Mobile Wallet and payment applications are poised to change the way consumers pay. This is driving substantial investment in the space with over $700 million flowing into private companies over the past three years and an estimated $1 billion into corporate initiatives and JVs like ISIS, MCX, Google Wallet, and PayPal mobile.
This report takes an in-depth look at how the industry landscape is evolving and some of the key trends driving innovation.
1. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE
The Future of Payments
Consumer Mobile Payment & Wallet
Applications
April 2014
2. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE
Contents
Mobile Payments Market Dynamics
mPayment Landscape and Ecosystem
Mooreland’s Perspective on NFC
mPayment Investment Activity
mPayment M&A Transactions
Mooreland Partners: Firm Profile
2
3. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE
History of Unmet Expectations: Mobile payments
have been talked about for over a decade,
however, a lack of quality consumer technology
has slowed adoption
Smartphone / Tablet as Catalyst: The proliferation
of smartphones and tablets is creating
opportunity for disruption across the entire
payments landscape/ecosystems
Impact on the Whole Ecosystem: Payments are
intertwined with both Banking and Retail
solutions, so we need to examine all three
segments to form a complete picture of the
ecosystem
– mPayment: Solutions that enable the consumer to
transact and make payments using their mobile device
– Retail 2.0: Solutions, sold to Merchants, that enable
new ways to accept payments and converge online
and offline commerce to “Omnichannel” commerce
– Digital Banking: Solutions, sold to banks, that
enhance the “anywhere, anytime” consumer banking
experience (includes online and mobile banking)
Mobile Payments: Market is accelerating the entire ecosystem is impacted
3
Retail 2.0
mPayment
Digital
Banking
• Mobile Wallet
• Merchant
Payment Apps
• Mobile Banking
• Internet Banking
• Mobile Money
Transfer
• Remote deposit
capture
• Mobile POS Terminals
• eCommerce Platforms
• Cloud/Tablet-based
POS Solutions
• Omnichannel
commerce
Dynamic Mobile Payments Ecosystem
4. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE
Mobile Payments: Illustrative Timeline
4
While mobile banking began to gain traction nearly a decade ago…
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
mPayments
Becoming more
Merchant-centric
while credentials
move from the
Secure Element to
the Cloud
Retail2.0
Moving
towards an
Omni-channel
SaaS solution
hosted in the
cloud
DigitalBanking
Moving towards
a completely
digital solution,
where branches
are less
important
…emerging retail solutions didn’t begin to establish themselves until ~2009 …
…and mobile payment adoption only began with the Starbucks App launch in 2011
5. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE
Significant growth is expected across all three segments …
5
Banking: Innovation is driving continued growth in mobile banking adoption
mPaymentsRetail2.0DigitalBanking
Retail: Massive opportunity as mPOS goes mainstream and OmniChannel disrupts
Mobile Payment: Innovations in Services and Contactless are accelerating growth
35
57
68
79 89 99
111
2010 2011 2012 2013 2014 2015 2016
mBanking adoption
in US (million users):
– 13% CAGR 2012-
2017
Source: Fiserv, Javeline Strategy & Research
In the US (and other developed markets) mobile
banking has become “table-stakes” and consumers are
gradually shifting behavior to use this technology
Over 51% of mobile phone owners in US will use
mBanking by 20161
Note 1: Javelin Strategy & Research forecasts
Source: IHL Consulting - Mobile POS Hype to Reality
2013 2017
380% CAGR
Use of handhelds for
Mobile POS:
– 380% CAGR 2013-
2017
Square’s innovation has lead to a number of new
solutions that innovate in both use case and business
model
Increased emphasis around Omni-channel commerce
solutions is driving new product development at major
POS and eCommerce platform vendors
Mobile merchandise
purchase ($ in
billions):
– 38% CAGR 2012-
2017
Contactless mobile payment is expected to hit $10
billion by 2018, representing a 35% CAGR over the next
six years2
Loyalty, rewards, coupons, and mobile ordering services
build a consumer value proposition and will drive
adoption
$9 $20
$34
$51
$71
$97
$129
$168
2010 2011 2012 2013 2014 2015 2016 2017
Source: Gartner Note 2: Juniper Research forecasts
6. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE
Mobile Wallet market now driven by greater consumer and merchant adoption …
6
Key trends
Wallet Providers: momentum shifting from Banks and
Mobile Operators to Retailers as the issuers of payment
applications
Wallet credentials: shifting from Device to Cloud (HCE),
multi access platforms allow for cross-wallet synergies
Critical Features: Beyond Payments, Value Added Services
(Loyalty / Fast Order/ Off-line Transactions / POS
Integration) are critical for driving consumer adoption
Hype Cycle: Mobile Wallet … showing signs of moving up the Slope of Enlightenment
(1) Transparency Market Research: "Mobile Wallet Market - Global Industry Analysis, Size, Share, Growth and Forecast, 2012 - 2018“ (2) Juniper Research: “NFC Mobile Payments Market Update”
2007: mPesa O
Technology
Trigger
Peak of Inflated
Expectations
Trough of
Disillusionment
Slope of
Enlightenment
Plateau of
Productivity
Visibility
O Jul. ‘12: Gartner
Hype Cycle
Jul. ‘11: Gartner O O Sep. ‘11: Google Wallet
Launch
Jan. ‘11: Starbucks Launch O
O Oct. ‘12: iPhone5
omits NFC
O
Feb. ‘13: Mobile is 5% of Starbucks transactions
O Mar. ‘13: Paypal: mobile = 10% of their TPV
O Sep. ‘13: McDonalds testing a mobile appNov. ‘12: ISIS pilots O
fall flat
Time
O Mar. ‘14: Mobile reaches 14% of Starbucks txns
7. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE
… resulting in various business models across the Mobile Wallet Landscape
Merchants are increasingly taking the lead role in mobile payment applications
7
Mobile Operators and Banks Merchants Consumer: Mobile
White Label Branded
Target
Customer
Consumer: Internet
Payment-Focused
Solutions
Loyalty,Promotionsand
Engagement-Focused
Solutions
8. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE
Mooreland’s Perspective: NFC adoption will accelerate in 2015
8
The Mobile Operator … Becoming Less Relevant due to HCE (“Host Card Emulation”)
– The Secure Element (SE) is the key asset controlled by the mobile operator
– Recent upgrade to Android enables the NFC antenna to be accessed by the OS directly, without the SE
– This allows over the top (OTT) payment apps to utilize NFC capabilities in conjunction with a cloud-based SE
The Mobile Operators can now be disintermediated from mobile payments
Apple … Waiting for the stars to align
– Has typically not enabled features unless they believe that there will be a great user experience
– Apple prefers to have total control, thus they have avoided the payments discussion with the mobile operators
• Android is proving that NFC can be implemented without MNO involvement, critical for an Apple solution
Apple will likely enable NFC on all their phones beginning with the iPhone 6
The mobile operator
creates friction in
the industry
There aren’t sufficient
NFC enabled
payment terminals
It will never happen if
it is not supported by
Apple
PERCIEVED ISSUES MOORELAND PERSPECTIVE
BENEFICIARIES: Merchant-Centric Wallet technology vendors with NFC capabilities, Cloud-based credential solutions
AT RISK: Companies without an EMV/NFC strategy, Mobile Operator-focused wallet vendors
EMV … Impacting both POS Terminals and Card Issuers
– EMV is already driving a complete retrofit of merchant POS terminals
nationwide to accept NFC.
• Expected to be 75% complete by 2015 and 90% complete by 2017
– NFC be driven by ISSUERS seeking a low-cost solution for providing their
customers with EMV capabilities
• Issuing new chip & pin cards will cost the industry ~$2.5 billion, while
enabling mobile apps will be virtually free
Issuers will choose NFC-based mobile apps for their EMV strategy,
driving user adoption in 2015
275
416
575
797
939
1,170
2013 2014 2015 2016 2017 2018
34% CAGR
Source: HIS Inc., Feb-2014
Global NFC Handset Shipment
(millions)
9. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE
N/A
$23
N/A N/A $4 $8
$51
$31
$52
$39
$109
$42
$138
$263
$318
$100
0
5
10
15
20
25
30
35
40
45
50
$0
$50
$100
$150
$200
$250
$300
$350
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Investments <$100M ($ in millions)
Number of Investments
Investments in mPayments companies have grown significantly …
9
Mobile Payments 1999 – 2013 Financing Activity
Source: Capital IQ, 451 Group, and publicly available information. Note(1): Values based on public disclosed deal values
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
# Investments - 1 1 - 1 1 3 5 5 5 10 10 33 45 38
Total value ($M)1 N/A $23 N/A N/A $4 $8 $51 $31 $52 $39 $109 $142 $138 $263 $318
Investments ($ in millions)
10. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE
$181
$96
$145
$244
$305 $240
$250
$795
$465
8
11
14
26
15
2009 2010 2011 2012 2013
… while M&A activity is just beginning to accelerate …
10
Significant Transactions Value ($M)
Number of Transactions
Transaction Value <$200M ($M)
Mobile Payments M&A Transaction and Marquee Deals 2009 – 20131
Source: Capital IQ, Group 451
Note (1): Deal values on disclosed valuation
11. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE
…with recent M&A activity centered around filling technology gaps
11
* Mooreland Estimate
Acquirer Target Category Date Transaction Size (EV) EV/Revenue
Feb-2014 Confidential Confidential
Oct-2013 NA NA
Aug-2013 $795m 3.0x
Jun-2013 $11m NA
Feb-2013 $175m 1.4x
Oct-2012 Confidential Confidential
Aug-2012 $26.2m 7.3x*
Jul-2012 $50m NA
Apr-2012 ~$225m* Confidential
Apr-2011 NA NA
Mobile Wallet Platform
Mobile Wallet Platform
Mobile Payments
Digital Wallet
TSM
P2P Payments
TSM
Wallet Platform
mPayments Software
Digital Wallet
12. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE
Mooreland in Brief
Technology Focused
Digital Media & Internet | Enterprise Software
Communications & Mobility | Industrial Technology
100% Partner
Owned
Founded 2002
One Global P&L
Global Reach
Serving European, North American, and Asian
markets from offices in Silicon Valley,
New York, and London
Team of 40+
13 Nationalities
10 Languages Spoken
53 Deals
Since January 2012,
Ranked #1 in Mid-Market
Technology M&A
Unrivalled Experience
1,000+
Deals Closed by
Senior Bankers
12
Mooreland is one of the most active tech focused M&A advisory firms in the world – differentiated by deep
sector knowledge, tier 1 buyer relationships, and a collaborative business model.
13. www.moorelandpartners.com
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