Secure Real-Time Payments Solutions Enabling a Unified ... · Payments Processing Problems (cont.) ©2016 SoPayMe, Inc. 8 Security - U.S. Data Breaches⁸ (selected) • Heartland

©2016 SoPayMe, Inc.

SoPayMe Pitch Deck ($9M Series A)

*** CONFIDENTIAL ***

Secure Real-Time Payments Solutions Enabling a Unified Shopping, Advertising and Payments Platform

January 2016

©2016 SoPayMe, Inc. 2

SoPayMe Overview

SoPayMe (SPM) is a fintech startup benefitting from four decades of financial industry experience. The Company’s backbone will be built on an in-house, secure payments processing platform that rides on trusted Fed Reserve rails and processes real-time transfers of collected funds.

The front end of the platform is a mobile wallet and optional smart card that utilize tokenization, encryption and multi-factor authentication so secure payments can be made anywhere, on any POS and on any device.

Although SoPayMe withholds consumer financial data, its platform is designed to facilitate integration of other valuable services such as shopping apps, self-checkout, real-time offline shopper data and ad campaign metrics, and the delivery of in-store, point-of-product, shopper-specific advertising.

Payments Solutions → Shopping, Advertising and Payments Platform


Problems and Solutions Overview

Payments Processing has Serious Problems

• In the U.S. alone, well over 120 billion non-cash transactions are processed annually¹ - these transactions are slow and expensive, and far too often, data is stolen.

SoPayMe Securely Delivers Real Money in Real-Time

• SoPayMe securely delivers real money in real-time via patented and patent-pending processes and platforms that require no POS hardware upgrades or changes in existing payment methods.

• SoPayMe eliminates expensive processor intermediaries and securely delivers collected funds in real-time, even on an interbank basis.

• Nearly all payments solution providers use third party processors, subjecting themselves to added expense and total dependency on others to process their transactions in a timely and secure manner.

¹2013 Federal Reserve Payments Study (Ref. 1, Appendix p. 2)


Problems and Solutions Overview (cont.)

The Payments Solutions Marketplace is Highly Fragmented

• Solution Providers only address segments of the payments market.

• Incremental innovation and lack of cross-industry collaboration have created a disorderly, muddled payment solutions marketplace.

SoPayMe can Combine Infrastructure-Free Locationing with Payments to Provide a Unified Shopping, Advertising and Payments Platform

• SoPayMe’s back-end processing and front-end mobile wallet/smart card is a vertically integrated platform that delivers a low-cost, real-time and secure end-to-end payments solution.

• Smartphone identification and indoor positioning adds loyalty and location-based capabilities to payments, creating a platform that enables collaborative shopping, advertising and payments solutions.

Payment Problems → Fintech U.S. Investment Flurry

©2016 SoPayMe, Inc. 5 ²Fintech New York: Partnerships,

Platforms and Open Innovation (Ref. 2, Appendix p. 2)

U.S. Fintech Investment Tripled in 2014 to $9.89B

Payment Problems → Fintech Global Investment Flurry

©2016 SoPayMe, Inc. 6 ³CB Insights Fintech Sector Overview (Ref. 3, Appendix p. 2)

$5.48B → 230 Deals (Q2 2015) | $13.6B → 882 Deals (Q3 2014 - Q2 2015)

Payments Processing Problems

Time

• Processing the transfer of good, irrevocable funds can take anywhere from 1 day up to 2 weeks or even longer.

Money

• Debit Card Interchange Fees average 23 cents per transaction⁴.

• Prepaid Card Interchange Fees average 50 cents per transaction⁴.

• Cash Transactions Costs average 25 cents per transactions⁵.

• Float / Cash Velocity Costs associated with transaction settlements⁵.

• Most Credit Card Fees range from 1.5 - 2% of transaction amount⁶′⁷.

• Total cost per check is calculated at 25 cents per transaction.


⁴Dual Message Debit Card Interchange Fees (Ref. 4, Appendix p. 2) ⁵Cost of Cash Study (Ref. 5, Appendix p. 2)

⁶′⁷Visa / MasterCard Rates (Ref. 6 & 7, Appendix p. 2)

Payments Processing Problems (cont.)


Security - U.S. Data Breaches⁸ (selected)

• Heartland Payment Systems - 130 million cards, estimated cost of $2.8 billion.

• T.J. Maxx - 90 million cards, estimated cost of $2.47 billion.

• CardSystems Solutions - 40 million cards, costs not disclosed.

• Target Corporation - 40 million cards, as well as data on 70 million customers, costs estimated up to $1.5 billion (Target’s 2015 10K reported cumulative expenses of $252 million).

• Global Payments Inc. - 1.5 million cards with a reported cost of $90 million.

• Citibank - 360,000 credit card holders, estimated cost of $19.4 million.

⁸Data Breaches that Stung U.S. Consumers (Ref. 8, Appendix p. 2)

Payments Processing Problems (cont.)


Security - 2014 Data Breaches⁹ (Global)

• 1,023,108,267 data records were lost or stolen in 2014.

• Data breaches totaled 1,541, up 46% from the 1,056 breaches in 2013.

• North America accounted for 76% of total breaches for the year.

• The retail industry lost more than 567 million data records - 55% of all records lost in 2014.

• Only 58 of the data breach incidents in 2014, or less than 4% of the total, involved data that was encrypted in part or in full.

⁹Data Breaches in 2014 (Ref. 9, Appendix p. 2)

Who Has Solutions → Randy Pentel, SPM Founder

Experience, Relationships, Innovation and Success

• In 1968, Randy’s father, Irwin Pentel, left the grocery industry and developed and patented the first portable POS MICR reader for checks.

• In 1971, Irwin founded ChexSystems, a verification service providing data from 9,000+ financial institutions at 100,000+ locations.

• In 1984, ChexSytems sold to Deluxe, was later spun off and sold to FIS.

• In 1986, Randy and his brother left ChexSystems, co-founding Notifications Systems, Inc. (NSI) in 1987 to acquire EARNS.

• Today, nearly every major bank is an NSI customer and utilizes NSI’s Electronic Advance Return Notification System (EARNS).

• NSI provides an electronic interface with all 12 Fed Reserve Districts, processing about $2B in returned check notifications per month.

ChexSystems, NSI and SoPayMe are all Minnesota Corporations ©2016 SoPayMe, Inc. 10

SoPayMe Platform Overview

Advantages: Secure, Universal, Inexpensive and Value-Added

• Financial data is never available to merchants, stored on phones or cards, or exchanged between consumers, merchants and banks.

• SoPayMe’s proprietary processing platform can work with any bank, delivering available funds in seconds, even on an interbank basis.

• SoPayMe works on all POS systems; payments can be made offline or online; via mag swipe or contactless; card or phone; with or without signature, biometrics, chip/token/terminal & pin.

• Noncredit transactions of $10 or more cost only a flat ten cents per transaction; P2P and transactions under $10 are free; credit-based transactions can be made with significant processing savings.

• SoPayMe’s platform facilitates other solutions such as in-store, point-of-product ad delivery, ad campaign management and self-checkout.


SoPayMe Platform Overview (cont.)

SoPayMe benefits from 40+ years of Fintech Industry Experience


SoPayMe benefits from working relationships with the Fed Reserve System, all 12 Fed Reserve Districts and nearly every major bank.

SoPayMe’s Back-End: Real-Time Payments Processing Platform In-house processing platform with access control of servers.

Encryption, multi-layered authentication, real-time threat detection.

Facilitation of immediate bank-to-bank transactions and elimination of expensive intermediary processors.

Collaboration with the Fed Reserve System enables the lowest possible cost model for SoPayMe.

Utilization of the secure money transfer infrastructure that is widely accepted and trusted by governments, banks, businesses and consumers alike lowers the cost and barrier of entry for SoPayMe.


SoPayMe’s Front-End: Mobile Wallet and Optional Smart Card


Multiple accounts can be loaded to both wallets and cards.

Multi-factor authentication, including biometrics, can be utilized on enabled smartphones and smart cards.

Mobile wallet and smart card option enables tokenized transactions on all POS systems.

Transactions can be made offline and online; funds are collected in real-time, even on an interbank basis.

SoPayMe payment processing fees are the lowest in the industry, potentially providing significant savings to retail merchants.

SoPayMe never shares financial data during any transaction, protecting governments, banks, businesses and consumers.


SoPayMe’s Vertical Payments Solution, plus In-Store Locationing, deliver Value-Added Capabilities to the SoPayMe Platform


Infrastructure-free locationing of shoppers and delivery of in-store, point-of-product, shopper-specific ads, specials and coupons.

Real-time bidding, ad optimization, collection of shopper data, ad conversion and ad campaign metrics.

Transparency of purchasing decisions and return on ad spend.

Shopping app sync, shopping list upload, item locator, and expedited shopping path.

Self-scan product codes, running basket total, automated couponing redemption, secure self-checkout and payment.

Remote ordering, product nutritional information, recipes.



Ancillary Revenue Potentials (not included in Revenue Projections) Ad and Data Revenue.

Processing Fee Revenue by providing processing to other Fintechs.

Sales Revenue from smart card and card-carrying phone case sales.

Remote Ordering Patented Technology In addition to filing patent applications and developing proprietary

processes relating to payments processing, Mr. Pentel previously developed and invented technologies relating to remote ordering. This patented technology covers various remote ordering through the use of various portable electronic devices, such as phones and tablets, etc. SoPayMe has non-sublicensable, non-exclusive, non-transferrable rights to use the remote ordering technology.

Payment Process Architecture / Merchant Advantages


Secure → no financial data → no target → reduced costs.

Inexpensive → reduced fees → increased net earnings.

Immediate → no float → increased cash velocity.

Universal → all POS, banks, payment methods.

* Offline or Online; via Mag Swipe or Contactless; Card or Phone; with or without Signature, Biometrics,

Chip/Token/Terminal & Pin

Notable Fintech Competition


*Selected from over 100 Startups & Industry Stalwarts Mobile FinTech Startup Landscape (Ref. 10, Appendix p. 2)

Mobile Payments Startup Landscape (Ref. 11, Appendix p. 2)

Select Features and Select Competition*

Y – YES N – NO S – SOMETIMES, MAYBE UNDER CERTAIN CONDITIONS U – N/A or UNKNOWN

SoPayMe Market Strategy

Acquire Customers with Massive Transaction Volume and Pains

1) Capture the C2B/B2C segment that has tremendous transaction volume but is subject to costly data breach and transaction fee pains.

• Merchant targets include big-box, convenience, pharmacy, fuel, grocery, dining and other retail and retail service companies.

• MCX → 110,000 locations → $1 Trillion in Annual Payments.

MCX Merchant Examples:

• Walmart → 11,000 stores → 260M customers per week¹².

• ShopRite → 250 stores → 238M annual customer transactions¹³.

2) Leverage the C2B/B2C customer base to capture P2P & B2B.

3) Capture P2G, G2P, B2G and G2B.

©2016 SoPayMe, Inc. 18 ¹²Walmart 2015 Annual Report (Ref. 12, Appendix p. 2)

¹³ShopRite Facts (Ref. 13, Appendix p. 2)

Merchant “X” Savings Using SPM (10% Capture)

10% SPM Payments Capture → $65M in Merchant “X” Savings

©2016 SoPayMe, Inc. 19 * After 33% Tax Assessment

¹⁴FMI Food Retail Industry Speaks (Ref. 14, Appendix p. 2)

Payments Market (U.S.)

¹2013 Federal Reserve Payments Study (Ref. 1, Appendix p. 2)

U.S. Annual Non-Cash Transactions Exceed 120 Billion


Payments Market (Global)

Global Transactions Revenues reached $425B in 2013¹⁵

©2016 SoPayMe, Inc. 21 ¹⁵BCG Global Payments 2014 (Ref. 15, Appendix p. 2)

SoPayMe Annual Revenue Forecast (Payments Only)

Annual Revenue Forecast (Payments Only - Years 1-5)*


* Does not include Ad, Data or Processing Fee Revenues

SoPayMe Annual Revenue Forecast (Payments + Ads)

Annual Revenue Forecast (Payments + Ads - Years 1-5)*


* Includes Ad Revenues, does not include Data or Processing Fee Revenues

SoPayMe Financial Highlights (Payments Only)

Financial Highlights (Payments Only - Years 1-5)*


* Does not include Ad, Data or Processing Fee Revenues

SoPayMe Financial Highlights (Payments + Ads)

Financial Highlights (Payments + Ads - Years 1-5)*


* Includes Ad Revenues, does not include Data or Processing Fee Revenues

The Opportunity: $9M (Series A)

$9M launches SoPayMe and provides Cash Reserves

• SoPayMe’s platform is scalable with only modest incremental costs.

• Profitable in 17 months (8 sales months) and 17M Paid Transactions.*

• SoPayMe’s initial customer base has the potential to provide sufficient annual revenues and cash flow to sustain ongoing organic growth.

Use of Funds (Startup through Year 1)

• Platform Software Engineering** - $1.5M.

• Platform Hardware Infrastructure - $800K.

• Consulting, Compliance, Licensing and Fee Expenses - $1.25M.

• Operating Expenses - $1.2M.

• Direct Cost of Revenue - $100K.

• Cash Reserves*** - $4.15M.


This slide does not consider Ad Revenue *With Ad Rev: Profitable Mo. 13, Break-Even Mo. 25

**Increase by $1M for shopping/adware development ***Includes $2M per Limited Purpose Trust company charter

Appendix

©2016 SoPayMe, Inc. Appendix

Appendix

©2016 SoPayMe, Inc. Appendix 1

References

1 https://www.frbservices.org/files/communications/pdf/research/2013_payments_study_summary.pdf 2 http://www.fintechinnovationlabnyc.com/media/830595/FinTech-New-York-Partnerships-Platforms-Open-

Innovation.pdf 3 https://www.cbinsights.com/industry?sector=281&setup=2&public_list#activity-pane 4 http://www.federalreserve.gov/paymentsystems/regii-average-interchange-fee.htm 5 http://www.ei.com/downloadables/Cost_of_Cash_Study.pdf 6 http://usa.visa.com/download/merchants/Visa-USA-Interchange-Reimbursement-Fees-2015-April-18.pdf 7 https://www.mastercard.us/en-us/about-mastercard/what-we-do/interchange.html 8 http://www.bankrate.com/finance/banking/us-data-breaches-1.aspx#ixzz3gUUILKoH 9 http://www.safenet-inc.com/resources/data-protection/2014-data-breaches-infographic/ 10 http://tracxn.com/#latest-coverage/report-21-MobileFinTechStartupLandscape 11 http://tracxn.com/#latest-coverage/report-4-MobilePaymentsStartupLandscape 12 http://stock.walmart.com/files/doc_financials/2015/annual/2015-annual-report.pdf 13 http://wakefern.shoprite.com/retail/shoprite/ 14 “The Food Retailing Industry Speaks 2015” (Food Marketing Institute) 15 https://www.bcgperspectives.com/Images/Global_Payments_2014_Next_Level_Value_Sep_2014_tcm80-

171913.pdf

https://www.frbservices.org/files/communications/pdf/research/2013_payments_study_summary.pdf




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©2016 SoPayMe, Inc. Appendix 2

©2016 SoPayMe, Inc.

Secure Real-Time Payments Solutions Enabling a Unified Shopping, Advertising and Payments Platform

Documents

Secure Real-Time Payments Solutions Enabling a Unified ... · Payments Processing Problems (cont.) ©2016 SoPayMe, Inc. 8 Security - U.S. Data Breaches⁸ (selected) • Heartland