The mobile wallet already exists!

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1 Digital Financial Solutions The mobile wallet already exists! 2015 It s called mobile banking

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3 The mobile wallet already exists!: It s called mobile banking P3 For more information please contact scadbury@intelligentenvironments.com What do we mean by a Mobile Wallet? The term Mobile Wallet has been a buzz word for some time. With a broad range of use cases, it unsurprisingly can mean different things to different people. If we look at what has been deployed to date, there are three core types of mobile wallet: Remote, Proximity and those used for both, omnichannel. Remote Person to Person (P2P) Pingit Online Payments In App Payments Mobile (Location Based) Amazon EE Cash on Tap Square Wallet Google Wallet Paypal MasterPass Mobile (Contactless) itunes O2 Wallet Proximity (Paying for things at a physical store)

4 The mobile wallet already exists!: It s called mobile banking P 4 Do we even need Mobile Wallets? What is not up for debate is the primary benefits of the Mobile Wallet. A main advantage is that people will no longer need to carry physical wallets anymore the mobile would replace the requirement to carry cash and cards. However we, Intelligent Environments, a leading provider of innovative financial services technology, believe that if we peel back the layers further, there are a number of mobile features that offer both a greater customer experience and added security benefits: Plastic Mobile Payment application can be remotely provisioned, updated & disabled CARDHOLDER NAME Pre-personalised Chip 4 digit PIN 10/12 10/20 Expiry date Payment details embossed Debit or Credit Limited to Visa or MasterCard or American Express mybank Pay Now Available Balance Update Latest Transaction 100 Merchant name You are near Argos 20% of all purchases today Today Account Transfer Chart Offers Faster Payments &/ or Card (Debit, Credit) - incl Visa and MasterCard and America Express Balance at point of transaction Ability to store electronic receipts Location based offers Full alpha-numeric keyboard & 2 way communication In addition, innovation around mobile payments is enabling the following: The reinvention of the payment process Take, for instance, Square founder Jack Dorsey, who climbed to fame as the co-founder of Twitter. He coined the phrase frictionless to describe his concept of making a payment with your name and nothing else. Once a payer has registered his/her card with Square, the payer s name and photo are displayed on merchant terminals when the payer s device is in close proximity. Customers to enter a brave new world Here is a world where bricks and clicks no longer compete; instead, they complement each other. Mobile wallets allow for customers to begin a transaction online only to complete it when in close proximity of a store, which can present the potential purchaser with additional promotions. Or the purchaser can start in store and then complete the payment via a device at a later time.

5 The mobile wallet already exists!: It s called mobile banking P 5 Why haven t Mobile Wallets taken off? Despite a hive of activity in the last few years with more than 100 mobile wallet companies currently active in the US - no winner has emerged. In fact, some might argue that there is a graveyard of unsuccessful ventures: Wallet O2 Wallet Launched in 2012, it was withdrawn from market in 2014 following poor adoption. Square Valued at $5B USD, Square abandoned the project after the app fell out of the Top 300 free Finance apps in Apple s App Store. Google Wallet Despite > $300M USD investment, it failed to attract sufficient merchants or consumers. Paypal Despite 148 million active ecommerce users and many mobile in-store pilots, the company has not cracked the in-store payments market. These examples highlight the complexity involved in launching a successful payments proposition. A key issue ignored by mobile wallet innovators is that a number of affected parties must all be at the table, ready and willing to support this method of payment. Without this support, mobile payments will flounder.

6 The mobile wallet already exists!: It s called mobile banking P 6 What s needed for a successful payment scheme? Customer Must be better than current methods of payment and be as secure. Also requires a compatible handset. Payment Merchant A commercial case that considers transaction fees, hardware compatibility, speed of transaction, training needs and e-value add (e.g. improved customer data, loyalty etc.) Settlement of funds Payment Scheme A trusted brand that sets the rules (e.g. refund policy) and may act as a switch between the customer and merchant banks Merchant fee Settlement of funds Customer s Bank (or issuer) A commercial case with a clear call to invest now. One that either creates new income, grows or retains income, and/or cuts cost (e.g. cash displacement). Interchange fee Settlement of funds Merchant s Bank (or issuer) Needs to be able to support the collection and settlement of the payment In addition, the regulatory landscape can also provide incentives and disincentives to invest.

7 The mobile wallet already exists!: It s called mobile banking P 7 Why financial institutions are best placed to answer this? We need to recognise the four strengths these institutions have: Trust. As a 2014 survey from Bain reported consumers trust banks with their data more than they trust retailers, technology companies, or alternative payment providers. Established interface. Mobile Banking has an infinitely higher adoption than any Wallet and is already used widely. The active mobile app user for a typical UK retail bank is logging into his/her app an average of 23 times per month. Established authentication model. The credentials currently used for digital banking. Established settlement. Whether it be the bank-owned Faster Payments network or the Card Schemes (where the largest debit provider, Visa Europe, is owned by its member banks). Financial institutions can build on these strengths, but they need to recognise that high levels of security and privacy need to be balanced out with accessibility and ease-of-use. What should financial institutions being doing about this opportunity? To maintain their position at the forefront of the payments value chain, financial institutions need to continue innovating. However, we do need to acknowledge that there is a myriad of payment types that will not all be replaced by mobile payments overnight. A mobile payments strategy needs to be approached via a series of baby steps and focus on specific use cases. The first decision an institution needs to make is whether it wants to settle its payments via Faster Payments the UK s intra bank network that settles 99.9% of transactions in a matter of seconds - or the Card Network. If you are a credit card issuer, with no access to the Faster Payments network, it becomes an easy decision. If you are a retail bank who issues both Debit Cards (Visa has 96% share of the UK Debit market) and has access to the Faster Payments network, the decision is more difficult.

8 The mobile wallet already exists!: It s called mobile banking P 8 How we can help Intelligent Environments can help its clients enable a number of solutions. Remote Proximity (Paying for things at a physical store) Person to Person (P2P) Online Payments In App Payments Mobile (Location Based) Mobile (Contactless) Faster payments (Sept 2014) (From 2015) Card based and / or or * The Wallet in the Cloud, an open platform that makes it easy for issuers to work collaboratively with merchants by enabling payments from within their mobile banking app. With these solutions, we allow our clients to take no regret decisions that enable them to progress their payment capability and better understand the emerging payment landscape. If you would like to discuss the contents of this paper, please contact me.

9 The mobile wallet already exists!: It s called mobile banking P 9 About the Author About Intelligent Environments Intelligent Environments is an international provider of innovative financial services technology. Our mission is to enable our clients to deliver a simple, secure and effortless digital customer experience. We do this through Interact, our digital financial services platform, which enables secure customer acquisition, onboarding, engagement, transactions and servicing across any digital channel and device. Today these are predominantly focused on smartphones, PCs and tablets. However Interact will support other devices, if and when they become mainstream. Simon Cadbury, Head of Strategy & Innovation Intelligent Environments Simon is a product marketer and strategist with 18 years experience working for a range of major international brands. Simon s role is to work with Intelligent Environments investors to set and deliver the company s mid and long term strategy, as well as overall responsibility for the product development and management of Interact; the company s core product offering. Simon joined in 2013 from Lloyds Banking Group where he was responsible for payment technology and also sat on the Credit Card divisions leadership team. Prior to this he worked on the launch of a number of firsts in new technology the Blackberry (BT Cellnet), BT Openzone (BT Retail), 3G Live! (Vodafone Australia) and Sky HD (BSKYB). We provide a more viable option to internally developed technology, enabling our clients with a fast route to market whilst providing the expertise to manage the complexity of multiple channels, devices and operating systems. Interact is a continuously evolving digital customer engagement platform that ensures our clients keep pace with the fast moving digital landscape. We are immensely proud of our achievements, in relation to our innovation, our thought leadership, our industrywide recognition, our demonstrable product differentiation, the diversity of our client base, and the calibre of our partners. For many years we have been the digital heart of a diverse range of financial services providers including Generali Wealth Management, HRG, Ikano Retail Finance, Lloyds Banking Group, MotoNovo Finance, Think Money Group and Toyota Financial Services. If you d like to hear more please contact Simon Cadbury +44 (0) info@intelligentenvironments.com

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11 Kingston Upon Thames Riverview House 20 Old Bridge Street Kingston upon Thames Surrey KT1 4BU +44 (0) Belfast, Northern Ireland Suite 1B Ground Floor Concourse Building 1 Northern Ireland Science Park Queens Road Belfast Northern Ireland BT3 9DT +44 (0) info@intelligentenvironments.com Digital Financial Solutions