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The Candy Store Syndrome of Mobile Wallets & P2P
Kevin ChristensenSVP, SHAZAM
Current Landscape & the Anatomy of a Mobile Wallet
Business Case
Wallet Implementations o Open Loop or Closed Loop o Open Technology or Closed Technology
Wallets in the marketplace
Acceptance, trends, future considerations
Agenda
Current Landscape & Anatomy of a Mobile Wallet
April: PayPal acquires Paydiant
July: Apple Pay® debuts in the UK, accepted at 250,000 locations
Sept: Google’s Android Pay®
Oct: Apple announces iOS 9, Passbook transitions to Wallet, iPhone 6s
Financial Institution Entrants
Event tickets, Loyalty cards, membership cards, store/gift cards
Mobile Wallets & P2P in 2015
More Financial Institution Entrants – Focused on Data
May - MCX Dies
June – Card Brands Digital Enablement
July – MasterCard Buys VocaLink
July – Visa / PayPal Partnership
August – Early Warning (ClearXchange) Adds MC & Visa. App (Zelle) in Development
Oct – CFPB Issues Final Rule For Prepaid Cards and expands definition of prepaid to include P2P
But What About Faster Payments
Mobile Wallets & P2P in 2016
Real Time / Faster
Comparison To Other Countries
International Payment Models
Key Attributes:
Credit or debit cards Boarding passes Event tickets Loyalty cards Membership cards Coupons Store/gift cards Control More than just Payment!!
Mobile Wallet
Business Case
Third Party
Acquiring (Merchant) Perspective o Steering and Least Cost Routing
o Security and Fraud Reduction
o Loyalty, Data, and CRM
Issuing Perspectiveo Non-Traditional Revenue Opportunity
o Brand Protection
o Data Driven (Advertising, Promotions)
o New Payment Types (Same Day ACH)
Why Wallet?
Wallet Implementations1. Loop (Open or Closed)2. Technology (Open or Closed)
Open Loop (Card/Payment Based) vs. Closed Loop (Merchant)
Third Party Solutions
o Apple Pay, Android Pay, Samsung Pay, Paypal
Financial Institutions
o Chase Pay, Capital One, Wells Fargo, SHAZAM Bolt$ (FI label)
Merchant and Embedded Solutions
o Starbucks, Wal-Mart, Amazon, Dunkin Donuts, Subway, Uber
Other
o Coin, eWallet, Gyft, Key Ring, LevelUp
Open Loop vs. Closed Loop
THE ONE THAT ENROLLS…….IS THE ONE THAT CONTROLS (R. Crone)
Technology Models
Hardware Based vs. Cloud Based
o Secure Element vs. Host Card Emulation
o Closed vs. Open
o Proprietary Implementation vs. Standards Based Implementation
Secure Element (SE) vs. Host Card Emulation (HCE) Secure Element (SE)
Existing Rails With Evolution
Reliance on core, foundational, payment backbone
Evolution of consumer payment “form factors”o Magnetic stripeo Contact smartcardo Mobile NFC/MST/QR Code
Convergence of evolutionary technologies —magstripe, contactless, NFC, encryption and tokenization — to enroll and complete payment
Security
Layered approach to secure payments
Success dependent on: o Consumer confidence and level of privacyo Merchant, acquirer, payment network and
issuer supporto Strength of payment security
Mobile Wallet Authentication
TouchID Fingerprint scan Customer device Retina scan One-time passcode Geo-location Selfie
Cardholder Verification Methods
EMV CVMso Offline plaintext PINo Offline enciphered PINo Signatureo Online PINo No cardholder verification method
PIN/signature in-store 3D-secure in-app
Introducing CDCVM
Consumer device cardholder verification method (CDCVM)o Supported by Apple Pay contactlesso TouchID or device passcode qualifieso In-app originating from iPhone 6 or later,
AppleWatch, iPad Pro, iPad Air 2, iPad mini 3 or later
EMVCo brand supporto Visa CPS 2.1 and latero MC reader specification 3.0 and later (ODCVM)
Introducing CDCVM
EMVCo brand support (continued)o Discover contactless D-PAS terminal application
specification 1.0 and latero AMEX ExpressPay 3.0 and later
Debit support will need to reinstate flexibility and choice for merchant routing options of CDCVM verified transactions
Enrollment Process
When cardholder enrolls a card in Apple Pay, the token service creates and loads a token card number into the iPhone’s secure element
Electronic vs. Customer Service Verification (ID&V)
o Issuer or processor (e.g. SHAZAM) verifies cardholder-provided information
o In some cases, issuer or processor will contact the cardholder directly to help issuers minimize fraudulent enrollment
Cardholder provides credentials such as:
o “Real” PAN
o Expiration date
o CVV2/CVC2
o ZIP code
Enrollment
Main Street Wallet Support
NFCTerminal Acquirer Issuer
2 3 6
789
Token Service Provider
54
10
11
Wallets in the Marketplace
Open Loop
Apple Pay announcement: Sept. 9, 2014 Uses near field communication (NFC) technology Wave your iPhone 6/7 over a contactless reader
with your finger on the touch ID Requires initial enrollment into Apple “Wallet” Uses tokenization for added payment security Supports Visa, MasterCard, American Express, and
Discover
Apple Pay
Apple’s brand loyalty and strong reputation adds legitimacy to the mobile wallet
Apple Pay reinforces support for NFC and EMV contactless in the marketplace
As merchants upgrade equipment for EMV, they will likely include NFC compatibility, too
Apple Pay’s touch ID & tokenization security
Usage – 19%-15%, Curiosity 22%-20%
Awareness – 88% - 84%
Apple Pay
Visa / MasterCard
o Residency & Token management services
o Effective January 1, 2016
Apple Pay Fees
o Monthly participation
o Apple Pay per transaction fee
o Call center for each token related call if issuer.
Participation Fees
Android Pay
Enroll existing “card” credentials into the wallet by entering or taking a photo
Uses Host Card Emulation (HCE) instead of a physicalsecure element, with tokenized credentials stored at a central server
4-digit code to access wallet
Uses one-time card number to make payment
Merchant never sees “real” card number
Android Pay
Samsung Pay (NFC & MST)
Samsung acquisition of LoopPay provides Magnetic Secure Transmission (MST) in addition to NFC
Broader coverage of terminal acceptance due to MST supporting traditional non-NFC terminals, with magstripe-only support
S6 and S6 Edge devices
Tokenization and biometrics for added payment security
Samsung Pay (NFC & MST)
PayPal (Paydiant)
QR Code based payments “Check in” at the store Pay with One Touch Cashier involvement In-app purchases —
checkout with PayPal
PayPal (Vodafone)
NFC based Later in 2016
Chase Pay
Open Loop with Closed Loop Advantage o Chase as Issuer & Merchant Processoro Lower Transaction Fees
Available on Most Devices QR Code “Problem” Use in Starbucks App, Chase Merchants, & Online
Capital One / Wells Fargo / US Bank
First U.S. Banks to release tap and pay functionality Builds on consumer trust of banks No competition among other cards Data!!!
SHAZAM Wallet Support
Apple Pay, Samsung Pay, Android Pay Support Interface with Your Mobile Banking Application Card Control Step-up authentication
o IVR/Customer serviceo One-Time passcode
In-app purchaseso CNP, PINless support
HCE Contactless support for SHAZAM participants
SHAZAM Wallet Support
Mobile P2P supporto Funds Transfer Debit/Credit transaction supporto BOLT$ P2P SHAZAM to SHAZAM/non-SHAZAM
customerso Integration services/APIs to send money (coming
soon)
Continue investment in security, authentication and tokenization
Closed Loop
Mobile accounts for 20 percent of transactions!!
Closed Loop (For Now?)
Uses Existing POS System
Order and Pay Ahead
o Avoid the Lines!!!!!
Rewards
Starbucks
Merchant Customer Exchange (MCX):the merchant conglomeration with its own mobile wallet — CurrentC
QR Code/Cloud wallet technology
Coupons and offers
Large merchant base
Slow adoption
Requires merchant and mobile software
Chase Pay?
MCX, Paydiant Wallet
Walmart Pay
iOS, Android support
Walmart Pay
Open: visit any register, open the Walmart app and choose Walmart Pay. Activate the camera
Scan: at checkout, scan the code displayed at the register
Done: associate scans and bags itemso An e-receipt will be sent to the app and can be viewed
at any time
Kohl’s
Scan: at checkout, scan the code displayed at the register
Incorporates Rewards & Coupons
Others
Microsoft Windows 10 Wallet
Credit/debit cards Boarding passes Event tickets Loyalty cards Membership cards Coupons Windows Store and Xbox
gift cards
Others
Coin o Physical, electronic card and connects with your phone via Bluetootho The card has both a magnetic stripe and an NFC chip, which means that
after you load your credit and debit cards on it, you can use it on most terminals
eWalleto Store and access all of your sensitive payment and personal informationo No ability to pay at retail locations using phone o Secure all information with 256-bit AES encryption, and grant you instant
access to them using a single password or touch ID
Gyfto Keep track of and spend them gift cards . It works on Apple and Android
phones as well as the Apple Watch
Others
Key Ring o Shoppers who want to maximize their loyalty perks without having to carry
around a stack of cards in their wallets. You can use it to store your membership and loyalty cards, create and share shopping lists, and find deals at your favorite stores.
o 12 million users. The electronic wallet can also hold your gift cardso No ability to hold debit or credit cards
LevelUpo Loyalty-based digital mobile wallet app o Provides rewards for shopping with participating businesses o Receive starting credit for using the app to payo Provided digital receipts and lets you track purchases and rewards
Mainstream Wallet Comparison
Mobile Wallet Acceptance
Acceptance Challenges
Acceptance trumps all Merchants have most successful apps POS technology and eCommerce changes What would move the needle
o Tender Reciprocity - FI cards in merchant apps and vice versa
o Lower Processing costs
o Sharing data
Acceptance Challenge
Issuer enrollment to multiple wallet programs Issuer card provisioning
on multiple wallets Agreement with each
wallet provider Agreement with each
token service provider
Acceptance Technologies
Card presento Magnetic stripe
o EMV contact/contactlesso NFC — SE & HCE
o MSTo QR Code
o Bluetooth Low Energy (BLE), iBeacon
Acceptance Technologies
Card not present
o Mail/telephone order
o eCommerceo Person-to-person payments (P2P)
o In-app purchases
Square Reader (Contact/Contactless)
Considerations for Issuing Financial Institutions
Thank You!
37
The Internet of Things (IoT)
What is the “Internet of Things?”
Intelligent connectivity of physical devices driving massive gains in efficiency, business growth and quality of life Connected people, data, devices, processes, etc. Moving toward Payments by “Things”
oWearableso TVsoDishwashers
oRefrigerators oCars
Payments by Wearables
“Nod to pay” “Pay with Wallaby” Internet “glass” banking
Smart Refrigerators
IoT is Here…and Growing
Rapid Adoption Rate of Digital Infrastructure:
5X Faster Than Electricity and Telephony
50 Billion
“Smart” Objects
7.26.8 7.6
25
12.5
InflectionPoint
TIMELINE
50
2010 2015 2020
0
40
30
20
10
BILL
ION
S O
F DE
VICE
S
World Population
IoT Growth
The Internet of Things – The Connectivist based on Cisco data
IoT Top Security Challenges
The Gartner Hype Cycle
Gartner Hype Cycle
Wearables
Thank You!
37