Direct-To-Consumer Insights
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STRICTLY PRIVATE AND CONFIDENTIAL State of payments: Direct-to-consumer insights May 9, 2018 CONFIDENTIAL This presentation was prepared exclusively for the benefit and internal use of the Chase client or potential Chase client to whom it is directly delivered and/or addressed (including subsidiaries and affiliates, the “Company”) in order to assist the Company in evaluating, on a preliminary basis, the feasibility of a possible transaction or transactions or other business relationship and does not carry any right of publication or disclosure, in whole or in part, to any other party. This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by Chase. Neither this presentation nor any of its contents may be disclosed or used for any other purpose without the prior written consent of Chase. This presentation does not constitute a commitment by any Chase entity to extend or arrange credit or to provide any other services to Company. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of the Company or which was otherwise reviewed by us. The statements, views, and opinions that will be expressed during the presentation are those of the presenters and are not endorsed by, or reflect the views or positions of, Chase. The information herein may not take into account individual client circumstances, objectives or needs and is not necessarily intended as a recommendation of a particular product or strategy to the Company and Company shall make its own independent decision. Chase is not liable for decisions made or actions taken in reliance on any of the information covered during the presentation. Furthermore, Chase makes no representations as to the actual value which may be received in connection with a transaction or use of the products and services mentioned nor the legal, tax or accounting effects of consummating a transaction. Chase, Chase Paymentech, JPMorgan and JPMorgan Chase are marketing names for certain businesses of JPMorgan Chase & Co. and its subsidiaries worldwide (collectively, “Chase”) and if and as used herein may include as applicable employees or officers of any or all of such entities irrespective of the marketing name used. Products and services may be provided by commercial bank affiliates, securities affiliates or other Chase affiliates or entities. In particular, securities brokerage services other than those which can be provided by commercial bank affiliates under applicable law will be provided by registered broker/dealer affiliates such as J.P. Morgan Securities LLC, J.P. 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CONFIDENTIAL Agenda Page 1 State of payments 1 Key trends in e-payments, digital wallets and mobile wallets 1 A day in the life of a digital consumer 5 The future of retail commerce 6 2 The rise of direct-to-consumer 11 CONFIDENTIAL Electronification of payments U.S. percent of dollars by payment instrument DEBIT/PREPAID* 17% 18% 19% 22% 24% 22% 26% 26% 28% 28% 26% 30% 30% 31% 28% 26% CREDIT 26% 27% 27% 24% 25% 26% 27% 28% 30% 31% 32% ACH** 10% 35% 36% 36% 39% 40% 11% 12% 13% 13% 13% 13% 15% 15% 10% CHECK*** 27% 24% 22% 21% 14% 19% 16% 14% 14% 13% 11% 19% 17% 13% 13% 13% 8% 8% 3% 5% 6% 4% CASH 20% 20% 20% 20% 19% 19% 20% 18% 17% 20% 16% 13% 10% 10% 12% 14% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E Source: Nilson Annual US Consumer Payments System Report * Includes debit, EBT, and prepaid cards ** Includes preauthorized and remote payments *** Includes money orders, official checks, and travelers cheques 1 CONFIDENTIAL Digital dominating key shopping days Cyber Monday hits $6 billion in total sales, nearly 30% more than Black Friday Thanksgiving weekend sales est. to reach $15 billion, 2x last year. Estimated sales share of 55% in store, 33% on mobile Alibaba accounted for $25.4 billion in sales this year’s Singles’ Day JPMorgan Funds, Market Insights here 2 CONFIDENTIAL The road ahead Digital wallets: Measures of consumer adoption Despite the pause in October 2016 June 2017 adoption this year, 41% of Consumers who prefer to consumers are likely to pay with digital wallets 15% 14% try digital wallets in the next year, and merchants Consumers likely to use a digital are getting ready for wallet in the next 12 months* 39% 41% them. (74% in next year) Merchants who accept digital wallets* 36% 37% Base: 1,500 US consumers ages 18-plus who go online at least weekly *Base: 800 professionals responsible for their organization’s payments strategy Source: Commissioned studies conducted by Forrester Consulting on behalf of JPMorgan Chase, October 2016 and June 2017 3 CONFIDENTIAL Fraud shift Rise in card-not-present fraud Millions of U.S. fraud victims 15.4 16.7 12.6 13.1 12.7 13.1 2012 2013 2014 2015 2016 2017 Where EMV adoption is mature, online fraud rose as much as 81 percent. Fraud losses ($ billions) $22.1 $19.3 $16.4 $15.5 $16.2 $16.8 2012 2013 2014 2015 2016 2017 Source: 2018 Javelin Identity Fraud Study 4 CONFIDENTIAL Agenda Page 1 State of payments 1 Key trends in e-payments, digital wallets and mobile wallets 1 A day in the life of a digital consumer 5 The future of retail commerce 6 2 The rise of direct-to-consumer 11 CONFIDENTIAL Your consumers are “never…not shopping” Retail channel strategy Single Channel Multi-Channel Cross-Channel Omnichannel Retailers have a single type of Retailers channel knowledge and Retailers have a "single view of Retailers are leveraging their “single touch-point operations exist in technical and the customer" but operate in view of the customer” in coordinated functional silos functional silos and strategic ways Blending clicks and bricks Buy Online, Pickup in Store (BOPIS) Buy In-store, Buy Online (BISBO) Order Ahead Retailers are allowing customers to retrieve Brick-and-mortar retailers are incentivizing in-store purchases at stores most convenient to them while shoppers to order online for out-of-stocks or online-only Results in better engagement, higher conversion rates, saving on shipping costs products; ecommerce retailers are setting up operational efficiency, and ultimately customer delight showrooms for customers to shop online, in-store 5 CONFIDENTIAL Agenda Page 1 State of payments 1 Key trends in e-payments, digital wallets and mobile wallets 1 A day in the life of a digital consumer 5 The future of retail commerce 6 2 The rise of direct-to-consumer 11 CONFIDENTIAL Retail redefined… I don’t think retail is dead. I think mediocre retail experiences are dead. - WARBY PARKER $5.4 trillion Over 90% 15 million 116,000 total retail sales in 2016, of transactions occur in the store employees U.S. shopping centers up 3% over 2015 Source: Plunkett Research, Ltd; excludes grocery and restaurants *Forbes, “Why retailers must restructure ”, http://www.forbes.com/sites/walterloeb/2016/01/04/every-sign-is-saying-retailers-must-restructure-in-2016/ 6 CONFIDENTIAL The future of retail commerce Phase 1: Convergence Right-sized physical footprint with optimized digital presence and distribution Brick and mortar Customer-centric Augmenting digital storefronts with on-demand physical presences Digital 7 CONFIDENTIAL Know your customer Your future depends on it Discovery Purchase Ownership Influenced by Bad experiences shared Traditional Strong preference for in- Wave 1 advertising and store with merchant employees store purchases Consumers employees and close acquaintances Only exceptionally good Connected Dedicates time to conduct Purchases in-store, (nearly all bad experiences) Wave 2 online research online or in-app Consumers shared on social media Opts-in to “invisible” Expects realtime feedback and Contextual Experience initiates recurring or subscription analytics to continuously improve Wave 3 commerce opportunity Consumers purchases experience 8 CONFIDENTIAL The future of retail commerce Phase 2: Context Keystrokes and mouse clicks are giving way to taps, texts and voice commands as consumers’ preferred way to order and pay. The evolution of interfaces Keyboard Mouse Touch Contextual and multimodal commerce The evolution of commerce Stores aggregated Malls aggregated Technology products stores aggregates value 9 CONFIDENTIAL Things buying things The Internet of Things 1 28 billion devices by 2021 . Real-time diagnostics . In-car connectivity . Growing at 27% CAGR2 Infotainment B2B now / B2C soon . Smart devices . Interactive gaming Introduces new fraud