Cash/Plastic is Trash: Mobile Payments is Future

Cash/Plastic is Trash:
Mobile Payments is Future

Banks using Host Card Emulation to launch
mobile payments solutions
© COPYRIGHT 2015 SAPIENT CORPORATION | CONFIDENTIAL
Examples of banks that are using or have announced plans of using HCE for mobile payments
Host Card Emulation (HCE) is the term describing on-device technology that
permits a phone to perform card emulation on an Near Field Communication
(NFC)-enabled device without relying on access to a secure element. This new
technology gained celebrity status when Google announced support for HCE in the
KitKat OS.

Biometrics Set to play a bigger role in the
Future of Payments authentication
 Chinese e-commerce giant Alibaba is
developing facial recognition technology
that enables mobile shoppers to replace
their passwords with selfies. (March 2015)
 Royal Bank of Canada is working with
Toronto-based technology developer
Bionym to test a wristband called Nymi.
The Nymi band uses the wearer’s unique
heartbeat to verify that he or she is the
real card holder. (November 2014)

Apple Watch announced & Apple Pay’s
Acceptance continues to Grow in US
 Apple Pay: In just three months since
launch, the contactless payment application,
which uses near field communications (NFC)
technology, is available in more than
700,000 locations in the US. The company
has also expanded the number of banks it is
working with to more than 2,500
 Apple Watch: Tim Cook (CEO, Apple)
announced that Apple Watch would be
available for purchase from April 2015.
Apple Pay can be used via Apple Watch,
which will allow Apple users with older
iPhones (5, 5C and 5S) to also use the
payment service. (March 2015)

Google, Samsung Pursued Acquisitions to
counter Apple Pay threat
 Samsung agreed a deal to buy mobile
wallet outfit LoopPay, giving it a new
weapon in its ongoing battle with
Apple for the mobile payments
market. (Feb 2015). LoopPay's
patented technology turns existing
magnetic stripe readers into
contactless receivers.
 Google also announced acquisition of
technology from mobile payments
solution Softcard (a joint venture
between 3 leading US telecom
operators). (Feb 2015). This is
Google’s attempt to revive its flagging
mobile wallet service by getting its
app pre-installed on handsets sold by
America's biggest telcos.

Microsoft Preparing its own mobile payments
service
 Microsoft is working on a tap-to-pay system with Host Emulation support,
allowing the mobile to work without a “Secure Element” provided by carriers. This
means Microsoft can work directly with VISA, Mastercard and American Express
to bring its own NFC payments service into the market. It will work with all
contactless card readers, similar to Apple Pay and Google Wallet. (March 2015)

Facebook Embeds Money Transfer
functionality in Messenger
 Facebook announced a new feature for Messenger that lets users send and
receive money to one another. The feature will roll out to Facebook users in the
U.S. across desktop, Android and iOS over the next few months. (March 2015)

Telecom operators Continue to strive for
relevance in this space
 Vodafone customers will soon be able
to add bank cards to their Vodafone
Wallet and use smartphones to pay for
goods and services at contactless
terminals. Following new agreements
with Visa and Carta Worldwide, bank
card payments via Vodafone Wallet
will be enabled in European markets
from Q2 2015 onwards. (March 2015)
 Some of New Zealand's biggest banks
and telcos have joined forces to launch
Semble, a SIM-based NFC mobile
payments service. (April 2015) Telcos
Vodafone, 2degrees, Telecom had
teamed up with bank-owned
payments network Paymark on the
joint venture nearly three years ago

Wearables & Payments Likely to go hand-in-
Hand → Apple Watch, LG, Xiaomi
 LG’s Urbane LTE is one of the first
smartwatches beyond the Apple
Watch to include NFC-based mobile
payments (Feb 2015)
 Huami, the manufacturer of Xiaomi's
smart fitness tracker Mi Band, has
entered into a partnership with
Alibaba's payment affiliate Alipay to
develop smart wristbands that
incorporate mobile payment (April
2015)

Massive increase in smartphone use in
recent years

56%
Annual Growth
(CAGR)for in-person
mobile payment
over next 5 years
US Mobile Payments Will
Reach $142 Billion By 2019

80%
of all transactions
will flow through the
retailers directly
within 10 years

More than half in the US have tried mobile
payments
91%
58%
75%
83%
54%
Cash
Check
Credit Card
Debit Card
Some form of mobile payment
What types of payment do you use?

Convenience will be the defining factor in the
near term
7%
37%
41%
76%
Other
Security
Rewards, discounts, or promotions
Convenience
What motivates you to use mobile payment instead of
other forms

PayPal most used in US, 7% have already
tried Apple Pay
3%
3%
3%
4%
5%
7%
21%
28%
94%
Square Cash
Other
Venmo
Softcard
Dwolla
Apple Pay
Starbucks
Google Wallet
PayPal
Which of the following mobile payments apps do you
currently use?

Opinions divided around the ideal future
experience
30%
32%
38%
App for each retailer that pushes
offers, integrates rewards and
coupons and allows me to pay
App that is integrated with by
banking app
Independent app that can be used at
any retailer and integrates rewards
and coupons
Thinking about the future of mobile payment, which of these
options would you prefer?

Flavors of Mobile Payment

Highly fragmented ecosystem

Burning questions about mobile payments
strategies
• Security
• Convenience
• Value added benefits to replace existing payment methods
What do my customers
want?
• Protection of existing brand equity along with transactional and interchange revenue
• Additional revenue from loyalty and consumer intelligence
What is at stake for banks?
• Reduce the existing transaction charges
• Minimize the cost of upgrading to new POS systems
• Protect reputation and build trust - avoid any security mishaps (such as Home Depot,
Target)
What are the retailers’
perspectives?
• Independent applications such as LoopPay, LevelUp (QR codes)
• MNO backed solutions like Softcard (NFC)
• OEMs’ offerings – Apple Pay, Google Wallet (NFC)
• Independent retailer offerings (e.g. Starbucks) and collaborative retailer solutions (MCX/
Current C) (QR codes)
What are the current
offerings in the market?
• Banks in the US are currently offering support to Apple Pay – a couple of the leading
banks are also supporting Softcard
What are banks currently
doing?
• QR code based technologies are easier to integrate into existing POS systems but are
perceived less secure
• Less than 3% of merchants that accept credit cards are equipped to handle NFC based
systems. However they will soon be forced to upgrade to EMV (by 2015) and they could
choose to add NFC . And with trend setters such as Apple supporting NFC, it has a
greater chance to succeed
What offerings are likely to
succeed?

Cloud-based HCE vs Secure elements

Android Implementation

Apple Implementation

Praveen Bohra
https://in.linkedin.com/pub/praveen-bohra/1/4a4/350

Cash/Plastic is Trash: Mobile Payments is Future

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