Channel Analytics Clouds ▪ Customer Journey ▪ Mobile Fraud Detection ▪ PIVAS — Tracking and Analytics ▪ Big Data Analytics for E- Negotiation ▪ IMC-Enabled, Packaged Commerce ▪ IP Money ERP/CPM ▪ Web Real-Time ▪ Customer Co- Applications Communications development Products ▪ Social Co-Browsing ▪ Subscription Management for and Services Banking Video Chat for Customer E-Commerce ▪ Infonomics Service ▪ Context-Enriched Content ▪ Member Incentives UXPs for Wellness for U.S. Healthcare Payers ▪ Mobile Digital Payment Advisor

Peak of Inflated ▪ Augmented Reality in ▪ Customer E-Services ▪ Social Capital Expectation Retail ▪ Predictive Analytics for E- ▪ Gift Economies ▪ Big Data Analytics for Commerce ▪ Green Money Customer ▪ Social for CRM: Social ▪ Peer-to-Peer Foreign Intelligence Feedback Management Exchange ▪ Mobile Commerce ▪ Context Delivery Architecture Marketplace ▪ Subscription Billing ▪ Digital Coupons for E- ▪ Cryptocurrencies ▪ UXPs Commerce ▪ Gaming Tokens as Money ▪ Customer-Centric Web ▪ Price Optimization and ▪ Gamification in Banking and Mobile Management Mobile Lending Technologies ▪ Context-Enriched Services ▪ Tag Management ▪ Social Commerce ▪ Internet of Things ▪ Content Analytics ▪ Responsive Design ▪ E-Invoicing Web Real-Time Virtual Assistants Communications Trough of ▪ Virtual Customer ▪ Enterprise Feedback ▪ Collaborative Commerce Disillusionment Assistants Management ▪ Digital Currencies P a g e | 63

Digital Commerce E-Commerce Future of Money ▪ Digital Coupons for E- ▪ Social Shopping Sites ▪ Retail Digital Coupons Commerce ▪ Group Buying ▪ Bandwidth as Currency ▪ E-Invoicing ▪ Online Product ▪ Behavioral Economics ▪ Social Commerce for Recommendation ▪ Loyalty Point Marketplaces Multichannel Engine ▪ Digital Wallet Solutions Retail ▪ Application Performance ▪ Alternative Card Networks ▪ Social for CRM: Social Monitoring ▪ Carbon Credits Feedback ▪ Open-Source E-Commerce ▪ Social Network Payment Management Software System ▪ Knowledge Management ▪ Social Analytics ▪ Micro patronage and for Customer ▪ Configure, Price, Quote Crowdfunding Service Application Suites ▪ Bank Digital Safety Deposit ▪ Personalization Engines ▪ Knowledge Management for Boxes ▪ Enterprise Feedback Customer Self-Service ▪ Time Banks Management ▪ Mobile Web Applications ▪ Virtual Worlds ▪ Content Analytics ▪ Personal Subscriptions Digital Barter Exchanges ▪ Application Performance ▪ Cloud/Web Platforms Monitoring E-Commerce SaaS ▪ Configure, Price, Quote Application Suites ▪ Price Optimization and Management Mobile Web Apps Slope of ▪ Cloud/Web Platforms ▪ 2D Bar Code Marketing ▪ PIVAS — Reward and Loyalty Enlightenment ▪ Digital Commerce SaaS ▪ Distributed Order ▪ Biometric Payment Systems ▪ Distributed Order Management ▪ Physical Complementary Management ▪ Fraud Detection Currencies ▪ MDM of Customer Data ▪ Integration Brokerage Tokenization ▪ Integration Brokerage ▪ Product Reviews 2D Bar Code Marketing ▪ Mobile Advertising ▪ QR/Color Code Consumer-Generated Media Plateau of ▪ Fraud Detection ▪ E-Payment Gateway N/A Productivity ▪ E-Payment Gateway ▪ E-Commerce Payment Mobile POS Processor ▪ Mobile Social Networks ▪ Web Analytics ▪ Consumer Digital Rights Management Mobile Search Appendix E Gartner’s: Mobile Hype Cycles

Enterprise Mobile Software & Services Mobile Applications & Development

Technology  Unified Endpoint Management  Mobile Sales Productivity Trigger  5G  Voice-Driven Sales Apps  LTE-M  Rapid Mobile App Development (RMAD) Tools  Rapid Mobile App Development  Wearables (RMAD) Tools  Mobile Marketing Analytics  Mobile Virtual Private Networks  Mobile Event Management Peak of Inflated  Develop Your Own App (DYOA)  Mobile App Analytics Expectation  Mobile App Analytics  Mobile Customer Service Applications  Wide-Area IoT Networks  Mobile Commerce  Workspace Aggregators  Bring Your Own App (BYOA)  Managed Mobility Services  Mobile Back End as a Service P a g e | 64

Enterprise Mobile Software & Services Mobile Applications & Development

 Bring Your Own App (BYOA)  Mobile Procurement Applications  Mobile Back End as a Service  Mobile BPM  iBeacons and Bluetooth Beacons  Mobile Application Development Platform  Wearables Security Capabilities  Mobile CPQ  UX Tools Trough of  Mobile Containers  Context-Enriched Services Disillusionment  Mobile Satellite Services  Mobile Containers  Windows 10  Mobile Field Service Management  Enterprise Mobile App Stores  Mobility in Oil and Gas  Mobile Testing Tools  Application Shielding  Cellular to Wi-Fi Authentication  Client-Side MVC  Enterprise Mobility Management  Enterprise Mobile App Stores Suites  Mobile Applications for Constituents  Device-Embedded Biometric  Mobile Application Security Testing Authentication  Mobile HCM  Mobile VoIP  Mobile VoIP  User Authentication to Mobile  Mobility in Manufacturing Operations Devices  Mobile BI  Mobile Unified Communications  MADP  Mobile BI  Enterprise File Synchronization and Sharing  MADP (EFSS)  Enterprise File Synchronization and Sharing (EFSS)  Mobile Web Apps Slope of  BYOD  BYOD Enlightenment  HTML5  HTML5  Fixed-Mobile Convergence:  Hybrid Mobile Development Enterprise  Mobile Advertising  Mobile Social Networks Plateau of  Mobile Device Management  Mobile Sales Force Automation Containers Productivity  VoIP Over WLAN  Mobile Device Management  Mobile POS  Mobile Sales Force Automation for Orders/Inventory  Native Mobile Development

Appendix F Gartner’s: Payment Hype Cycles

Financial Services Payment Systems Payment Innovations Technology  Payment-Acquiring Convergence Solutions  Wearable-Originated Payments Trigger at the POS  Sound-Wave-Based Payment System  Bump P2P Payment Systems  Money and Payment Clouds  Alternative Payment Origination Systems  PIVAS — Tracking and Negotiation  Application PaaS for Payments  Acquiring Convergence Solutions and  PIVAS — Tracking and Negotiation Dashboards  Mobile Digital Payment Advisor  Application PaaS for Payments  Peer-to-Peer Foreign Exchange  Bank Payment Obligations Marketplace  Mobile Digital Payment Advisor  Retail Payment Portfolio Management Solutions P a g e | 65

Financial Services Payment Systems Payment Innovations Peak of Inflated  Merchant Dashboard  Social Messaging App-Based Payment Expectation  Payment Value Chain Composition System  Trusted Service Manager for NFC-Enabled  Peer-to-Peer Foreign Exchange Mobile Payment Systems Marketplace  EMV Migration (U.S.)  Remote Commerce Emulation for  Mobile Proximity Payment Systems — Proximity Payments Europe  Trusted Service Manager for NFC-  SEPA Direct-Debit Mandate Management Enabled Mobile Payment Systems Solutions Trough of  IBAN/BIC Conversion Applications and  PIVAS — Synchronization Process Disillusionment Services  EMV Migration (U.S.)  Payment Architectural Frameworks  Payment Architectural Frameworks  PIVAS — Synchronization Process  Payment Services Hub  Payment Services Hub  Digital Wallet Solutions  Digital Wallet Solutions  Transaction Banking 2.0 (Payments)  Transaction Banking 2.0 (Payments)  Mobile-Originated Proximity Payment  Alternative Card Networks Systems  Mobile Devices as Payment-Acquiring  Alternative Card Networks Terminals  Social Network Payment System  Mobile Proximity Payment Systems —  Mobile Devices as Payment-Acquiring North America Terminals  Social Network Payment System  Online Bank-Enabled Payment (OBEP)  Enterprise Mobile Financial Services Systems Solutions  Mobile-Originated P2P Solutions (for  Online Bank-Enabled Payment (OBEP) Mature Payment Markets) Systems  Enterprise Mobile Financial Services  Decoupled Payment Systems (U.S.) Solutions  Near-Real-Time Retail Payment Systems  Near-Real-Time Low-Value Payment  OTA Mobile Phone Payment Systems Systems (North America)  PIVAS — Reward and Loyalty  Biometric Payment Systems  OTA Mobile Phone Payment Systems (Europe)

Slope of  Mobile Proximity Payment Systems —  PIVAS — Reward and Loyalty Enlightenment Japan  Biometric Payment Systems  Multipayment Application Instruments  Multipayment Application Instruments  OTA Mobile Phone Payment Systems  Mobile Wireless Payment Systems (for (Southeast Asia and India) Nonmature Payment Markets)  Contactless Retail Payment System  Contactless Retail Payment System  OTA Mobile Phone Payment Systems  Internet Micropayment Solutions (Africa)  Internet Micropayment Systems Plateau of N/A N//A Productivity