Event Impact November 2014 TABLE of CONTENTS Money2020 Hones in on Money2020 Emphasizes the Spirit of Reinvention 2 the Broader Payments Methodology 2

Event Impact November 2014 TABLE OF CONTENTS Money2020 Hones in on Money2020 Emphasizes the Spirit of Reinvention 2 the Broader Payments Methodology 2

Opportunity The Top 10 Money2020 Mobility Announcements 2 Jordan McKee, Senior Analyst, [email protected] Five Mobile Trends Fueling the Next Chapter of Commerce 3

The Bottom Line The 451 Take 4

Money2020 has unequivocally become the must-attend payments event of the Further Reading 5 year. In this report, we identify the show’s most significant announcements and highlight several underlying trends beginning to manifest themselves in the commerce ecosystem. COMPANIES MENTIONED

Amazon, American Express, Apple, Clover, Dream Payments, First Data, Highlights Gemalto, Ingenico, Leaf, MCX, Paydiant, PayPal, Poynt, Proxama, ShopKick, • Apple Pay catalyzes mobile payment momentum. Unsurprisingly, Apple Pay was Softcard, Spindle, Square, TSYS, a focal point throughout the event. Vendors pointed to Apple’s uncanny ability to Verifone, Visa spark interest and movement in mobile payments as its most profound implication. • The NFC renaissance is underway. The combined forces of EMV and Apple Pay have renewed interest in NFC, with stakeholders across the ecosystem once again heralding it as the de facto means of interfacing with the point of sale. • The point of sale goes platform. Numerous vendors at the show, including Poynt and Ingenico, revealed point of sale solutions that aim to attract developers to build applications for their ecosystem. • Emphasis on the shopping journey continues to increase. Entities traditionally laser-focused on payments continue to build out their capabilities to play a more significant role across all phases of commerce. Money2020 Homes in on the Broader Payments Opportunity November 2014

Money2020 Emphasizes the Spirit of Reinvention During a fireside chat at the recent Money2020 conference, American Express CEO Ken Chenault brazenly remarked, “We want to become the company that will put us out of business.” This message was a central theme throughout the duration of the show, as incumbent vendors discussed their strategies to remain relevant in the era of mobile- influenced commerce. Many of these strategies are predicated on partnerships, API- centric efforts and new product lines, underscoring mobile’s role as a disruptor, and incumbents’ understanding that complacency is not a viable alternative. Notably, large, walled-garden vendors such as Visa emphasized the importance of pursuing strategies that enable third-party access to extend value beyond the confines of their traditional boundaries, while nascent vendors like Poynt have come to market with a similar vision in hopes of creating open ecosystems that foster collaboration. At this year’s show, it was apparent that vendors new and established have their sights set beyond the transaction in hopes of playing a more meaningful role across the entire commerce journey. The intent of this report is not to provide a summary of the event, but instead to pinpoint and dissect the key mobile trends identified at Money2020.

Methodology In its third year, Money2020, held in Las Vegas, Nevada, has quickly become the payment industry’s must-attend event. This year’s show saw an impressive 7,000 attendees hailing from 2,500 different companies across 64 countries, truly making it the largest gathering of its kind. Senior Analyst Jordan McKee attended the show from November 3-5, holding conversations with nearly two dozen vendors and sitting in on a number of keynotes and panel session discussions. Vendor briefings ranged from startups such as Paydiant, Proxama and Spindle to incumbents including First Data, Gemalto and Verifone.

The Top 10 Money2020 Mobility Announcements More than 100 announcements were made at this year’s Money2020 from vendors of all sizes and industry verticals. We’ve identified the top 10, in no particular order, as the most impactful mobile announcements, and detailed their implications below: • Ingenico releases Telium Tetra. Underscoring an ecosystem-wide trend where vendors are increasingly setting their sights on a platform-based approach to the PoS, Telium Tetra is an attempt to create an integrated commerce ecosystem by inviting third-party developers to deploy business applications. • Verifone re-launches its brand. With 37% of revenue derived from services, Verifone has worked to reposition itself as a platform company, and its new brand, along with a card- linked offers and a partnership with MasterCard, is a further execution of that strategy. • PayPal rolls out Pay After Delivery. In what is essentially a 14-day line of credit, Pay After Delivery is an attempt to guide users’ hands away from funding mechanisms that are costlier to PayPal, such as credit cards, and direct them toward fee-friendly funding sources such as checking accounts and users’ PayPal balance.

• Amazon extends Prime benefits to third-party sites. As Five Mobile Trends Fueling the Next its lone launch partner, midsized fashion retailer AllSaints Chapter of Commerce has agreed, perhaps naively, to advertise its products on Amazon.com search results and offer Prime Members Throughout our numerous conversations at the show, a free, next-day shipping for purchases on AllSaints.com. handful of trends consistently emerged, shedding light on the The move is yet another effort by Amazon to extend ecosystem’s future direction. In particular, we’ve identified its influence beyond the confines of its website, and, the following as the most impactful trends at this year’s plausibly, to gain richer data. Money2020 show: • First Data debuts Clover Mobile. Building on its Clover • API-driven commerce comes to the fore. APIs are quickly PoS solution, which it has sold 26,000 units of, First becoming the lifeblood of the mobile payments space, Data’s Clover Mobile is a portable PoS device capable of creating opportunities for vendors large and small to accepting NFC and EMV payments and scanning barcodes, bolster the value of their platforms. Visa president Ryan among other things. The debut highlights one of the many McInerney drove this point home during a keynote address measures that payment processors are taking to secure where he emphasized that Visa – historically a network their footing in the SMB space in light of numerous over- that operated in a walled garden – is now opening up the-top entrants. the edge of its network to clients and partners in a more collaborative way. With eight billion cards in force for • Paydiant enhances loyalty and reward capabilities. As the use across 40 million global merchants, Visa is making a platform provider of Merchant Customer Exchange’s (MXC) concerted effort to secure its relevance by unbundling CurrentC app, Paydiant is no stranger to the role loyalty many of the products it provides, and extending services and rewards play in increasing engagement and customer like coupons and receipts in the cloud to third parties via lifetime value. By enabling streamlined enrollment and APIs. This trend is also evident in the tablet-based PoS real-time loyalty point redemption, Paydiant looks to space, where vendors including Clover, Ingenico, Leaf enhance the utility of its platform in hopes of creating a and Poynt have opened their APIs to allow developers to wallet ecosystem in due time. build business applications on top of their platforms. The • Proxama acquires Aconite Technology. In an effort to expand intent is to both build out the utility of the PoS system its US footprint, Proxama plans to ride the wave of contactless while opening up alternative revenue streams. Elsewhere, growth that the EMV liability shift is set to deliver. To catalyze mobile wallet platform providers like Paydiant have its entrance, the vendor has picked up EMV-enabler Aconite developed APIs to extend payment functionality into Technology to better target banks and card issuers in need of existing applications, as illustrated by MCX’s CurrentC. both EMV- and NFC-enabled solutions. • NFC is ‘Now For Commerce.’ The shift in thinking • Poynt unveils new partners. To advance its open platform surrounding NFC as a payment technology between and distribution strategies, Poynt has signed on Chase the 2013 and 2014 shows was palpable. Whereas most Paymentech and Vantiv as founding partners, while vendors had all but declared NFC dead last year, the announcing new relationships with EVO Snap, POS Portal general consensus this year is that NFC will be the de facto and Creditcall. For Poynt, partnerships are both the means of interfacing with the PoS, at least in the near- to cornerstone of its value proposition and its revenue model. mid-term. Even PayPal, a vendor that has long adhered to an anti-NFC stance, pointed to the technology as one • Dream Payments announces Dream Mobile Point of Sale. of three trends shaping the future of mobile payments. Another entrant into the crowded mPoS arena, Dream While PayPal’s current approach to the PoS can best be Payments looks to provide merchants, payment service described as spaghetti throwing, the vendor sees great providers and operators with EMV-compatible mPoS potential in Host Card Emulation (HCE), and the role it can solutions. Available in early 2015, Dream Mobile Point play in driving NFC forward. With the combined forces of of Sale is targeted at attracting third-party developers EMV and Apple Pay catalyzing NFC’s progression, we noted to its ecosystem – a platform strategy that has become a significant uptick in the number of NFC-enabled products increasingly popular in the PoS space. coming to market, and a renewed interest in the US market from international vendors such as Proxama. • TSYS develops Surround technology framework. TSYS is looking to leverage its $2.6tn annual processing footprint to connect to third-party platforms to increase value for clients and their cardholders. The approach aims to give issuing clients a more holistic view of their cardholders to enable better visibility of cross-channel interactions.

• The PoS is being reimagined. It’s become clear that • Payments go customer-centric. PayPal’s chief product the role of the PoS is progressing far beyond simple officer Hill Ferguson emphasized the importance of being payment acceptance. A fundamental shift in thinking is where your customers are – a message noted across many under way whereby new PoS functionalities including conversations at the show. Players are gradually beginning customer relationship and business management tools are to recognize that payments are merely a component transitioning the point of sale to the point of service. To fend of a broader commerce journey, and to be effective, off the intrinsic threat posed by mobile, incumbents such understanding the customer across the entire journey is as Ingenico and Verifone have diversified their strategies to mission-critical. MCX CEO Dekkers Davidson focused his become more service- and platform-oriented. Meanwhile, keynote around this topic, and pointed to personalized startups like Spindle and Square Inc have placed bets on benefits and choice in payment as critical success factors. providing marketing and engagement tools through the As 451 Research has long stated, vendors must add value PoS in hopes of broadening their value proposition. First beyond the transaction by enabling payment experiences, Data has doubled down in this arena by making a number something MCX’s CurrentC aims to do with features such of forward-thinking acquisitions (including Clover Network, as pay-at-table and pay-at-pump functionality. SoftCard Gyft and Perka) in an effort to secure its footing in the SMB looks to execute on the broader commerce journey by space and provide a more compelling and less payments- delivering its SmartTap partners a wallet token, which centric offering to its customers. Its newly introduced Clover allows merchants to track and reward customers with Mobile solution is a further manifestation of that strategy. ‘surprise and delight’ experiences, regardless of their In the new world of the PoS, secure payment acceptance is loyalty program status. As Chenault emphasized, winners merely table stakes. in payments – and most any industry for that matter – will be those that meet customer needs by delivering • The beacon hype transitions to more candid differentiated and meaningful value. conversation. While the buzz surrounding the latent opportunities presented by Bluetooth Low Energy beacons was alive and well, sobering reality seems to be setting in, The 451 Take and that’s a good thing. After its introduction at last year’s Money2020, little has been heard of PayPal Beacon since. With more than 100 announcements and representatives During discussions with the vendor, it’s apparent much hailing from 2,500 companies, Money2020 has once again remains to be done before widespread deployment is a proven it’s the payment industry’s marque event. The possibility. Other vendors, including Vibes and Spindle, dominant theme coming out of this year’s show was a focus noted that while merchants remain interested in beacon on the broader opportunity beyond the transaction, and technology from a marketing standpoint, it’s rarely seen it’s evident vendors have a number of strategies in place to as a priority. With attention surrounding other in-store execute. To execute effectively, incumbents stressed the technology enhancements – most notably the EMV-liability need to reinvent, while their more nascent counterparts shift in the US – beacons have yet to cross the divide from emphasized the importance of reimagining what already ‘nice to have’ to ‘need to have.’ The general consensus is exists. Both are bullish on the role that partnerships can play that relatively elementary in-store engagements such as to drive future growth and unlock hidden value. APIs saw welcome messages will precede more advanced initiatives considerable attention in this regard, and their role as an such as personalized and contextual offers. Marketers extender of value appears to be resonating in a variety of remain in the early stages of understanding how to best sectors, including with point of sale (PoS) providers and card engage with consumers and overcome confidentiality networks. In the same vein, the PoS is undergoing a profound concerns. ShopKick CEO Cyriac Roeding emphasized this evolution, whereby platform approaches are becoming the point during a panel session, pointing to privacy hurdles norm and payment acceptance is now merely a component and opt-in challenges as key obstacles impeding the of a larger value proposition. On the technology side, NFC beacon’s role in analytics and marketing. seems to have experienced something like a renaissance, Bluetooth Low Energy beacons were looked at more soberly, and EMV saw much of the limelight with the liability shift nearing. Many vendors are developing solutions that encompass all three because there is little doubt each will play an important role in some capacity moving forward.

451 Research Reports “Money2020: The Changing Face of Payments,” October 2013 “Paydiant Builds Out Payments Ecosystem With Platform Approach,” April 2014

About the Author HEADQUARTERS

Corporate Jordan Mckee 20 West 37th Street Senior Analyst 6th Floor New York, New York Jordan McKee is a senior analyst on the 451 Research Mobility 617-598-7200 phone team, which was established in July 2014 with the integration of Yankee Group. He focuses on mobile marketing and commerce. His research examines the development of mobile devices being used European across each phase of the shopping journey. In particular, McKee 30 Artillery Lane analyzes mobile’s role in the physical world for payments and other London E17LS forms of transactions. His key research areas include mobile point United Kingdom of sale (mPoS), mobile wallets, NFC, EMV and virtual currencies. 44-20-7426-1050 phone

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