How To Make Money From A Mobile Wallet

Transcription

1 powered by

2 Background MEE has developed a complete payment ecosystem, which will change the future of mobile payment. The new mobile payment solution was launched in 10 shops in Randers on October 31st Thus, the technology and functionality is proven and fully tested in use. The competitive advantages of the solution and results from Randers verify the prospect for commercialisation As a result, MEE has reached an attractive stage with proof of concept and a great strategic platform in place inquiries from several potential interested parties. Today, MEE is increasing its rollout. Rollout is mainly driven geographically, starting from Randers.

3 MEE at a glance Selected partnerships MEE introduction Product Related Market Related Mobile Economic Ecosystem ( MEE ) is a Danish based payment ecosystem developer. In 2003, the idea was conceptualised by Kim Vindberg Larsen. In 2012, Mikkel B. Thrane joined MEE together with a Greek IT development team. Today, MEE has 20 employees in Denmark, Greece and Russia. MEE works in close collaboration with leading technology providers such as, Cryptomathic and Microsoft Azure. MEE introduction More than 300,000 Danish people has access to MEE s payment solutions. MEE is going to be rolled out in Denmark for 2015/2016 MEEwallet Merchant physical followed by Nordic expansion in Merchant web MEEgg Cash register - POS Customers Infrastructure powered by MEE MEEweb Consumers/Merchants Source of funds Clearing Provider

4 Founders Our Vision We are here to make mobile payments and transactions accessible, affordable, and simple for all Born: 1974 Kim Vindberg Larsen One of the founders of MEE Prior to founding MEE, Kim was Managing Director of BluePhoenix Nordic (NasDaq Company) 16 years in banking IT Mikkel B. Thrane Born: 1976 Joined MEE in 2012 Entrepreneur specialised in user interfaces and user behaviour within IT Expert in the Computer Software Business with focus on app development and identity management. We think security first, in everything we do We make innovative and sustainable solutions that will co-exist in a fragmented market, and expand the possibilities within our industries - not just for the selected few, but for everybody involved Member of Advisory Board at the Danish Trade council in Brazil

5 Key highlights Strong underlying market growth in the fast developing industry An excellent and scalable platform securing the highest available level of security for a mobile wallet, the capability of operating on both the traditional infrastructure and disrupting the existing infrastructure, flexibility with regard to operative system and technology, and the most competitive transaction prices The platform is developed by people with broad and specialised technology competences in combination with in depth market understanding ensuring the optimal technological foundation and the capability of developing first class value creating add-ons Competent and agile organisation with an energetic and experienced management team Strong strategic partnerships with attractive partners such as Cryptomathic, a leading technology vendor and SDC, an it-service partner for the financial sector in the Nordics. Highly scalable payment solution with global appeal offers MEE a great number of exiting market opportunities, which the company s growth strategy clearly defines how will be targeted

6 Ecosystem perspective Mobile payments are taking off Overview Ecosystems Mobile payment solutions are closely connected with both digital banking, retail 2.0, mobile technology and social media, hence it is necessary to compose all segments to form a complete picture of the Social media Social media advertising, chat services ecosystems. Mobile payment solutions have been high on the agenda for more than a decade, but the development has been slowed due to a lack of quality in consumer technology. Currently, mobile payments are taking off due to recent technology innovations are breaking down barriers to adoption. The proliferation of smartphones and tablets has been a catalyst creating an opportunity to disrupt the entire payment ecosystem. A increasing rate of mobile payment adoption will continue to be driven by three key factors: Widely distribution, Privacy & Convenience. Customers Retail 2.0 Cloud-based mpos, ecommerce, omnichannel Online/Mobile Payments Mobile wallet, direct carrier Digital banking Mobile internet banking, mobile money transfer, remote deposit capture Customers/Merchants The payment landscape is changing rapidly with a broad range of new players in the mobile wallet space (e.g. Banks, Payment Network Mobile technology Owners, Mobile Network Operators, Smartphone, Ecosystem Owners, Retailers and Technology companies). The new players are all approaching the issue from a slightly different angle reflecting their different core competencies and motivations).

7 Mobile payments in the broader context of a rapidly changing traditional payments value chain Payment industry value chain Comments Credit cards have been the dominating payment type but now we are seeing a shift towards alternative payment services The mobile payment system is the bridge between the online and the offline world Mobile POS systems together with a broad range of enabling technologies bundled in almost every smartphone encourages consumers to transact using the mobile in everyday situations MEE is capable of disrupting the existing infrastructure via its bank account2account solution, but the MEE solution is also compatible with the traditional card-based infrastructure. Thus, MEE is prepared for the infrastructures to co-exist.

8 A closer look at selected mwallet business models How it works Differences in technology Value chain impact Examples Mobile at the POS (HW) - Consumer pays for purchase by - Opening the app - Waving the mobile in front of the POS - Keying in the PIN - NFC, QR or BLE is implemented in the smart phone, card etc. - Uses and interactive app interface to access credit and debit card accounts - ISIS: Additional charges to issuers to participate - Google Wallet: None - PayPass: None - V.me: TBD Mobile at the POS (cloud) - Consumer pays for purchase by - Opening the app - Keying in the PIN - Dual bluetooth chip (Bluetooth classic + BLE) - MEEwallet: capable of disrupting existing infrastructure Mobile is the POS (Cloud) - Consumer pays for purchase by - Opening the app - Selecting the Merchant account - Authentication and authorisation - No traditional POS HW is needed - Consumer sends payment directly to retailers account via mobile network - A device is needed to set up an account after which everything is wireless - Displaces traditional acquirers, processors and financial institution (no physical POS is needed) - Wallet operator may seek to take a cut of previous acquirer and processor fees Mobile is the POS (Direct carrier billing) - Consumer pays for purchase by - Keying in mobile number and SIM Card verification - Purchase is charged to phone bill - Currently only for digital mobile - Payments are applied to phone bill - Displaces traditional acquirers and processors (no physical POS is needed) - Displaces the issuer out of the direct value chain (the issuer is included only when the phone bill is paid)

9 Perspectives on contactless technologies MEE has solved the Bluetooth hurdle to provide a state-of-the-art solution MEE has selected Bluetooth technology for MEEwallet following insights and analysis of the current landscape of technologies One of the biggest obstacles against the use of NFC technology is the great dependency of handset compliancy. Furthermore, even if a handset is NFC compliant, it is not necessarily compatible with the NFC solution in place. NFC is a hardware, which is implemented by the device manufacturer in a device. The NFC chip varies across handset suppliers and versions of their devices. I.e. todays implementation of a NFC solution is not future proof. Furthermore, a true digital wallet should be transferable to another phone. Consumers should not buy a phone based on the condition of which phone or operating system supports the digital wallet We do not consider QR codes as a real challenger to either NFC or Bluetooth solutions due to lack of positive User Experience and Security Several competitors (e.g. Apple) have tried to develop a payment solution based on Bluetooth without success MEE (as the first provider) has developed a Bluetooth-based solution with several significant competitive advantages. In addition, MEE is also compatible with NFC. 1 Security is dependent on how the security solution is implemented and where the secure element is stored. MEE has implemented the SE in the Cloud, ApplePay has implemented the SE on the device, others may choose to implement the SE in the SIM. MobilePay and SWIPP have no SE solution implemented currently. 2 NFC technology rollout has been very costly and still is. It is not necessarily costly to implement a NFC compliant solution to existing infrastructure. Adding NFC chip and others to non NFC compliant devices is very costly 3 The cost of implementing QR solutions strongly varies according to selected implementation model. 4 Ranging settings in accordance to shop needs, e.g. McDrive vs Supermarket 5 E.g. loyalty and coupon offers. Tap at offers or point of information vs. automatically receive pop up (push) notifications. Bluetooth NFC QR Number of devices supported n n n n n n n n n User Experience n n n n n n n n n Security 1 n n n n n n? Implementation cost 2 n n n n n n? 3 Network dependency Null Null n n n Flexible Ranging 4 n n n n n n n n n In-shop Notifications Proximity Marketing 5 n n n n n n n n n

10 Perspectives on security technologies Biometrics Tokenisation Host Card Emulation (HCE) Secure element Token Service Provider (TSP) Merchant - A technology for contactless payment, that could replace the need for the technologies - Process in which a card information is decomposed into a token administered by - HCE allows the emulation a virtual card using software. The related financial information is - On SIM card, on payment card (EMV), in phone or in cloud Pros & cons (as described on the previous page) - Technologies in this category includes among others: face recognition, handprint recognition, sound waves - Advanced and cost effective hardware is needed to drive the complex biometric scanners on mobile devices TSP, who interacts with merchants - Tokenisation has several security features: 1) Credit card details are not stored on any device, 2) The token can be made device specific to limit usage to specific devices, 3) Duration of token lifetime can be manually altered - High cost for the token issuers typically hosted in a secure cloud environment, which is arguably more secure than being held on the handset. - HCE is the next generation of virtual cards, with the potential to be used in a contactless environment - Moves are afoot to ensure that it is agnostic of contactless payment type, to ensure it can be used with NFC, BLE beacons, QR codes etc., but also as a non- - A secure element (SE) is a tamper-resistant platform (typically a one chip secure microcontroller) capable of securely hosting applications and their confidential and cryptographic data (e.g. key management) contactless way to pay Comments 1. MEE utilises the tokenisation process in its application to fortify security, implying that no card or account information is exchanged 2. Visa and MasterCard are writing standards for HCE, which MEE sees as their way of entrenching their presence in the mobile payments space

11 The market needs a solution that provide Different parties in the industry have different needs, which set high demands for a solution to be attractive for all parties in the value chain. Financial institutions primarily focus on security and banks want an open solution, merchants focus on disruptive pricing and loyalty schemes, while consumers and regulators have other focuses On a general level the payment solution has to universally accepted. For consumers to adopt a new payment methods, it must be accepted widely at merchants and vice versa. In general the four following market needs are the most significant. Security High security is a prerequisite for a solution to be a serious contender in the market Especially, the pressure for high security originates from financial institution and regulators, and it is also essential to win the consumers trust, which mainly is based on convincing the consumers that the solution is secure. Transaction friction The speed and ease of use is important attributes. A new payment solution has to be at least as easy to use as the one it is replacing. Additionally, the speed of processing a payment transaction is a key consideration, especially for merchants as ability to streamline checkout process is important to optimize growth. Open / Flexibility / Scalability Open with respect to platform (ios, Android, etc.). Flexible with regard to different structures and regulation for different countries. Additionally, the solution has to be independent of operators and be based on wide-spread technologies as well as functioning in all kind of payment situations. Disruptive pricing The traditional payment infrastructure is complex, which implies high transaction costs. Consequently, reducing transaction costs is a very attractive attribute.

12 The market needs a solution that provide Consolidated adoption Scenario 1 Hardware-based technology dominate and chip-card based authentication becomes and remains the global standard for authentication transactions in-store. NFC turns out to be the global standard for mobile payment. Existing payment networks and issuers consolidate the market, and we will se mass adoption of a few dominant digital wallet solutions. Advantaged: card networks, issuers, merchants Challenged: wallet players, telco s Scenario 2 Cloud-based authentication prevail, and few digital wallet solutions will dominate the market. Tokenization enables card-present interchange fees for digital wallets, removing a major hurdle to merchant acceptance. Advantaged: digital innovators and data analytics companies Challenged: hardware and telco s Hardware-based Scenario 1 Cloud-based Scenario 3 Consumers choose from a wide variety of competing hardware-based digital wallet solutions. Chip-card EMV-based authentication turn out to be the global standard and NFC becomes the norm, but the wallet selection remains fragmented due to varying loyalty offerings. Advantaged: telco s, trusted service managers, vendors Challenged: merchants Scenario 4 Consumers choose from a wide variety of competing cloud-based apps/ digital wallet solutins. In this scenario, the proliferation of wallets leads to no players becoming dominant. Advantaged: card networks, issuers Challenged: hardware POS vendors, telco s Fragmented adoption Comments The future for POS transaction technology has four potential scenarios as shown in the figure Scenario 2 and 4 have an edge due to the clear advantages of cloud-based solutions with regard to security The most plausible outcome will be a development starting in the fragmented scenario four consisting of a lot of different technology solutions moving towards scenario two as players consolidate the market

13 MEE s Mobile Economic Ecosystem - Overview ➊ MEEwallet ➋ Merchant physical MEEgg Cash register - POS Customers Infrastructure powered by MEE ➍ Authentication Switching ➌ Merchant web MEEweb ➎ Authorisation Tokenisation Capture ➏ Cloud-based hosting Consumers/Merchants Source of funds MEEadapter MEEadapter Comments Capture of data in order to process transactions in accordance to predefined instructions Switching to ensure that correct Source of Funds are directed to correct recipient Tokenisation Global Unique Identifiers of the user, payment method, merchant and session (transaction) MEEadapter - is a component in the MEE infrastructure enabling communication between clearing/payment partners and the MEE backend. The adapter is handling the tokenization ensuring that sensible payment data are secured

14 What is MEEwallet? How it works Front Consumer Easy and intuitive enrolment of cards and accounts immediate shop ability Merchant Fast and simple implementation of terminal. Immediate Shop ability Back Multi-factor and Progressive authentication process Multi-factor and Progressive authentication process Rapid MEEgg distribution Today consumers have an increasingly number of payment and loyalty cards. The physical wallet has increased significantly in size over the last decade. MEEwallet is a true digital wallet in an app for all smartphones with an intuitive, simple and user friendly interface. Thus, MEEwallet offers an unique opportunity to replace the physical wallet with a digital wallet solution, where any payment and loyalty cards can be stored and used in the same way as a physical wallet. MEEwallet is an open solution where partners and Source of Funds can brand their own means of payment and loyalty card. It s an independent alternative to existing incumbent service providers WAPI the Wallet API, is an easy and robust way for 3rd party vendors to connect to the solution. VASP Value Added Service Providers, are 3rd party applications such as electronic receipts providers, various coupon and loyalty solutions. 1. User clicks PAY and a signal is sent to the shop terminal MEEgg. 2. Amount is entered in the POS and sent to the terminal. 3. The terminal sends amount and geo-location to the user through the cloud. 4. User accepts and the transfer of funds is processed. 5. User receives electronic receipt in the App and by mail. Merchant s receipts are integrated in the POS.

15 How it works MEEgg in the shop MEE in the shop MEEgg Unique Secure POS Terminal Solution No financial information is exchanged between customer and merchants The multi-factor SAFEauthorisation protocol ensures the highest level of security currently available on the market Data consumption is approximately 1Kb / transaction Easy deployment and setup Streamlined integration of API Plug and Play - Dual Bluetooth is an integral part of the MEEgg - The MEEgg communicates between the Phone, POS and the MEE server - Secured data communication sessions between Phone and terminal - All internet connectivity is handled though MEEgg, i.e. the phone does not need to be online - Flexible coverage radius between m - A wide range of phones supported, ios, Android, Windows Phone - Small in size and price - Embedded SIM in MEEgg - Connectivity is through Ethernet or GPRS - MEEgg offers a retail ready, non-intrusive Point-of-Sales solution MEEegg 2.0 with embedded SIM to be launched in the second half of 2015 Semi-offline transactions Roaming free turist transactions possible New design ü ü ü

16 Merchant - Web MEEweb The customer chooses items in a web shop and proceeds to check out The customer selects the MEE Icon on desktop and is shown a one time Web ID (WID) The customer select WEB PAY in the app The customer enters WID in the app* The customer is shown transaction information in the app and is prompted to accept The customer enters personal PIN in the app The customer gets a confirmation message on the web and the on mobile device

17 Globally unique ID s in the MEE platform Globally Unique Identifiers We use the word ID to denote a globally unique randomly generated ID, it could also be called a GUID in general industry terms this is the token The token is an object which substitute a sensitive data element - e.g. card number + CVC (formerly known as CVV) translated into a randomized value Cloud based security ensures compatibility with multiple user authentication technologies such as SIM based authentication or biometrics The diagram shows how IDs are related to each other in the MEE database and in underlying banking systems and clearing providers. PID RID SDC RID CH RID Payment method ID: unique ID of the Payment method in MEEWallet (source of funds) Retail ID: unique ID of a specific point of Retail in a specific shop (MEE egg) same as RID, only this ID is used internally in MEE SDC Adapter same as RID, only this ID is used internally in ClearHouse

18 Authorisation level of access granted Patented authorisation security protocol The MSPay authorisation protocol Token based security developed and patented by one of the world s leading providers of security software, Cryptomathic The multifactor authorisation protocol enables MEE to offer the highest security available today. More secure than current payment card technology or future NFC based technologies however MEE is NFC compatible in a secure way Eliminates the man in the middle attacks All transactions are handled securely in the cloud. No sensitive or financial information is ever exposed Optimised for embedded devices Designed to resist malware infection Communication numbered 2, 9 and 11 are tunnelled through the Bluetooth link between the phone and the terminal. Hence the only internet connection used while running the payment protocol is the internet connection of the terminal (MEEgg). SID Session-ID: unique key generated for this payment only expires after 15min PID Payment method ID: unique ID of the Payment method in MEEwallet TID Terminal ID: unique terminal ID of a specific point of sale in a specific shop (MEE egg) Same as TID, only this ID is used internally in the Clearing Provider. Mapping from TID to XTID XTID is done by MEE Backbone $ The amount to be paid

19 Cloud-based hosting MEE backbone is hosted on Microsoft Azure, a global leading provider Microsoft Azure Microsoft Azure is one of the most secure cloud- and datacentre platforms, both with regard to protection against breakdowns, catastrophes and data compromise. Microsoft has underpinned its unhesitating willingness to protect its customers at several occasions. Furthermore, it is noteworthy that the sensitive data is stored at a third party, at which the data is transformed to tokens, which the MEEwallet uses. In this way, the Azure platform will never contain sensitive data. Moreover, Azure offers a complete palette of server capacities from small and almost free servers to extremely large and powerful servers, which is capable of satisfying all future needs for capacity and performance. Thus, MEE can build a solution with minimal operating costs and upgrade as the need for capacity increases. MEE and Microsoft has entered a strategic partnership offering MEE excellent technical support and attractive discount on operation

20 Business model Regulatory Considerations Payment Service Directives Revenue streams Turnover derives from several revenue streams: transaction fees, the sale of POS units, service & support, and the offering new digital services to the market such as loyalty programs, etc. Business model considerations Various business models exist in the market Applied business model depends on the nature of payment solution applied adding complexity to revenue models One needs to distinguish between national and international bank payments, legacy cards, prepaid solutions, loyalty cards, and other payment cards. With the current setup with connected partners MEE is in the process of implementing various business models. Our revenue varies across the scenarios taking several elements into account: Cost/Revenue of integration Cost/Revenue of maintenance Cost to partners (processing, banks etc.) Revenue from tokenisation of means of payment/loyalty cards Revenue from capture, switching, authorisation and authentication Maintenance of many business models complexity MEEgg revenue, sale and subscription Different usage patterns, regulatory restrictions and payment structures in different countries In EU the European Commission have created the PSD (Payment Service Directive). When the PSD2 replaces the existing PSD it will have a wider scope so that it covers the new payment services created by a period of innovation in financial services. The objective of the current Presidency is to conclude negotiations on PSD2 by June This would lead to implementation at national level in A major part of the PSD2 is to open up access to payment account information to third parties. I.e. businesses that provides and maintains the customer s payment account such as a bank or credit institution ( account servicing PSP ) must give certain 3rd parties that have a license to provide a payment service under the new regime access to customers account information, providing the customer has given their explicit contend. The main changes that the Council has proposed relate to the actions it said account servicing PSPs and third party providers - payment initiation service providers (PISPs) - should take in the event that a defective payment is processed. Under these plans, the account servicing PSPs would be barred from placing restrictions on third party account information access. This includes applying added charges to those payments or treating them as being of lower priority. Before each transaction PSPs would be required to provide customers with explicit information on the maximum execution time and the charges payable by the payer and, where applicable, a breakdown of the amounts of any charges. A note of the charges would also have to be provided to payers after funds have been debited from their accounts, and payees PSPs would similarly have to outline what charges and interest, if any, payees face after each individual payment transaction.

21 Regulatory Considerations Payment Service Directives Card scheme liability model Four Party Model The PSD2 proposals contain a significant stiffening of rules on payment service user authentication, with the purpose of ensuring that PSPs can be confident that the people using their services are who they say they are Strong customer authentication is defined by the Commission as a procedure for the validation of the identification of a natural or legal person based on the use of two or more elements categorised as knowledge, possession and inherence that are independent, in that the breach of one does not compromise the reliability of the others and is designed in such a way as to protect the confidentiality of the authentication data. In IT security-speak, this means twofactor authentication. As a consequence PSPs that fail to apply strong customer authentication for payments made online or over the phone cannot require payers to bear any financial consequences unless those payers themselves act fraudulently Capping of Interchange Fees (IF). The caps would be set at: - 0.2% of the value of the transactions for debit cards; and - 0.3% for credit cards. The cap would only apply to cards within four-party schemes, such as Visa and MasterCard (which cards cover the vast majority of the EU market). The cap would not apply to three-party scheme cards, such as Diner s or some American Express cards. The Commission expects that merchants may apply a surcharge for the use of these cards. The Regulation would also ban surcharges such as levied by certain discount airlines for the use of four-party scheme cards. PSD2 would allow surcharges for other methods of payment, as long as the charges levied do not exceed the actual cost to the payee of the method of payment involved.

22 Summary Intuitive Simple, based on customer centric convenience embodied in user friendly interaction Future Proof MEE will support any device supporting a communication protocol MEE is a solution that solves what others have not yet solved We are an Innovative, Secure, and a Simple Solution Secure Thanks to the multi factor SAFEauthorisation protocol, MEE offers the highest security available today. No financial information is exposed between consumer and merchants Convenient The solution is ready for integration into the cash register and has a standalone POS solution for smaller retailers We do what Apple Pay and Android Pay wish to do and then some more Thank you Open MEE can integrate any payment solution Scalable The solution is ready and fully operational. Internationally fully scalable Contact details: Lillian Grosman Chief Business Development Officer, ICT Flexible MEE supports legal and regulatory requirements for most countries, and all business models Competitive Transaction prices are low and competitive lg@meewallet.com Website LinkedIn

23