Alternative Payments Strategy for Financial Services Providers. James Van Dyke, President and Founder

Transcription

1 Alternative Payments Strategy for Financial Services Providers October 2009 ATM, Debit and Prepaid Forum James Van Dyke, President and Founder 1

2 QUIZ: Presented by Javelin Strategy & Research Name: Company: (Answers will be sent to you via ) 1. What famous banker was a founder of American Express? Answer: 2. To use Mobile P2P transfers, consumers have identified three essential features. For the following two income groups, rank the features by their importance. (Rank 1 3, 1 being the most important.) Income Level: $25 34K $ k Real time notification of funds transfer: Enhanced Security: Real time access to funds: 3. In 2008, what was the mean amount charged per fraudulent card transaction? (Place an X in appropriate space) Amount: $3 4k $4 5k $5 6k Existing Credit Cards: Existing Debit Cards: All Existing Cards: 4. What % of the following use mobile banking on a monthly basis: (Place an X in appropriate space) %: 0 20% 21 40% 41 60% 61 80% iphone Users Smartphone Users: All Consumers: We would like to add you to our newsletter list. Please check here if you would prefer not to receive the newsletter:.

3 Banks Still Reeling from Consumers Reduced Credit Card Spend Credit Card Spend Migrates to Other Payment Forms or Disappears 2009 Javelin Strategy & Research. All rights reserved. 3

4 The Downturn Accelerated the Long term Shift from Credit Card Payments to Alternatives Change in Financial Behavior (October 2008) Payment Methods Used Past 90 Days (March 2009) Source: Javelin Strategy & Research, Online Retail Payments Forecast, October 2008 and Credit Card Spending Declines, March 2009

5 Changeable Market Conditions Shape Go to Market Positioning Example: Primary Reasons for Using Mobile P2P (Longitudinal ) To send and receive money more quickly To send money from my bank or card account from any location 23% 29% 31% 32% To try something new 12% 17% To no longer have to carry cash and checks in my wallet Click to edit Master 9% title style To keep electronic record of payments to friends and family 5% 17% 17% Other, please specify 4% 5% % 10% 20% 30% 40% Q36: What is the primary reason you would use mobile P2P transfers for? Sept. 2007, 2008, n = 454, 569 Base: Consumers likely to use mobile P2P Javelin Strategy & Research 5

6 Alternative Payments Will Increase by 50% in the Next 6 Years Figure 2: Alternative Versus Traditional Payments Percentages % 90% 80% 70% 60% 50% 86% 82% 80% 78% 75% 73% 69% Traditional Payments Online Dollar Volume 40% 30% Alternative Payments Online Dollar Volume 20% 10% 15% 18% 20% 22% 25% 27% 31% 0% Javelin Strategy & Research. All rights reserved. 6

7 Analysis of Features and Needs Reveals Unique Vendor Market Positioning Banks best partners know their position and keep it balanced 2009 Javelin Strategy & Research. All rights reserved. 7

8 Segment targeting Example: Real time Notification and Access Appeals to Lower Income Essential Features to Spur Mobile P2P Usage, Affluent vs. Less Affluent Enhanced security (so only I can make transfers) 63% 72% Real-time access to funds (funds immediately available) 45% 50% Real-time notification of funds transfer (text message sent to sender and receiver of funds transfer) 44% 53% 20% 100K to 149K Straight forward registration process 27% 25K to 34K Click to edit Master title 37% style Simple user interface (display only important features) 24% Other, please specify 5% 7% 0% 20% 40% 60% 80% Q 35: Which of the following features do you believe are essential in order for you to begin using moblie person-toperson (P2P) transfers? Sept n = 92, 60 Base: Consumers likely to use mobile P2P 2009 Javelin Strategy & Research 8

9 Research your Assumptions Example: Mobile Payments not Just for the Affluent Figure 7: Likelihood of Underbanked Consumers to Use Mobile P2P Underbanked Consumers with Mobile Phones 17% 20% 63% All Consumers with Mobile Phones 13% 17% 71% 0% 20% 40% 60% 80% 100% Likely (4 + 5) Neutral Unlikely (1 + 2) Q34: Using a 1 to 5 scale, how likely would you be to use mobile P2P transfers? Let 1 represent "very unlikely" and let 5 represent "very likely." September 2008, n = 1946; 149 Base: All consumers with mobile phones; Underbanked consumers with mobile phones 2009 Javelin Strategy & Research 9

10 As Alternative Payments go Mobile, Banks and Networks Must Consider Telco Value Note: Content has not been updated from a late 2008 Javelin report 2009 Javelin Strategy & Research. All rights reserved. 10

11 Building Consumer Payments Adoption: The Customer Driven Architecture Bankers: Design and Integrate Capabilities from the Customer Point of View Always- On Real- Time Transparent Integrated Customer Controlled Safe! Goalfulfilling 2009 Javelin Strategy & Research. All rights reserved.

12 Recommendations to Financial Providers Formulate stakeholder specific value propositions. Focus on end users, merchants, networks, telcos, etc Consider value prop overall and within segments Include the best and worst impact. Be precise. Unless one stakeholder can dominate, always aim for balance Understand vital market landscape forces Economic, Click regulatory, edit technological, Master title competitive, style organizational fit, etc Model based on current and future Flag critical and uncertain factors, and research them If you can, Go big or go home! 2009 Javelin Strategy & Research. All rights reserved. 12

13 Thank You! Javelin provides superior direction on key facts and forces that materially determine the success of customer facing financial services, payments and security initiatives. Our advantages are rigorous process, independent position, and expert people. For questions regarding access to Javelin research please contact: 2009 Javelin Strategy & Research. All rights reserved. This data was provided to accompany a report which was licensed for use by the original subscribing client only. The data and report is protected by copyright and other intellectual property laws. Licensors may display or print the content for their use only, and may not sell, publish, distribute, re-transmit or otherwise provide access to the content of this report without permission. 13