Presenting a live 90 ‐ minute webinar with interactive Q&A Mobile Payment Systems: Mobile Payment Systems: Legal and Regulatory Challenges Best Practices for Minimizing Risks and Liabilities With Wireless Financial Transactions THURS DAY, FEBRUARY 9, 2012 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Today s faculty features: Duncan B. Douglass, Partner, Alston & Bird , Atlanta Jarrett Helms, McKinsey & Company , Atlanta The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Mobile Payment Systems: Mobile Payment Systems: The US Market and Its Legal and Regulatory Challenges and Regulatory Challenges Jarrett Helms, Payments Practice Expert y p McKinsey & Company Duncan Douglass, Partner Alston & Bird LLP Alston & Bird LLP CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company and Alston & Bird is strictly prohibited
Defining the U.S. Mobile g Payments Market
GCI-AAA123-20110606- There are numerous forms of mobile payments, we will concentrate on using the mobile device at the traditional point-of-sale Traditional POS Mobile Commerce “Near Field NFC Communication Communication” based POS Payment processing Other Mobile purchases POS POS from a mobile device (e.g., card swipe “sleeve”) “ l ”) NFC alternatives (e.g., SMS, barcodes, “bump”, Mobile purchase of Bluetooth, etc) digital content (e.g., digital content (e g music, books, games, apps, etc) The use of a mobile Money device to initiate bill Digital Transfer & Bill payment or money t Content Content Pay P Mobile purchase of transfers Mobile e- physical goods and commerce services (e.g. shopping via a b browser or app) ) McKinsey & Company | 7 SOURCE: Team analysis
GCI-AAA123-20110606- A rich ecosystem of mobile payment services is evolving that will benefit from mobile wallet capabilities Potential mobile wallet applications EXAMPLES Alternatives to the Alternatives to the traditional card / cash traditional card / cash In-person I based POS based POS retail card / experience (e.g., NFC, experience (e.g., NFC, cash Payment processing Payment processing bar codes, etc.) bar codes, etc.) alternative from a mobile from a mobile Mobile Mobile Mobile Mobile device (e.g., card device (e.g., card d d i i ( ( d d Incentives POS swipe “sleeve”) swipe “sleeve”) Deploying coupons, Deploying coupons, offers, etc. via mobile offers, etc. via mobile Mobile device (e.g., location device (e.g., location Wallet based offers) based offers) based offers) based offers) Mobile purchase of Mobile purchase of Banking digital content (e.g., digital content (e.g., P2P / and bill music, books, music, books, social pay games, apps, etc) games, apps, etc) Enabling online Enabling online E- banking and bill banking and bill banking and bill banking and bill C Commerce payment via mobile payment via mobile Services that Services that “check- device device streamline the ability streamline the ability out” to pay for mobile / to pay for mobile / ecommerce ecommerce transactions initiated transactions initiated via mobile via mobile McKinsey & Company | 8 SOURCE: McKinsey Payments Practice
GCI-AAA123-20110606- Mobile payments themselves are unlikely to generate significant new payments revenues … US Mobile Payment Transaction Value 1 % of merchant terminals that are NFC enabled Billions Cash displacement Existing card-based spend via mobile g p 100% 100% 60 60 50 44 0 44 BN represents less p 40 40 than 1% of total card 30 spend 50% 30 0 44 20 20 29 8 10 0 2 In general, mobile payments will 1 8 0 simply shift the form factor of a simply shift the form factor of a 0 0 card transaction from a plastic card 2011 12 13 14 15 2016 to the mobile device . This does not change the economics of the base transaction 1 includes only NFC based transactions originated in the US 2 Effectively zero volume; mobile NFC pilots may have generated some volume McKinsey & Company | 9 SOURCE: McKinsey US Payments Map, team analysis
GCI-AAA123-20110606- …So why is there a big fuss over mobile payments? Mobile payments offer more opportunities to attackers than incumbents, threatening direct consumer relationships for issuing banks and providing new revenue streams for entrants ILLUSTRATIVE Area of ea o change: Card controlled by an issuing bank Consumer Merchant Terminal Processor Network Issuer Loaded into E-wallet controlled by any of the any of the following: 1 Optional McKinsey & Company | 10 SOURCE: Team analysis
GCI-AAA123-20110606- Integrating digital wallets into mobile devices presents many opportunities to improve customer experience and generate new revenue streams Key opportunities for in-person mobile payments: NFC Example Mobile components 1 3 Provide enabled devices Develop ad / loyalty platforms Telco’s Telco’s Groupon / Scoutmob Groupon / Scoutmob Handset manufactures Issuing Banks NFC chip manufacturers Card Networks EXAMPLES Mobile OS developers Transaction flow Transaction flow NFC Coupons / Contactless Payment Consumer Enabled e-Wallet Merchant Rewards & Terminal Processing Device Loyalty 1 Merchant offers 1 2 4 Develop e-wallet Develop POS systems Telco’s Verifone Google / Apple Google / Apple ViVOtech ViVOtech Issuing Banks Coupon providers Card Networks The mobile payments ecosystem PayPal promises a richer shopping experience Other 3rd parties p for consumers with real time contextual for consumers, with real-time, contextual information and offers. 1 Optional McKinsey & Company | 11 SOURCE: Team analysis
GCI-AAA123-20110606- New technologies and functionalities have lead to new purchase & payment related products and applications for the mobile device… Hype around mobile payments tends to be blurred together with hype over other mobile based products and services, but some payments applications are coming online Couponing / Rewards Location Mobile based ticketing marketing Transaction Mobile POS based marketing NFC McKinsey & Company | 12 SOURCE: Team analysis
GCI-AAA123-20110606- …But further convergence among these new applications is likely, and could create a powerful tool for consumers and merchants alike The next generation of payments applications could combine the functionality of several existing mobile products to create a more integrated and compelling product Marketing Mobile Payments New Application Money Savings Location Budgeting based applications pp marketing marketing + + = E-wallet E ll t New combined Coupons / NFC Transactional application Rewards based marketing McKinsey & Company | 13 SOURCE: Team analysis
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