Digital Wallets Executive Briefing Michael Bradley Managing Director, NorthCard Inc. [email protected] 416-929-0422 11-June-14 Digital Wallets Executive Briefing Digital Wallets Executive Briefing I. Digital Wallets 3 II. Stakeholder Positions / Profiles A. Financials: Defending the Fortress 16 B. Telecoms: Chasing the Promise 22 C. Retailers: Uncertain Times Ahead 28 D. Internet Giants: Seizing the Future 40 III. Who will Win? 46 Appendix - Key Issues: Security, Privacy & Costs 54 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 2 Digital Wallets Executive How did we get here? Briefing Commerce 3.0 1950s Commerce 1.0 • Bigger, self-service stores • Mass media/advertising • Packaged goods driven 1990s Commerce 2.0 • Data-driven marketing / loyalty programs • Internet ordering and fulfillment • Global mega-retailers 2010 Commerce 3.0 • Technology enabling new experiences • Smart devices blurring channel lines • Data-based relevant, personal marketing • Living in the virtual world 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 3 Digital Wallets Executive Briefing What’s in Your (Digital) Wallet? Payment Loyalty / Electronic Cash Receipts Credentials Membership Data (Prepaid) Functioning across …integrated into the …and delivering converging channels… customer’s context… added value. Face-to-Face Profile Alerts E-Commerce Preferences Offers Mobile Location Keys 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 4 Digital Wallets Executive Big players and start-ups are Briefing entering a frenzied market. Postioning • In-store, e-com or mobile? • Data, transactions or currency? • Add-on or standalone? • Segment or mass? • Selling to whom? • Buyer (consumer) • Seller (retailer) • Enabler (Bank, telco) • Local, regional or global? Perhaps most importantly: • What problem are you solving? 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 5 Digital Wallets Executive Digital Wallets: Briefing A simple, compelling vision… Which phones does it work on? How does the card get on the phone? How is it stored? Securely? What payments does it work with? Where does it work? What else does it do? 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 6 Digital Wallets Executive Briefing …that requires a complex operating environment. Credentials: Wallets or Apps may be Multiple provided by Bank, Mobile banks/ Operator or independent payment products developer Wallet 1 App Wallet 2 Secure Provisioning of Payment Credentials (Trusted Service Manager) Credential 1 Credential 2 NFC Enabled Credentials stored securely Phone: Multiple manufacturers, in Secure Element on phone devices and or in cloud operating systems 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 7 Digital Wallets Executive There are many hurdles to Briefing Mobile Wallet adoption. Hardware Enablement NFC Handsets OS Readiness SE Readiness Business Enablement TSM/OTA Application Carrier – Bank deals Personalization NFC Acceptance Breadth of deployment Staff training Version Control Consumer Adoption Utility/improvement Ubiquity of solution 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 8 Digital Wallets Executive Briefing The Case for Mobile Wallets in Canada Canada is world’s leading Early trials are informing the contactless market business model 75% of major retailers Beginning in 2008-09 with accept across 3 major RBC/Rogers/Visa and card brands BMO/Bell/MC All major Issuers in CIBC/Rogers market launch in Est. 1 billion transactions Nov./2012 to date Multiple Banks & Carriers now in market 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 9 Digital Wallets Executive Briefing The Case for Mobile Wallets in Canada (cont’d) EnStream has developed Canada has a good record enabling infrastructure of industry collaboration JV of major telcos Work on Payments Task Designs to new device Force incorporated views models across carriers from mobile operators and retailers Facilitates one-stop credential deployment CBA Reference Model documented bank perspectives on major issues 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 10 Digital Wallets Executive Who’s Making Headlines in Canada? Briefing Launched Nov/12 Launched April/14 First: mobile contactless NFC First: Carrier wallet platform in payment in Canada (CIBC/ market Rogers/Simon Whitfield @ Tim Available with Rogers Prepaid Hortons) MasterCard & Gift Cards Separate CIBC Mobile Other cards “coming soon” – Payments app Rogers Bank, etc. Additional Android & Passcode / wallet security Blackberry devices deployed Communicate directly to users through 2013 Will come pre-installed on Feb/14 – Added Telus Rogers phones Other carriers may follow 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 11 Digital Wallets Executive Who’s Making Headlines in Canada? Briefing Announced Nov./2013 Launched Jan/14 First: Open wallet combining First: Cloud-based credentials multiple payment & loyalty (Patent Pending) Single Tap to pay, earn and Requires Applet on Bell NFC SIMs redeem points Sent encrypted to phone (handles expiries) Loblaws backing Loyalty & payment, transfers, initiative of PCF offers & gift cards with retail integration Will flex to bar codes & QR May/2014 • First: Three big carriers • TD mobile app enhancement 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 12 Digital Wallets Executive Briefing Who’s Making Headlines? April/2014 – PayPal Wallet Launch 2013-14 – Square Canada Growth 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 13 Digital Wallets Executive The Buck Stops Here: Briefing Keys to Consumer Adoption You are Add significant Deliver on here new value promise • Compelling • Ubiquity of benefits usage • Vision that • Layer new resonates functionality Integrate into Acceptable today’s downsides experience • Costs • First reason • Security • Easy to find • Privacy • Easy to adopt 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 14 Digital Wallets Executive Digital Wallets Overview Briefing Stakeholder Positions Financial Services Key players jockeying for • Banks / Issuers • Card Networks position in emerging • Acquirers / Processors business models Telecoms Sectors have different • Network operators • Aggregators approaches to problem • Manufacturers No player does it all Retailers/Merchants Hurdles include: trusted • Retail-centric payments networks brand, reach and scale, execution Internet Giants • Search • Social networks 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 15 Digital Wallets Executive Digital Wallets Overview Briefing Stakeholder Positions Financial Services Banks/card networks • Banks / Issuers • Card Networks concerned about • Acquirers / Processors disintermediation Telecoms Primary position in wallets • Network operators today drives lucrative • Aggregators payments business • Manufacturers New revenue opportunity: Retailers/Merchants capture and monetize • Retail-centric payments networks customer data Need to deliver better Internet Giants service and protect fraud • Search • Social networks in new channels 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 16 Digital Wallets Executive Banks have a strong strategic position Briefing in the battle for Digital Wallets Bank Position with Consumers Primary Trust Electronic Primary role in payment (data and distribution Authentication accounts privacy) channels Banks developing own wallets, leveraging success of mobile Banking Apps 70 % of Canadian Smartphone Owners Use Financial Apps (2013 BMO Mobile Banking Survey) Mobile is overtaking Web Banking! Separate apps are being developed to drive payment Is this where you will go to pay? CBA Reference Guide is a stake in the ground on framework 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 17 Digital Wallets Executive Card Networks are natural catalysts Briefing and enablers for Banks Structural Advantages Factors in play: Merchant Fatigue Scale Acceptance Regulation Direct-to-Customer Global players Brands Focus on Canada Tech EMV in USA Standards Tokenization Deep pockets Liability rules Control the end-point Model to support Banks Incentives 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 18 Digital Wallets Executive Key Player Profile Briefing v.me by Visa Strategic priority is remove friction from e-com shopping Playspan ($190MM) and Cybersource ($2 billion) Out of the gates strong in 2012, with Bank partnership model to integrate/distribute wallet: U.S.: PNC/US Bank/B of A Canada: RBC, TD, Scotiabank Developer center launched E-tailer acceptance developing: buy.com, Overstock.com movietickets.com, 1-800-FLOWERS Parallel NFC plans emerging payWave enablement/certification; HCE standards 11-June-14 V.me launched CONFIDENTIALin Europe (c) 2014 (2013) NorthCard Inc. 19 Digital Wallets Executive Key Player Profile Briefing MasterCard 2011 – Google Wallet partnership with Citi, Sprint Heavy focus/investment in NFC / PayPass acceptance 2012 – PayPass Wallet Services launched E-commerce focus, set up for cross-channel convergence 2013 - MasterPass Checkout Services announced Multiple interfaces (NFC, QR) for POS Grocery Gateway, Porter Airlines & WagJag 2014 – MasterPass Connected Services Enable Banks, Merchants & Partners to offer wallets Major telco partnerships (Telefonica, Orange, Rogers) driving PayPass 11-June-14 CONFIDENTIAL (c) 2014 NorthCard Inc. 20 Digital Wallets Executive Networks and banks are anxious to avoid Briefing “another PayPal” Addressing merchant-side gaps: Small merchants, Risk Revenue $6.6B (+19%) Meeting consumer needs: + Volume $180B Authentication/security & Prepaid 143MM users + Leveraging eBay customer base