New Products and Services For Payments Processors

Transcription

1 New Products and Services For Payments Processors May, 2009 Contact: Deborah Baxley Managing Director, Keypoint Consulting Copyright Keypoint 2009

2 Global retail payments is driven by margin pressure, innovation, disintermediation, risk and fraud Forces Impacting Global Payments Business Regulation Fraud dominates news Increasing compliance & privacy/aml requirements Merchants/Billers Processors Squeeze Gaming payments for least-cost New venues Banks Processors Concentration Growth & innovation Margin pressure Customers Innovation Personalization driven by data, devices and network Remittances Processors play a critical role by using 1) 1) devices, 2) data and 3) networks to enable their partners New Entrants/Substitutes Processors Disintermediation Substitutes threaten revenue 2

3 1) devices DEEP KNOWLEDGE GLOBAL EXPERIENCE Using mobile technology as a route to new revenue streams, NTT Docomo is a leading payments enabler NTT Docomo is making money from customers downloading electronic money, electronic tickets, applications, etc., to i-mode handsets Felica services NTT Docomo in Japan has over 30 million subscribers to its e-wallet cellular phone payment service Contactless payment service built into phones Offers a DCMX credit line for subscribers over 12 years old, with purchases billed to phone charges Partnered with Sumitomo Mitsui, Japan s #2 credit card company, to gain access to 608k NFC terminals across Japan NTT Docomo, not Sumitomo, owns the credit card brand Approximately 1 in 5 of these subscribers use the phones for purchases daily E-wallet services have over 40% mobile phone market penetration in Japan McDonald s partnered with Docomo to offer a offer enhanced membership services and to strengthen customer loyalty through Docomo phones Recently forged a tie-up with Singaporean communications company StarHub to offer e-wallet in Singapore Electronic credit card (e.g., Sumitomo Mitsui Card) Electronic cash (accepted in > shops) Event tickets (e.g., cinemas, theatres) Key/ID (e.g. Hayakawa Estate) Transport (e.g. transit, Nippon Airways) Membership cards/clubs (e.g. McDonald s, GEO Corp) Source: Company web sites; Nikkei Report, 11 July 2008; Cards & Payments, July 2008; NTT Docomo/McDonalds press release, Feb

4 1) devices Amazon.com has been a leader in using mobile devices to enable its customers In April 2008, Amazon.com launched TextBuyIt, a service that enables customers to use text messages to find and buy products sold on Amazon In less than a minute using text messages, Amazon customers can find the product they are looking for for instance, a CD from an artist they just saw or a book referred by a friend and complete a purchase using TextBuyIt. The customer sends a text message to Amazon with the product keywords, and Amazon replies with the products that match the search, along with prices. Customers can buy an item simply by replying to the text message. In December 2008, Amazon.com launched an iphone application that enables customers to search for items by taking photographs using their phones. The customer sends a picture of a desired product to Amazon, who will then try to match it with products in their inventory, along with suggestions of other items they might like. The application also offers access to other retailers, such as Target, and allows users to buy with "one click. It includes a new feature called Amazon Remembers, allowing users to keep track of items they see while away from home. 4

5 1) devices Boletazo is a creative payments network aimed at underserved segments to regularize the informal economy in Mexico CAGR POS transactions 242.2m 361.5m 534.4m 30% Total transaction amount $13.3b $20.5b $32.2b 34% POS terminals at year-end 160.3k 201.9k 286.7k 21% Average per terminal $54.9 $56.7 $60.3 Key Results Increased bank card usage by incenting consumers with raffles & advertising Additional sales tax collection of nearly $2b Backbone for health programs, microfinance, government disbursements Success spurred FONACOT to subsidize credit card scheme to underbanked employees via large retailers US dollars Expansive network of affordable wireless POS terminals Government sponsored consortium promotes card acceptance to small merchants and underbanked. Source: TowerGroup, Asociación de Bancos de México, Beoltazo 5

6 1) devices DEEP KNOWLEDGE GLOBAL EXPERIENCE Disruptive innovators can overtake banks in emerging markets by catering to the under-banked M-Pesa was launched in March 2007 by Safaricom, owned 35% by Vodafone, and is part of Vodafone's larger strategy to reach the base of the pyramid with new goods and services Allows phone users to send money via text message, by handing cash to a registered agent - typically a retailer - who credits the user s virtual account. Users can send amounts ranging from approximately US$1 to $500. The recipient cashes it at an agent by entering a secret code and showing ID. A commission of up to $2 is paid by the recipient, comparing favorably with fees levied by the major banks, whose services are too expensive for most of the population. By December 2008, M-Pesa had over 5M users and over 5,000 registered agents, compared to 3M bank accounts and 750 banking outlets in the entire country. Over US$125M is transferred via M-Pesa every month. Concerned by the threat posed by M-Pesa, Kenyan banks are pressuring the government to shut it down. Sources: Kenya sets world first with money transfers by mobile, The Guardian UK, March 20, 2007; Big Banks in Plot to Kill M-Pesa, Nairobi Star, Dec. 23,

7 2) data Cellfire s advertising network targets relevant ads and promotions to bank s credit and debit card holders Provides savings on groceries, shopping, restaurants, and entertainment PC and/or mobile phone Retail partners sponsor offers Sources: 7

8 2) data Affinity Solutions provides turn-key loyalty solutions to help banks implement effective merchant-funded reward programs Benefit: captivate customers with segmented, customized offers Relationships with >400 retailers including Home Depot, Gap, Exxon Mobil, Applebee, Blockbusters, etc. Drives incremental card spending by $ / year Merchant funded rebates and points automatically credited to relevant customer accounts Benefit: Increase customer loyalty, retention, and longevity Benefit: Make your competitors customers yours Sources: Mercator 8

9 3) network PaySimple allows small businesses to bill, collect, and manage payments through a single online system Web-based application allows small businesses to quickly accept multiple methods of electronic payments, and integrate all transactions directly into accounting software Single solution for credit cards, recurring billing, invoicing, echeck processing, ACH processing, online payments Sources: 9

10 3) network Creative firms develop offerings that blur traditional industry lines, such as Person-to-Person and international remittances Value Proposition Allow for quick transfer of funds at a fraction of the cost of bank or specialized transfer organization, such as Western Union Go direct to customers or white label service for a fee Operating Model(s) All leverage existing payments infrastructure; , cell phones are the preferred customer interfaces The objective is to dramatically cut fees, build up a loyal user base and, in some instances such as Xoom, act as the white label provider for banks Western Union charges $34 to send $250 to India, while Xoom allows you to send $300 for $7; Moneybookers charges a maximum of 0.50 Xoom can send money to 20 countries, compared to Western Union s 200 and Money Gram s 170 Paypal and Skype are allowing for instant money mailing from a chat window at Paypal rates Source: TowerGroup; Company web sites; American Banker online; 10

11 3) network DEEP KNOWLEDGE GLOBAL EXPERIENCE Social Networking: Payments professionals ignore this trend at their own risk The Visa Business Network is a Facebook community established by Visa for small businesses It provides a Business Finder function that allows businesses to find each other. It allows businesses to exchange ideas, information and opportunities with other small business owners by inviting associates to connect. Provides expert advice and tools for managing a small business Smartypig allows members to save money for a specific goal and on an open loop prepaid card, or onto a gift card. Smartypig also functions as a social network where, users can make their goals public, and allow friends and family to provide financial support. Users can also add a personalized SmartyPig widget to their Facebook or MySpace page, blog or Website. Sends updates via Twitter. Facecard is a prepaid reloadable payment card that operates on the MasterCard network. Facecard emphasizes social and peerto-peer features, particularly the ability to transfer funds to other Facecards belonging to friends or family. The Facecard can also be loaded by friends or family using their credit cards or bank accounts. Facecard accounts can be managed online, and information can be retrieved via text message. Payments businesses must get involved in social networking communities. If these organizations wait to have a complete understanding of these technologies and their capabilities, they will miss the opportunity to become a relevant destination for social networkers. Source: Mercator Advisory Group, Social Networking is the New Community Banking, Jan

12 KeyPoint is a global management and technology consulting firm specializing exclusively in electronic payments, cards and risk management Active in electronic payments evolution since 1990 Clients include issuers, acquirers, retailers, operators, processors and other industry suppliers such as system integrators, hardware manufacturers, software providers, and city services Consultants are recognized industry experts averaging >15 years experience in strategy development, advanced payment concepts, product development, processing architectures, legacy and emerging payments KeyPoint has an established and well respected reputation worldwide 12