BAI Micro Payments DFL Version 1.0 1-2-08 Color

8/6/2019 BAI Micro Payments DFL Version 1.0 1-2-08 Color

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What Happened toMicropayments and WhatHappens Next?

Dion F. LisleSenior Vice PresidentCitibank Global Consumer GroupGrowth Ventures and [email protected]


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F ull Disclosure

I work in Growth Ventures andInnovation

This is NOT an operating unitI worked for Obopay a mobilepayments startupI have worked in technology as a non-technologist for 20 years and the past10 in startups.

I am NOT a 20 year banker I love gadgets


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W hat is a Micro Payment

Micropayments are means for transferring very small amounts of money, in situations where collectingsuch small amounts of money with theusual payment systems is impractical,or very expensive, in terms of the

amount of money being collected.

Source: Wikipedia (so you know its true)


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Micropayments 1. 0B eenz

B orn: 1998Sold to Carlson Marketing in 200 1 for ?B urned about $1 00 million

In F airness was sold off

F loozB orn: F ebruary 1999Died: August 200 1B urned about $ 4 0 million (real money, not F looz)

DigicashB orn 199 4 ishDied: November 1998B urned who knows how much money

The Common Denominator they all tried to create a new currency


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Micropayments 2 .0Peppercoin

B orn: 200 1Died: April 2007B urned about $1 4 million

YagaB orn:Died: January 2006 (oddly enough acquired by B itpass)B urned about $ 20 million

B itpassB orn: 2002Died: January 2007B urned about $1 5 million

The Common Denominator They all tried to aggregate payments or content


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Gartner Hype Cycle 200 5


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W hat is the Problem ?

As with all great technologies lookingfor a problem to solve, Micropaymentsgets bogged down at the beginningW hat is the problem thatMicropayments Solves ?


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It Depends on Perspective

O n-LineMerchants

VendingMachine

ContentProvider

FoodMerchant

Charity


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Success: Ringtones

Math Word Problem2 ,27 9,000 Downloads

$ 3 Price Per Download

$6 ,83 7 ,000 Gross Revenue$2 ,7 3 4 ,800 Share for the Phone company ( 4 0% )

$4 ,102 ,200 for T-Pain and Zomba Records

Note: the Album Epiphany sold about 700 ,000 copies andthe song was digitally downloaded 1. 6 million times

T-Pain (featuring Yung Joc)

B uy U a Drank (Shawty Snappin)

Konvict/Nappy B oy/Jive - Zomba


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Success: iTunes

This has been covered adnauseam but I want to emphasize

the following:Closed Loop

The content Aggregator is Apple

The payment Aggregator is ApplePricing is controlled by AppleThe user experience is Apple


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Success: Transit CardsOyster - London10 million cards issued 5 million inuse

The Tube has nearly 4 million dailyriders

Octopus Hong Kong Almost $1 0 million per day intransactions20% of revenues are now comingfrom Non-Transit Octopus purchases


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The F uture of Micropayments


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Micro of the F uture

I predict:It will initially involve Credit Cards

It will move to Debit CardsIt will involve Mobile PhonesIt will start with a closed loop

system Ala iTunes


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Mobile is Micro

The best method of making a micropayment is a mobile phone

It is ubiquitous

It is always on(unless the battery dies)

It is interactive


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W hat is a Mobile Payment

Moving money from one entity toanother using the Mobile Phone asthe interface

P 2 P Paypal, ObopayMerchant Paypal, Obopay (soon),

Apple (Patent applied)Not to be confused with MobileB anking check balance, A 2 Atransfer

F irethorn(Qualcomm), M F oundry


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Mobile Payments Ecosystem

CardCardIssuer Issuer

HandsetHandset

Maker Maker

MobileMobileCarrier Carrier

SoftwareSoftwareDeveloper Developer

ChipsetChipset

Maker Maker

PaymentPaymentNetworksNetworks

CardCardAcquirer Acquirer

Processor Processor CardCard

AssociationsAssociations

SIMSIMCardCard

Consumer Consumer

MerchantMerchant

MobileMobileApplicationsApplications

P O SP O SVendor Vendor


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Enabling TechnologiesNF C R F ID Contactless

The ability to swipe a card or phone at POSfor a payment

Mobile P 2 PThe ability to pay an individual with your mobile phone

Mobile Merchant PaymentsThe ability beyond N F C to pay merchants for goods or services

Mobile W allet An account on a mobile phone allowing youto choose among various paymentinstruments


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NF C is Coming Sooooooon After hearing about N F C (R F ID) for the past 3 years, where is it?W hy the delays?

Heavy lifting of infrastructureMobile phones need to changeMerchant terminals need to change

B ack end processing needs to change


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NF C Technology TimelinePhone Chipsets

SIM CardsW ireless

InfrastructureHandsetsCash Register

ReadersT imeline

12 to 18Months 18 Months2 4 Months 1 2 Months

Players


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NF C B usiness PlayersOnce the technology is decided, there arenumerous mouths to feed.Carriers is this a value added service or simply data trafficMerchants do they get incentives to convert,or is there incremental revenue to offset costsHandset Makers W ho pays for the cost of the chips to make handsets N F C ready

In the US the handsets are built to carrier specifications

Associations Is this a net gain or lossB anks W hat is their motivation


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NF C B rand Confusion

Match the NFC Programs to their O wners


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Mobile P 2 P A new space being trialed by many North American banks including Citibank.Paypal as the leader in P 2 P has an edge in

accounts, but has so far lagged on MobileP 2 P.Obopay is the leader of the pureplay mobileP 2 P companiesSpace is being encroached by mobilebanking companies such as F irethorn(Qualcomm) and M F oundry.


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Hurdles to Mobile P 2 P

Authentication are you authorized justbecause you have the phone?Ease of use across banks and carriers

Can a Citibank customer using Verizon sendmoney to a W achovia customer usingSprint?

DemographicsMobile P 2 P has shown strong acceptanceamong Underbanked and very youngB anks target B anked and Middle-Aged.


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Cross Matrix

BREWJ2M

ESMS WAP


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A Very Powerful Combination

Ubiquitous

Interactive

W idely Accepted Always On

Available Today

Ubiquitous

Interactive

W idely Accepted Always On (almost)

Available Today


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Digital W allet

How to manage your mobilemicropayments?Digital or e- W allets have a badreputation from 1999. (long story)B ut they could be resurrected with theMobile Phone becoming the center of

our daily money managementW hose Digital W allet remains to beseen.


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W HY ?Or How do I use this


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TAXI !

The best use case for MobileMicropayments

Verifone installed in NYC TaxisImagine instead of a card, you call thedriver with the payment informationand he smss you a receipt.Hurdles Taxi Drivers, Cash Incomeand others


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Vending Machine

A true Micropayment applicationthat eliminates the need for coins.Requires further infrastructureupgrades as the VendingMachines need to be changedoutDelivers convenience for consumersReduces cost of coin handlingfor vendors


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Content Purchase

NF C W ill allow users to wave their phone at a poster and purchaseassociated contentImagine a concert poster that allowsyou to buy tickets to the concert or anMP3 download from the artist.

B uy a t-shirt from the concert you justsaw.


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Parking Meters sans CoinsVerrus Mobile Payment of B C Canadahas recently introduced a method topay for parking using your mobilephone.


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Line B uster

You pull up to Starbucks and usingyour mobile phone you order and payfor your Grande, Extra Hot, DoubleShot, Non- F at Latte.This requires the interactivity of amobile phone

Delivers convenience to the consumer and possibly incremental sales to themerchant


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Pizza Delivery

Driver pulls up with your two largecheese pizzas for $18 plus tipYou send a mobile payment to thedriver and the application leaves aspace for a tipIncreases security for Delivery Driver

Increases audit trail for Pizza Parlor Delivers convenience for theconsumer


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Success Looks Like:


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Success Looks Like: Japan

O saifu-Keitai


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5 Takeaways

Micropayments are morphing toMobile paymentsClosed Systems are the best place tostartIgnore technology and focus on whatpeople do with their wallet everyday

Reality takes time to catch up topredictionsLook around see where you wouldlike to use your phone instead of cash


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Reference List

AB I Research Great content on R F IDContactless Payments

www.abiresearch.com

Glenbrooks Payment Newswww.paymentsnews.com/F ederal Reserve B ank of Philadelphia

Micropayments: The F inal F rontier by JamesC McGrath June 2006

The Register UK Mobile Newshttp://www.theregister.co.uk/comms/mobile/

BAI Micro Payments DFL Version 1.0 1-2-08 Color

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