2016 Credit Card Monitor Report “Beyond Apple Pay

2016 Credit Card Monitor Report “Beyond Apple Pay:

Payment Market Trends”

Leon Majors March 2016 410-860-2005 [email protected]

Substanal growth coincides with the early Apple Pay period – leveling at 75% in October 2015.

% of Credit Card HHs Owning a Smartphone (October 2014 – March 2016)

≈ 68 Million 75% 75% Smartphone HHs 73% + 8 Mil HHs Since 72% October 2014 Today ≈ 60 Million 66% September Launch of Smartphone HHs Android Pay and Samsung Pay

October 20 Launch of Apple Pay

October '14 February '15 July '15 October '15 March '16

> 4 Months > 8 Months > 12 Months > 16 Months

Base: All Credit Card-Owning Respondents (n=3,003) As of March 2016

The smartphones of most cardholders support mobile payments in third-party wallet apps.

Note: In terms of the total household universe, mobile-ready smartphones address 58% of credit card households.

% Smartphone Owners With Smartphone that Supports Mobile Payments (iPhone 6 / Android 4.4+ / Galaxy s6)

≈ 52.4 Million Credit Card HHs Eligible for 90% Smartphone Payments 84% 77%

≈ 14.7 Million ≈ 19.6 Million Credit Card HHs Eligible for Credit Card HHs Eligible for Smartphone Payments Smartphone Payments 64%

59% ≈ 4.3 Million ≈ 13.8 Million Credit Card HHs Eligible Note: Baby Boomers: lower incidence than Millennials but Credit Card HHs Eligible for for Smartphone comparable number of eligible phones. Smartphone Payments Payments

Total Millennials (18-32) Generation X (33-48) Baby Boomers (49-67) Greatest Gen. (68+)

Base: All Credit Card-Owning & Smartphone-Owning Respondents Per Age Segment (n=2,257 for “Total”) As of March 2016

• While incidence rates among Gen X may be lower than among Millennials, the current value of Gen X’ers is higher than that of Millennials.

• Generation X cardholders contribute 30% of market spending on credit cards – twice the spending share

Avg. Month Spend on All Cards Owned in the HH

$1,800 Difference of $400 per Month Per HH $1,462 $1,460 $1,500 $1,367 $1,384

$1,200 $1,112

$900

$600 Total Millennials (18-32) Generation X (33-48) Baby Boomers (49-67) Greatest Gen. (68+)

Spend (SOM) 100% 15% 30% 38% 17% Spend HHs 100% 19% 28% 37% 16%

• Apple Pay’s influence on TOW card selection is reflected in various questions throughout the Frequency of Changing the Default survey • For 55% of users, once the TOW is set, the Credit Card Apple Pay wallet is on ‘automatic pilot’ – unless the user is given a reason to move a new card into the default position. Never Regularly 13% 23%

42% 21% Rarely Occasionally

Incidence of Changing Primary Card in the Past 3 Months

All Cardholders 35% 34% 37% 32% Apple Pay Adopters 28% 10% 14% 21% 13% 14% 15% 16% 10% 0% Total Millennials Gen X Boomers Greatest Gen. Affluent Mass Market

Most credit cardholders have heard of a third-party smartphone payment app.

% All Credit Cardholders Aware of Brands / Any Brand

Aware of Any (Net) 84%

Apple Pay 71%

Google Wallet 67% Used Only for P2P Payments Since September 2015

PayPal 64%

Samsung Pay 57%

Android Pay 49%

“Have you heard of any of these speciﬁc brands of smartphone wallet apps that let you make purchases with your smartphone instead of using a plasc payment card ….?” Base: All Credit Card-Owning Respondents (n=3,003) As of March 2016

The advent of bank-branded and retail-branded apps are also gaining an awareness foothold in consumers’ minds.

Awareness of Existing or Planned Smartphone Payment Apps

Capital One Wallet 32% * Existing Bank-Branded App

Chase Pay 29%

Walmart Pay 29%

Target Pay 22%

LG Pay 17%

CurrentC 12%

“Have you heard of any of these speciﬁc brands of smartphone wallet apps that have been announced but are not yet widely available for consumers to use?”

Base: All Credit Card-Owning Respondents (n=3,003) As of March 2016

43% of smartphone owners have loaded any payment method to any smartphone payment app – led by credit card loads.

% Smartphone Owners Loading Any Payment Method to Any Smartphone Payment App (Note: Survey Question is Broad and Can Include Closed-Loop Apps)

Any Payment Method 43%

Credit or debit cards most Any Credit or Debit Card 41% frequently loaded

Credit Card 34%

Debit Card 28%

GPR Prepaid Card 15%

Checking Account 16%

“Do you have a payment card or a checking account number linked to any smartphone payment app that lets you make an in-store purchase or in-app purchase? For in-store purchases, the smartphone payment app is used instead of a plasc card?”

Base: All Credit Card-Owning & Smartphone-Owning Respondents Per Age Segment (n=2,257) As of March 2016

The Apple Pay adopon rate has climbed to 18% due to an increase in those loading a credit card.

Incidence of Apple Pay Adoption by Card Type (% All Credit Cardholders)

Credit or Debit Card Credit Card 18% ≈ 16 Mil CC HHs Debit Card Credit and Debit Card 16% ≈ 14 Mil CC HHs 13% 14% Credit Card Loads Driving Growth 10% 12% 12% 9% 6% 6% 6% 6% ≈ 5 Mil CC HHs 5% 5% 4% 3% ≈ 3 Mil CC HHs

October 20 Launch of February '15 July '15 October '15 March '16 Apple Pay > 16 Months > 4 Months > 8 Months > 12 Months

Base: All Credit Card-Owning Respondents (n=3,003) As of March 2016

Over the past year, adopters have been steadily adding credit cards to the Apple Pay wallet – intensifying the ﬁght for preferred wallet posion.

% Loaded 1 Credit Card “Do you expect to add more cards to your Apple Pay wallet? % Loaded 2+ Credit Cards 74% 59% 65% 64% 2015 Credit Card 58% 31% Monitor 41% 69% 34% 42% 35% 26% 26% Add Credit Add Debit Keep the Same

February '15 July '15 October '15 March '16

Base: Loaded any Payment Card to Apple Pay Within Time Period As of March 2016

10 Copyright © Phoenix Marketing International 2016. All rights reserved Broader “Pays” Market - Adoption & Usage Samsung Pay and Android Pay have achieved a comparable market posion – on a par with Apple Pay’s posion the ﬁrst six months aer launch.

% Loading Credit or Debit Card

24% % Using for In-Store or In-App Purchase 23%

18% 17%

12% 11% 11% 10%

Net Pays Apple Pay Samsung Pay Android Pay “Do you have a payment card or a checking account number linked to any smartphone payment app that lets you make an in- store purchase or in-app purchase? For in-store purchases, the smartphone payment app is used instead of a plasc card?”

Base: All Credit Card-Owning Respondents (n=3,003) As of March 2016

Credit cards are more frequently loaded than debit cards for each brand. PayPal has a stronger debit card proﬁle than the other brands.

% Loaded Credit Card % Loaded Debit Card 86% 77% 75% 65% 59% 44% 48% 31%

Apple Pay Adopters Android Pay Adopters Samsung Pay Adopters PayPal Adopters n=583 n=367 n=414 n=694

“Do you have a payment card or a checking account number linked to any smartphone payment app that lets you make an in- store purchase or in-app purchase? For in-store purchases, the smartphone payment app is used instead of a plasc card?”

Apple Pay loads favor credit cards while PayPal loads favor debit cards.

Share of Cardholders* Loading Credit Card Share of Cardholders* Loading Debit Card to to One or More Third-Party Apps One or More Third-Party Apps

19% 29% 33% 44% 17% 19% 18% 20%

* Base: Duplicated total of all cardholders loading a * Base: Duplicated total of all cardholders loading a credit card to indicated third-party wallet brand. debit card to indicated third-party wallet brand.

“Do you have a payment card or a checking account number linked to any smartphone payment app that lets you make an in- store purchase or in-app purchase? For in-store purchases, the smartphone payment app is used instead of a plasc card?” As of March 2016

Most of those loading a credit or debit card have gone on to make at least one purchase. Most of this group have made at least one in-app purchase.

Active Use Rates & In-App Use Rates

% Using App to Make Any Purchase (Among App Owners) % Making an In-App Purchase (Among App Users) 92% 91% 88% 84% 77% 76% 72% 67%

Apple Pay Android Pay Samsung Pay PayPal

As of March 2016

The expected age-adopon curve is shown for all brands – but Apple Pay pulls younger cardholders to a far greater extent than Android Pay or Samsung Pay.

% Cardholders in Each Segment Loading a Credit or Debit Card to Pays Brand

39%

30% Apple Pay 29%

Android Pay 27% 21%

18% 19% Samsung Pay 12% 11% 4% 3% 2% 0% 2% 0% Total Millennials (18-32) Generaon X (33-48) Baby Boomers (49-67) Greatest Gen. (68+)

Base: All Credit Cardholders Within Age Segment As of March 2016

Across brands, over 90% of adopters are Millennial or Gen X. The high proporon of adopters in the Gen X group – given their segment size vs. Millennials – make them an important target.

% Brand Adopters Classified Within Generation Age Group

All Credit Cardholders 19% 29% 35% 16% Millennials (18-32)

Pay Adopters (Net) 9% 42% 47% 2% Generaon X (33-48)

7% Baby Boomer (49-67) 42% 49% 2%

Greatest Generaon (68+) 6% 45% 48% 1%

5% 46% 49% 0% As of March 2016

Despite Samsung Pay’s MST advantage, the brand users report a subjecve sense of app acceptance comparable to Apple Pay and Android Pay.

% App Users Giving Top 2-Box Rating (On a 10-Point Scale) 70% 68% 68% 62%

Apple Pay Android Pay Samsung Pay PayPal

“To what extent is [app brand] accepted in the stores you visit?” As of March 2016

Samsung Pay users report execung transacons using the NFC mode more oen than the MST mode.

In-Store Payment Mode Detail

Use the 'tap and pay' contactless payment feature on 83% the merchant's terminal

Hold your Samsung phone over the magnetic stripe reader on 59% the merchant's terminal

Base: Used Samsung Pay to make an in-store purchase (n=374)

“When you used Samsung Pay to make an in-store purchase, did you ….? “ As of March 2016

App users give high marks compared to purchases made using a plasc payment card. Apple Pay does not have a perceived security advantage over other app brands.

App User Ratings Compared to Plastic Cards

More Convenient than Plastic 94% 91% 93% 89%

Safer than Plastic 84% 86% 86% 83%

Better Overall 82% Experience 81% 84% 82%

n=542 n=330 n=374 n=613

“Based on your experience, do you think paying with [app brand] is…?“

As of March 2016

Brand for brand, a majority of users reported POS fricon and the need for customer support or help from a friend.

% Brand Users Experiencing POS Problem & Needing Support

61% 62% 64% 62% 60% 57% 50% 49%

Apple Pay Users Android Pay Users Samsung Pay Users PayPal Users

Support “Did you at any me need customer support, or help from a friend, regarding [app brand]? …?“ Problem “When using [app brand], did you encounter any problems at the point of sale (such as a terminal that didn’t work properly or cashiers that were unfamiliar with [app brand])? “ As of March 2016

Most current app users embrace the idea of leaving their plasc cards at home – now or in the future.

Will Always Want to Carry Plastic 4% Payment Cards 7%

36% Comfortable Leaving Plastic Payment SOMETIME IN THE 53% Cards at Home -- NOW FUTURE

Base: Have used Apple Pay, Android Pay, Samsung Pay or PayPal for in-store purchases: n=727

“At what point, do you think you will feel comfortable leaving your plasc payment cards at home and just use your smartphone to make store purchases with digital payment cards?” 1. I feel comfortable now (leaving my plasc payment cards at home) 2. I may feel comfortable doing that someme in the future 3. I doubt I will ever feel comfortable doing that 4. I’m sure I will always want to have my plasc payment cards with me when I shop As of March 2016