Gemalto Podcast for 8_29 [1] CARSLEY: Welcome. This is Ben Carsley for PYMNTS.com, and I am

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1 Gemalto Podcast for 8_29 [1] CARSLEY: Welcome. This is Ben Carsley for PYMNTS.com, and I am joined today by Amol Deshmukh, who is the vice president of mobile financial service for Gemalto. So, thank you for joining us today, Amol. DESHMUKH: Thank you, Ben. CARSLEY: Well, we are here today to discuss the future of mobile payment, which is the title of a recent whitepaper by Gemalto, that I know looks into proximity payments, both via the cloud and NFC, and that what s really going to drive consumers to adopt mobile payments on a larger scale, and if they re doing so today. So, I think to start, probably the best way to do this is to have you give us an idea of where mobile payments stand today, maybe some stats, where proximity payments sit with current adoption, and then we can get a glimpse at some future projections for mobile payments as well. DESHMUKH: Sure. So, if you look at mobile payments that are sectored, primarily proximity payments, evidence, and both mobile payments, all of these are predicted, like, really, really high locations upcoming years. There s a few reasons in support for that, starting to the smart phones and tablet sales are to reach about $1 billion to 2013, 1

2 according to Forrester, with more and more mobile payment programs like data and general use by almost two-thirds of the population there are Mexico and Latin America, and deployments in Japan and Singapore. It s not that surprising that the future of mobile payments looks quite bright, just globally, if you look at it. Forrester s research estimates that for the US, just for the US, over the next five years, mobile payments could soar to a whopping $90 million dollars. Now, this is pretty quick, though, right? Of the three types of payments that I just mentioned -- proximity payments, cloud mobile payments, and cloud evidence -- proximity payments today will even make 34% of the entire mix here today. But that s really anticipated to break about 50% by Also estimate from the e-market evidence that by 2016, proximity mobile payments will have just exploded in the market place, and in the US, specifically, and although the transaction value will -- it goes to $62.25 million. So, these are, you know, really quite staggering figures, and fortunate for mobile payments industry, generally. CARSLEY: Right, well, yes, I mean, I understand those are definitely some pretty impressive numbers, so I guess the next question is, let s talk about, you know, what could drive the growth so they could reach those numbers? I know 2

3 that, you know, you speak about mobile, so use both cloudbased and NFC-proximity payments in the paper, so let s start with the former, first. What is a cloud-based payment, and what s an example of a player who uses this method today? DESHMUKH: OK. So, cloud-based payments are just a type of proximity payment that forwards credentials of users, or payment because different people call them different names, on a secure remote servers, otherwise known as the cloud. This is just a remote server up -- in the Internet that is secure, that stores all this information. Consumers can access their mobile wallets by using a mobile application, but because it s cloud access, they can access the payment application on an auxiliary tablet, as well. So, it s not limited to their mobile, in this case. STX, for example, is a big player and a key type of cloud-based mobile payment. The fact that they re being in this arena. STX, as you may or may not know, has brought together 40+ US retail environments and STX wanted primarily a barcode and cloud-based solution. Consumers such as you and me will access to a personalized payment experience, and would have actually benefit from a lot of the awards and promotional offers. So, that would be a key of them, of cloud-based -- 3

4 of payments that s up and coming in the US marketplace right now. CARSLEY: OK, so, let s switch gears and tackle the other half of that switch, is of course, NFC payment. And you know, I think people are generally fairly familiar with NFC, but let s have you give us a breakdown of what the advantages are and the difficulty that it faces in the market today, and then again, maybe an example of a prominent NFC player. DESHMUKH: OK. Sure. So, NFC, as you may know, is also proximity payment that contactless payment application NFCenabled both. It uses existing acquiring networks so that you can go through the payment experience in the same way that you would with a contactless card, for example. With NFC, the payment information is stored on a secure effort, and so, being stored in the cloud. So, that, like, keeps it more locally pricing in that -- in something that s like a card. Although the key advantages that we see, or see payment participations, that are offered by Amex, MasterCard, Visa, is that NFC gives a wide range of acceptance and builds off credit card company. Another advantage definitely is the security of the personal payment information and this access -- direct access to mobile payment. And a key one is that the infrastructure for payment, of course, that state already exists and keeps 4

5 with whatever people are used to, and they re used to using their contactless cards. On the flip side of that, the difficult part of the deployment -- and of any payment technology -- is really the amount of time that is required to get users to use it, make it a habit, and you know, this cannot be done really overnight. So, some of these things have a slow ramp-up, but you know, that s the nature of the business. CARSLEY: Well, let s talk a little bit about that ramp-up because, you know, this talk about projection is great and everything, but right now, mobile payments haven t really taken off yet. So, what, in your opinion, is going to make consumers want to adopt mobile payments on a wider scale? Does EMV have a role in this? Is it more about the consumer experience? What s your take on that? DESHMUKH: And I m going to kind of present this by saying, you know, mobile payments are the -- talked about as different types of mobile payments, so all the way from the service application to what Square does, you know, are examples of mobile payment. So, there is -- there s a difference where, you know, users are actually getting more and more used to these kind of payments. The main motivations that will drive consumer are like any other business: immediate reward and security, the fact that you have the piece of 5

6 mind that you re paying, not only is it easy, but it s beneficial, and it s absolutely secure, so nothing is compromised from this. Already, about 18% of the customers would like an alternative to existing wallet, especially in situations that you are kind of restricted from using cash. Folks are already, you know, attached to mobile devices. If you lose your mobile phone, you re going to realize that in about six to 10 seconds. That s probably common for most people. There is a physical wallet lost, you know, it takes even somewhere up to 10 minutes to know that you lost your wallet. So, you know, with that, folks being really attached to their mobile devices, if you may, mobile payments is one more thing that folks and people such as you and me can use the mobile to do quickly and securely. It s already there with them. Consumers like myself absolutely love getting and using rewards and discounts. The mobile wallet and the mobile phone in general make this absolutely easy and convenient, for both consumers and brands who want to get their name in the hands of the consumers, right? The question you have about EMV is a good one, right, because EMV plays a role in the mobile payment adoption, especially without having EMV having to shift which is a huge option to update and upgrade and make transactions more secure. And once you re upgrading the 6

7 terminals, you know, these are going to be mobile-enabled as well. According to media research, about 85% of the terminals shipped worldwide will be contactless-enabled in If you look at it, this is a huge, huge number. And so, that means is hardware-wise, terminals are already ready for contactless payments and, by effect, mobile payments, today. Now, another point that is going to be a key is that the consumer experience is -- could play a huge part in the mobile payment adoption. It s absolutely important to promote consumer awareness because that s who is going to be absolutely be using that, there. Different options in mobile payments as well as the security features, when folks understand that not only is it convenient but secure, then they re going to start using it more and more. So, for cloud and NFC-based mobile proximity payments, keep -- they are much more secure than our current mag stripe cards. I mean, there s not even a comparison. If you own the mag stripe cards, I mean, both NFC and cloud-based payments have secure, you know, secure elements, and you re -- the data-securing clouds. And you know, this is one part where most consumers are pretty aware of this and it s up to us to make them really aware and make sure that whatever they are going to use, from a mobile payment standpoint, they re going to have a much 7

8 more immediate, easy to use, rewarding, and at the end of the day, still a much more secure experience than they do in the market. CARSLEY: So, Amol, now that you re sort of given us a breakdown of the inherent advantages that we see here, I guess the best way to wrap this up is to have you tell us the strategy that Gemalto suggests will help move mobile wallet adoption forward so that consumers can take advantage of this technology. DESHMUKH: OK. So, we look at mobile payments from Gemalto as in separate different areas, just because of our position in the marketplace right now, with telecom operators, retailers, financial institutions that we work with. So, some of them are going to need -- would get is -- take advantage of the shift to EMV because this is definitely an opportunity to include mobile payments that are predicted to become the future of payments for everyone. Goldman Sachs concurs for casting that over 20% of smart phones and tablets are close, I think, 550 million devices will be NFC-enabled by This -- Our strategy, again, because now you have more and more endpoints that can be use for mobile payments, making it easy for consumers to play a large part of the adoption. Ease of enrollment and ease of use are absolutely essential to the lower barriers of 8

9 initial activation. Another option, strategy that will be a part of the payments feature is mobile marketing. End users such as you and me are going to pick up the phone and start using it once there s something in it for them. And, you know, looking at that from a mobile marketing and large offer standpoint is that the key -- that should -- that has to move mobile along in its adoption. The security of our payments was, as I ve mentioned before, will be the key in adoption strategy. This is something that will create consumer confidence as well as safeguard mobile wallet providers. So, 51% of consumers in the survey said that they ve used mobile wallets to do -- often in the security online. So, more than half of the people that we are concerned and look at this as a key metric. So, if you look at all the points that I just made -- payments, larger progress, efficiently services, coupons, discounts, and other offers -- all in all, this whole package is something that, you know, all service providers should strategize and move it up. And our suggestion is that if you look at some of these points, there s absolutely no way to stop the mobile wallet adoption. CARSLEY: Well, Amol, I thought this was a breakdown of the current mobile and proximity payment spaces, hey -- and we ll certainly look forward to monitoring the space, 9

10 seeing if some of those strategies you just outline do indeed lead to wider consumer adoptions. So, I m sure that you ll end up speaking on -- in PYMNTS again in the future, but today was a great start, and I thank you for sharing with us, and take your time. DESHMUKH: All right, thank you, Ben. END OF AUDIO FILE 10

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