Transcript Preparing Retail For the Mobile NFC Transactions Evolution

Preparing Retail
For the Mobile NFC
Transactions Evolution
Prepared for VeriFone
Andy Castonguay
Director
[email protected]
Why Near Field Communications Should Be
On Your Short-term Radar – An NFC Overview
From the telecom salad of acronyms, one that has potential to make a real impact
What is NFC?
• A Technology Standard that permits important personal account details to be delivered
quickly to a “contactless” or “touch” reader
• Near Field Communication (NFC) is an evolution of contactless and short range RFID
technologies. NFC enables easy and straight forward use of cards and mobile phones
with touch-based technology – operating at a distance of only a few centimeters.
• Leverages current payment infrastructure in use through out the world
• Currently: A chip and an antenna residing in debit, credit, stored value, and special
purpose cards
• In the future, NFC will be embedded in mobile phones
When will NFC reach the U.S. market?
• NFC-style implementations have been a small but growing part of the payments
market for years
Why is it important to retail and commerce?
• Fast, secure payment – Ideal for high volume establishments
• Growing demand and usage among US consumers
• Future mobile phone deployments have explosive volume potential and dynamic
interface
NFC Is Growing Independently of Mobile Operators –
Providing Retailers w/ Short and Long-term Benefits
US Issuing Banks Estimate Over 15m Have Been Issued Since 2005
NFC cards will outpace mobile wallets,
creating behavior that is potentially difficult to
alter unless 3-point balance becomes more
advantageous.
Credit Card Offerings
• MasterCard PayPass
– Embedded cards being issued since 2005.
– Bank partners include Citi, HSBC, MBNA, KeyBank
• Visa Blink
– Embedded cards being issued since 2005
– Chase is key bank partner
– Upwards of 5m cards already issued
• American Express ExpressPay
– Embedded in Blue cards and key FOBs since 2005
– Exclusive to Amex
Merchants Deploying POS
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McDonalds
CVS
7-Eleven
Subway
AMC Theatres
Fry’s
Walgreens
NYC’s MTA
Eckerd
Ritz Camera
Wawa
Cold Stone Creamery
KFC
Arby’s
Carl’s Jr.
Duane Reade
Regal Cinemas
Sheetz
QuickChek
NFC-based Programs and Products
Quickly Evolving
Public Transportation
• New York City, MTA
• Boston, MBTA Charlie Cards
• Parisian Metropolitan Subway System
• London Oyster Card for the Underground
Gasoline Stations
Primary NFC Activities
• Mobil Speedpass
1. Purchases at POS
Mobile Operator Trials (for US)
• AT&T/Cingular
• Verizon Wireless
2. Ticketing & Transport Pass
3. Content Discovery & Info
Exchange
• Sprint/Nextel
Social Spending Programs
• Health and Food Benefit Programs in US and Western Europe
Mobile Provides Scale, Distribution & Dynamic Interaction
Total Mobile Users in US, 2003-2011
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: Service provider’s reports and Yankee Group, 2Q07
Mobile phones represent the next great focus
for transactions, advertising and marketing
US Mobile Services Market is Maturing & Consolidating
1Q2007 Market Share, by Subscribers*
Metro PCS
1%
US Cellular
3%
Leap
1%
Dobson
1%
Other
4%
AT&T
26%
Alltel
5%
T-Mobile
11%
Sprint
23%
Verizon
25%
*includes direct, reseller/affiliates, and wholesale subs within each carrier
Source: Service provider’s reports and Yankee Group, 2Q07
• Provides retailers with a “short
list” of potential marketing
partners to drive usage of
mobile NFC in stores
• Heavy competition drives
Mobile Operators to constantly
offer service technology
innovations to gain marketing
edge – NFC is among key
priorities for 2008
• Competition also ensures
constant effort to offer newest,
most robust handsets. Like
Bluetooth and Wi-Fi, NFC will
become a necessary standard
for future mobile phones
The Mobile NFC Ecosystem Involves Significant
Number of Players with Unique Strengths
Handset
Manufacturer
Card
Associations
Mobile
Carriers
Banks
Mobile NFC
Contactless
Ecosystem
POS Terminals
Merchants
SIM/NFC Chip
Manufacturers
OTA
Provisioning
How Will Mobile NFC Work in Real Life?
Over-The-Air (OTA) Provisioning Facilitates Ease of Use
Source: Venyon
Defining the Leading Edge of Mobile Transactions
Mobile Transactions
• Involves any type of transaction initiated or completed on a mobile device. These transactions fall
into activities of Marketing, Selling, and Servicing customers via mobile devices
• Sub categories of Mobile Transactions include:
– M-Payments (e.g. point-of-sale, peer-to-peer, remote)
– M-Coupons (e.g. discounts, loyalty programs)
– M-Service (e.g. M-Banking alerts and account management, situation-aware Airline customer
service, etc.)
• Examples:
– Using a mobile device as a cash replacement at a fast food restaurant to pay for a meal
– Receiving and redeeming a coupon at a retail POS
– Accessing real-time financial account information or executing a trade with your mobile device
– Purchasing a ticket to a sporting event online and receiving an “m-ticket” on your mobile
device which you use to enter the event
– Checking in for your flight over you mobile device
– Remittance payments in lesser developed countries
• This is primarily and Interactive activity that involves both the end-user and brand, merchant,
agency, enterprise to take action
Mobile Transactions is a Disruptive technology and a key area of focus for YG
Understanding the Importance of NFC
In Mobile Commerce
Mobile
Commerce
Mobile
Content
Mobile
Advertising
Mobile
Transactions
M-Payments
M-Coupons
M-Service
Despite Outstanding Potential, Mobile Payments Have Suffered By
Not Leveraging the Existing Point-of-Sale Payment Infrastructure –
NFC Changes That
Core Payment
Focus
Regional
Players
Global
Players
Core Billing/
PRM Focus
Defining the Value Proposition to Consumers & Retailers
Mobile Wallet Payments Have Important Benefits Over Existing
Mechanisms to Gain Traction With Consumers – Striking Important
Balance of Primary Payment Characteristics
Security
Cost Efficiency
Convenience
Who is Successfully Leading the M-Commerce Charge?
Japan’s NTT DoCoMo Expanding With Diversified Financial Services
Device distribution provides entry point for m-commerce
iD Credit Platform services
• DoCoMo-branded DCMX/iD mobile credit services
– Operator expanding into retail credit sector
– Partnering with other financial institutions like Mizuho Bank and UC Card
– Leveraging distribution infrastructure for handsets to drive credit card uptake
– Currently over 3m subscribers and 150,000 iD payment terminals
• Edy contactless payments
– Utilizing Sony FeLiCa technology and bitWALLET platform
• ToruCa data retrieval service
– Allows storage of coupons on handsets
– Coupons and information can be accessed and stored by reader/writers at retail outlets
US Mobile NFC-Based Payments
Ecosystem Is Defining Structure
Player Type
Primary Expected
Benefit
Key Barriers
Likely Short-term
Outcomes
Wild Card Options
Mobile Carriers
Transactions fee
participation
Card
Associations,
Banks &
Merchants
No Major
Progress Until
2008
Create Parallel
Network to
Bypass Cards
Card Associations
Expanded
Volume of
Transactions,
Enhance Brand
Contactless
POS
Coverage
Slow to Grow
Driving Solid
Volumes of
Card-based NFC
deployments
Push for OEM
adoption of NFC
Issuing Banks
Incremental
Spend Increase,
Potential for
Payroll Products
Contactless
POS
Coverage
Slow to Grow
Driving Solid
Volumes of
Card-based NFC
deployments
Integrate NFC
Experience with
mobile banking
services
Merchants/
Retailers
Operating
Expense
Savings, Better
Ability to Track
Customers
Costs of POS,
Compatibility
across
systems
Larger chains
investing in POS
upgrades
Could partner
with operators to
force hand of
card
associations
US Mobile Wallet Initiatives –
Moving From Trial to Implementation
US Market Identifying Business Models That
Benefit Whole Mobile Wallet Ecosystem
• For NFC deployments, the key business model
is transaction fee participation – operators see
little upside to other potential revenue streams
(e.g. content discovery, slot leasing, subscriber
fees, couponing, etc) that will benefit card
associations and retailers
• ISO/IEC 14443 standard is gaining final
structure. multiple trials for mobile phone
contactless payments:
– Atlanta (Cingular, Chase, Nokia, Philips, Visa, &
VivoTech)
– Dallas (MasterCard, Nokia, AT&T & JP Morgan
Chase)
• Ramp up period for handset volumes 6 to 12
months
• SMS-based payments gaining acceptance
– PayPal & Obopay SMS-based payments facing
difficult push to critical mass
Business
Model
Structure
Benefits
Next Steps
Transaction
Fee Split
Peaks Carrier
Interest and
Guarantees
Quicker RollOut
Credit Cards
Associations
Work to
Develop
Marketing &
Cost Plans
SIM Slot
Leasing
Creates
Steady
Revenue
Stream for
Mobile
Operators,
Potentially
Reduces
Costs for
Cards
Issuing Banks
Must Work Out
Details for
Leasing Space
on Mobile
Wallet and
Ensure Top
Placement and
Customer
Experience
NFC-enabled POS Will Support Payments & More
Strong Future Opportunity for Retailers in Mobile Marketing/Coupons
• Coupons delivered to the phone as a text or dynamic message
• Can use real time analytics from the merchant and real time location from the
carrier to deliver the right messages to the right person at the right time
• Can scan the bar code directly off the phone
– Problems with screen resolution, scratch on the screen, etc…leads to an
inability to scan a coupon directly from the device
– Merchants want the ability to scan directly from the device to eliminate human
error and to identify whether this coupon is unique or has been forwarded
• Coupons should be time based and location based
• Loyalty programs
– Can be stored on the phone so you don’t need to remember all of your cards
– Can be combined with a coupon such as buy 9 get the 10th free promotion
Thank you!
Andy Castonguay
Director, Consumer Research
Yankee Group
[email protected]