Google-Cash: A new mobile payment platform MobilCash LC - February 2008 -

Google-Cash: A new mobile payment platform

MobilCash LC- February 2008 -

Google-Cash - Mission Statement

• The development of a mobile payment platform that will become an open standard, allowing customers to conduct transactions from their cellular phones with merchants, financial institutions, mobile operators or other customers in a safer, cheaper and more convenient way than the traditional use of cash, physical cards and POS machines.

Mobile Commerce - Definition

• Conducting commerce transactions via web-enabled personal devices

• Extending eCommerce beyond the static terminal of the PC to anytime, anyplace, anywhere

• Enabling companies to interact more effectively with their workforces and to do business more interactively with their customers

• Five sought after outcomes: New Revenue, Cost Containment, Attract New Customers, Create Loyal Customers, Cross Sell

Mobile Commerce - Status

• Mobile commerce is poised to grow explosively over the next several years, with many players from multiple industries all vying for the customer’s attention

• Mobile commerce is not simply about a new channel, it’s about harnessing the unique characteristics of wireless: anytime/anywhere access, always-on, location based

• Mobile payments are many and varied, and are somewhat determined by regional differences and individual market dynamics:

• NTT DoCoMo’s i-mode service in Japan has currently 34 million data subscribers.

• Short messaging (SMS) in Europe, according to the GSM Association has surpassed the 30 billion SMS messages per year.

• In 2004 there was an estimated 60 million mobile payment users generating sales of $50 billion.

The payment systems based on credit/debit cards...

• Suffer from excessive rigid ness in non-stationary business, which requires hardware devices.

• Cards are easily duplicated.

• Have costly implementation of security measures (card chip).

• Are not used for electronic commerce (Internet) due to their perception of insecurity.

Payment Industry - Status

The shift from physical to virtual payments has brought enormous benefits to consumers and merchants. Despite the differences, the success of mobile payments is contingent on the same factors that have fuelled the growth of physical world non-cash payments, namely:

• Security• Interoperability• Privacy• Global acceptance• Ease-of use

Payment Industry - Status

Google-Cash is how individuals and businesses make payments, send and receive money, utilizing their cellular phones

FOR BUYERS• Choose to buy and pay from their own mobile phone browser in

an easy and fast way (only a click and enter a PIN)• Make secure purchases without revealing their personal data,

credit card number or financial information• To buy and pay using Google-Cash with merchants worldwide

FOR SELLERS• Accept credit cards, debit cards and bank account payments in

an innovative bussiness model• Facilitate the mobile e-commerce to customers worlwide

What is Google-Cash ?

Google-Cash Functionality

1 – Customers and merchants register by connecting to Google-Cash server through a web page, entering personal information and the payment method that will be linked to the cellular account: private labelled card, prepaid card, bank account, Visa or Mastercard account. This information is saved in the host. A PIN or Security Code is generated by the customer / merchant.

2 – Customers and merchants establish a GPRS/UMTS connection with the server (through the registered cellular phone). The server validates the user identification and generates a unique encryption key that will be stored at the server.

3 – Customer and merchants download the Google-Cash application into the cellular phone. The customer or merchant is ready to use the service.

1

Customer

Internet

Google-Cash Server

1

2

Registration

Internet

Merchant

1 1

2

3 3 3 3

1 – Customer launches Google-Cash application on his/her registered cellular phone. Enters amount to be paid, merchant/seller cellular phone number and PIN and initiates transaction (not necessary if the purchase is virtual from the phone’s browser. In this case only will be needed to enter the PIN.

2 – Information is received and validated by Google-Cash server. Server checks if the customer has an existing balance on his account to cover the amount of the transaction. If he/she does, the transaction is immediately authorized and customer receives a confirmation message. The new balance shows on the screen.

3 – If the customer does not have an existing balance or the current balance is not enough, server will request an authorization for the associated payment method to the account (Visa/MC card, prepaid card, etc.) Once the authorization is received, the customer receives a confirmation message.

4 – Merchant or seller can verify the completion of the transaction from his/her own cellular phone by querying last transaction. The updated balance will be shown on the screen.

1

Customer

Merchant

4

Associated Payment(Visa/MC, Bank

Acct.)

Customer’sGoogle-Cash

Acct.

Google-Cash Functionality

Customer Initiated Transaction

Google-Cash Server

1 2

233

1 – Merchant/Seller launches Google-Cash application on his/her registered cellular phone:

• Enters amount to be paid.• Server requests cellular phone number from the customer/buyer. Number is entered and validated.• Server provides the customer/buyer name and ID. Seller verifies name and enters his/her PIN.

2 – Merchant cellular phone is now handled to the buyer. Buyer finalizes the transaction:

• Verifies his name, password and amount to be paid showing on the screen.• Enters his/her PIN.

3 – Information is received and validated by Google-Cash server. Server checks if the customer has an existing balance on his Google-Cash account to cover the amount of the transaction. If he/she does, the transaction is immediately authorized and merchant receives a confirmation message. The new balance shows on the screen.

4– If the customer does not have an existing balance or the current balance is not enough, server will request an authorization for the associated payment method to the account (Visa/MC card, prepaid card, etc.) Once the authorization is received, the merchant receives a confirmation message.

5 – Customer/Buyer can verify the completion of the transaction from his/her own cellular phone by querying last transaction. The updated balance will be shown on the screen.

2

Customer

/Buyer

Merchant/Seller

Associated Payment(Visa/MC, Bank

Acct.)

Customer’sGoogle-Cash

Acct.

Google-Cash Functionality

Merchant Initiated Transaction

Google-Cash Server

1 3

43

52

MobilePayment

Google-Cash Dimensions

BusinessModel

Technology MarketOpportunity

• Funding source (credit card, prepaid card, bank account)

• Withdrawal methods (check, bank account, prepaid card, etc)

• Transaction Amount• Transaction type

(P2P, P2C)• Merchant Type (small,

virtual, traditional)• Domestic vs.

International

• Communication options and cost

• Security features• User friendliness• Transaction speed• Standardization

Technical approaches to mobile payment:

1. Voice – Systems based on voice calls, such as voice automation and tones DTMF

2. SMS – Systems based on the exchange of single messages with the operator or payment provider

3. WAP – Systems based on the communication with a WAP server

4. USSD – Systems based on the communication through a special data channel dedicated to the payment application

5. CLIENT APP. – Systems based on the communication through a standard GPRS/UMTS connection – Example: Google-Cash

Google-Cash Technology – Market analysis

Google-Cash Technology - ComparisonAdvantages Disadvantages

• Phone Independent

• Expensive voice communication• Not user friendly• Slow transactions (requires automation and tone DTMF)• High implementation cost (hardware)• Not a session (requires 2 connections)

• Phone Independent• Problems with transaction integrity (security)• Slow transactions (SMS delays)• Not a session (requires 2 connections)• May require change of SIM

• Session based transaction

• May require change in phone to WAP• Slow transaction• Not user friendly• WAP protocol is not secure (security based on the detection of HTML headings in SIM cards, these can be simulated)

• Session based transaction• Lacks standardization (requires agreements with operators to use the USSD channel and connection fee)• Not user friendly

• Session based, fast transaction • Phone Independent • User friendly• High security• Standard downloadable java application

• Phone should be GPRS able

Voice

SMS

WAP

USSD

ClientApp.

(Google-Cash)

• Universal • Based on the use of existing programmable mobile terminals (Java technology) • Uses a GPRS/UMTS connection to standard Internet • Can be implemented in any country without any modifications

• Secure• The Java program installed in the terminal carries out a data encryption process • Encryption based on unique session codes • Identifies the user of the system up to 5 distinct parameters of difficult relationship • Links just one SIM card, one terminal, one PIN, and one telephone number to one

single cardholder or financial account, providing greater security than any other systems

• Economical• Economical standard connections via the Internet GPRS or UMTS (data connection) • Transactions are possible in one single connection (session based) • No need for hardware at the points of sale

• Easy to implement• The mobile phone can be activated and configured remotely through the Internet • Use of a standard service (Internet GPRS – UMTS). No need for special developments

• Easy to use / to accept• Easy and fast transactions from any mobile browser with no other request that to

enter a numeric PIN• By not requiring terminals nor specific hardware it favors the adhesion to the system

of new points of sales and new customers

Google-Cash Technology - Key features

Google-Cash covers all size of transactions and merchants (including virtual ones), without competing with the existing payment methods

Market Opportunity

Transaction Amount

Small Ticket Average Ticket

Vir

tual

Merc

hant

Physi

cal

Merc

hant

/ A

vera

ge

Merc

hant

Type

Physi

cal

Merc

han

t /

Sm

all

Payment Cards Today

Payment Opportunity

with Google-

Cash

According to market research studies in Europe, 44% of cellular phone users are aware of mobile payment solutions and 46% intent to use them in the future

Source: Mobinet IV – AT Kearney & Cambridge University. Base of 6500 interviews.

44%

1%

46%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Awareness Current usage Intent to use

Market Opportunity

Google-Cash facilitates payments to both individuals and businesses, through existing and new channels

Consumer

Market Opportunity - Definition

OnlinePoint of SaleOnlineRemotePhysical

BusinessConsumer

Online

Payment Originator

Channel

Recipient

• Allowance• Monetary gift• Auctions• Payment for

service• Rent payment

• Purchases• Auctions• Recurring

payments

• Personal delivery

• Mail• Remittance

services (Western Union)

• ATM money transfer

• P2P Service • Personal delivery

• MOTO

• Online Service (merchants with card acceptance)

• Online Service (merchants without card acceptance)

Google-Cash Participants: Financial Institutions• Customer relation• Merchant relation• Payment provider• VISA/MC Members

Market Opportunity

Cellular Operators• Customer relation• Phone provider• Payment provider

Non-Participants / Possible players: • Those with a customer base with payment needs, especially small ticket

purchases or small merchants (Personal deliveries)• Those with a customer base with virtual payment needs (Ebay)• Those who are payment providers (Amex, Discover)

• Money Transfer companies (Western Union)

Google-Cash is positioned as an open standard for both financial institutions and cellular operators, any customer is able to sign up

Payment

Card

SellerGoogle-Cash Google-Cash

Account

Buyer

Google-Cash

Account

BankAccoun

t

Check

Payment in thephysical world

www

Prepaid

Card

BankAccoun

t

Payment in thevirtual world

www

Funding Methods

Withdrawal Methods

Google-Cash is a virtual wallet for both: buyers and sellers

Google-Cash: Example of Business Model

Google-Cash: Example of Bussiness Model-Buyer

Google-Cash

Account Buyer

BankAccoun

t

Funding Methods

Free / Instantl

y

Free / 3-4 Days

Google-Cash is always free for the buyer:

• Both, buyer and seller should register with Google-Cash, getting a Google-Cash account

• Google-Cash account can be funded instantly for free from a credit card

• A bank account can also be used to fund the Google-Cash account for free (3-4 business days)

• Seller remains unaware of buyer’s funding source

Payment

Card

SellerGoogle-

Cash

Account

Check

Payment in thephysical world

Prepaid

Card

BankAccoun

t

Payment in thevirtual world

Withdrawal Methods

Free / 3-4 Days

Google-Cash: Example of Business Model - Seller

X % +$ x

$ x / 1-2

Weeks

$ x / Instantl

y

Free / Instantl

y

Google-Cash charges the seller a merchant discount fee:

• Charge to seller per transaction: Personal Account: X % + US $x Business Account: X % + US $x

• Google-Cash offers the following options for withdrawing funds from the Google-Cash account:

Transfer to bank account: Free / 3-4 business days Request a check: $x / 1-2 weeks Load a prepaid/debit card: $x / Instantly Make a purchase in the physical or virtual world (Google-Cash seller): Free / Instantly

Google-Cash Value Chain

Merchant

MerchantPhone

Operator

Merchant

BankGoogle-

CashCustome

rBank

CustomerPhone

Operator

Customer

Sale

Call /Comm.

Merch.Disc. Rate

IssuerReimburs.

Fee

ProcessingFee

Purch.Price (+)

Purch.Price (-)

Cost ofCall (-)

Cost ofCall (+)

Transaction Flow

MDR (+)MDR (-)

IRF (+)IRF (-)

ETransFee (-)

ETransFee (+)

Call /Comm.

Payment

Cost ofCall (-)

Cost ofCall (+)

Purch.Price (+)

Purch.Price (-)

Compens. Purch.Price (+)

Purch.Price (-)

Note:(+) Revenue(-) Expense

Google-Cash Value Proposition

Merchants Cellular Phone Oper. Banks / Card Companies Customers

• Access to a new payment technology with minimum investment

• Increase sales• Improves security

of traditional payment methods

• Simplifies the payment process / Open model

• Increases traffic of data

• Facilitates the reload of prepaid accounts

• Generates loyalty and dependency on the cellular phone

• Establishes relationships with merchants, allowing cross marketing

• Increases sales with both consumers and merchants

• Generates new customers/merchants

• Increases loyalty of existing customers

• Increases banks penetration on payment system

• Converts cellular phones into POS devices at a minimum cost

• Creates entry barriers to new player

• Allows banking of lower income segments

• Allows new transactions (P2P, Small ticket, etc.)

• Increases security• Allows entrance

of new customers (lower economic levels)

• Provides a convenient new payment channel using the existing cellular phone

• Provides different payment methods (cards, bank accounts, etc.)