Digital Wallets Executive Briefing Michael Bradley Managing Director, NorthCard Inc. mike.bradley@northcard.com 416-929-0422 11-June-14
Digital Wallets Executive Digital Wallets Executive Briefing 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 CONFIDENTIAL (c) 2014 NorthCard Inc. 2 11-June-14
Digital Wallets How did we get here? Executive 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 CONFIDENTIAL (c) 2014 NorthCard Inc. 3 11-June-14
Digital Wallets Executive What’s in Your (Digital) Wallet? Briefing Payment Loyalty / Electronic Cash Receipts Credentials Membership Data (Prepaid) …and delivering Functioning across …integrated into the added value. converging channels… customer’s context… Profile Face-to-Face Alerts Preferences E-Commerce Offers Location Mobile Keys CONFIDENTIAL (c) 2014 NorthCard Inc. 4 11-June-14
Digital Wallets Big players and start-ups are Executive 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? CONFIDENTIAL (c) 2014 NorthCard Inc. 5 11-June-14
Digital Wallets Digital Wallets: Executive 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? CONFIDENTIAL (c) 2014 NorthCard Inc. 6 11-June-14
Digital Wallets Executive …that requires a complex operating environment. Briefing Wallets or Apps may be Credentials: provided by Bank, Mobile Multiple banks/ Operator or independent payment developer products App Wallet 2 Wallet 1 Secure Provisioning of Payment Credentials (Trusted Service Manager) Credential 1 Credential 2 NFC Enabled Credentials stored securely Phone: Multiple in Secure Element on phone manufacturers, or in cloud devices and operating systems CONFIDENTIAL (c) 2014 NorthCard Inc. 7 11-June-14
Digital Wallets There are many hurdles to Executive 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 CONFIDENTIAL (c) 2014 NorthCard Inc. 8 11-June-14
Digital Wallets Executive The Case for Mobile Wallets in Canada Briefing 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 Nov./2012 Est. 1 billion transactions to date Multiple Banks & Carriers now in market CONFIDENTIAL (c) 2014 NorthCard Inc. 9 11-June-14
Digital Wallets Executive The Case for Mobile Wallets in Canada (cont’d) Briefing Canada has a good record EnStream has developed enabling infrastructure of industry collaboration JV of major telcos Work on Payments Task Force incorporated views Designs to new device from mobile operators models across carriers and retailers Facilitates one-stop CBA Reference Model credential deployment documented bank perspectives on major issues CONFIDENTIAL (c) 2014 NorthCard Inc. 10 11-June-14
Digital Wallets Who’s Making Headlines in Canada? Executive 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 CONFIDENTIAL (c) 2014 NorthCard Inc. 11 11-June-14
Digital Wallets Who’s Making Headlines in Canada? Executive Briefing Announced Nov./2013 Launched Jan/14 First: Open wallet combining First: Cloud-based credentials multiple payment & loyalty (Patent Pending) Requires Applet on Bell NFC SIMs Single Tap to pay, earn and Sent encrypted to phone (handles redeem points expiries) Loblaws backing Loyalty & payment, transfers, initiative of PCF offers & gift cards with retail Will flex to bar codes & QR integration May/2014 • First: Three big carriers • TD mobile app enhancement CONFIDENTIAL (c) 2014 NorthCard Inc. 12 11-June-14
Digital Wallets Executive Who’s Making Headlines? Briefing April/2014 – PayPal Wallet Launch 2013-14 – Square Canada Growth CONFIDENTIAL (c) 2014 NorthCard Inc. 13 11-June-14
Digital Wallets The Buck Stops Here: Executive Briefing Keys to Consumer Adoption You are Deliver on Add significant here promise new value • • Ubiquity of Compelling usage benefits • • Layer new Vision that functionality resonates Integrate into Acceptable today’s downsides experience • Costs • First reason • Security • Easy to find • Privacy • Easy to adopt CONFIDENTIAL (c) 2014 NorthCard Inc. 14 11-June-14
Digital Wallets Digital Wallets Overview Executive Briefing Stakeholder Positions Financial Services Key players jockeying for • Banks / Issuers position in emerging • Card Networks • Acquirers / Processors business models Sectors have different Telecoms • Network operators approaches to problem • Aggregators • Manufacturers No player does it all Hurdles include: trusted Retailers/Merchants • Retail-centric payments networks brand, reach and scale, execution Internet Giants • Search • Social networks CONFIDENTIAL (c) 2014 NorthCard Inc. 15 11-June-14
Digital Wallets Digital Wallets Overview Executive Briefing Stakeholder Positions Financial Services Banks/card networks • Banks / Issuers concerned about • Card Networks • Acquirers / Processors disintermediation Primary position in wallets Telecoms today drives lucrative • Network operators • 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 in new channels • Social networks CONFIDENTIAL (c) 2014 NorthCard Inc. 16 11-June-14
Digital Wallets Banks have a strong strategic position Executive 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 Is this where you to drive payment will go to pay? CBA Reference Guide is a stake in the ground on framework CONFIDENTIAL (c) 2014 NorthCard Inc. 17 11-June-14
Digital Wallets Card Networks are natural catalysts Executive Briefing and enablers for Banks Structural Advantages Factors in play: Merchant Fatigue Scale Acceptance Regulation Direct-to-Customer Focus on Canada Brands Global players EMV in USA Tech Standards Tokenization Deep pockets Control the end-point Liability rules Model to Incentives support Banks CONFIDENTIAL (c) 2014 NorthCard Inc. 18 11-June-14
Digital Wallets Key Player Profile Executive 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 V.me launched in Europe (2013) CONFIDENTIAL (c) 2014 NorthCard Inc. 19 11-June-14
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