Copyright 2008 © Welcome Real-time

All rights reserved. Material in this presentation can be copied on condition that

“Source : Welcome Real-time” is included in a clearly visible fashion next to the copied material.

How will banks meet the challenges of innovations

in retail payments?

Aneace Haddad Chairman & Founder Welcome Real-time

Hong Kong, 15 July 2008

1964

1967

“I can present it and sign the bill in 35,000 shops, garages, restaurants etc., throughout Britain.”

“Instead of making dozens of separate payments, I can make just one a month. To you.”

“I get all these advantages, yet the card and the service cost me nothing.”

“BARCLAYCARD is all I need to go shopping.”

Stock

return %

over ’95-’05

Margin

growth %

over ’95-’05

Source: 24th April 2006 BusinessWeek, BCG.

Internet payments

Mobile payments

Contactless Biometrics

Prepaid

Loyalty

Micropayments

EMV

P2P

NFC Mobile

banking

“What problem does this innovation solve?”

“What pain does it alleviate?”

“What value does it deliver?”

“Who cares?”

The key questions

Source: The Paradox of Pain, www.chrisoleary.com

“A great idea eliminates a significant source of pain for a large number of people.”

Source: The Paradox of Pain, www.chrisoleary.com

WHERE’S THE PAIN ?

Source: Loyalty 2.0, Market Platform Dynamics, May 2007

USA Aug 2007

(LA Times)

1

8

Nashville August 2006

New York January 2006

www.StopInterchangeNow.com

Sydney April 2006

London Nov 2007

Denmark Nov 2006

Singapore March 2007

Singapore March 2007

1 - Find a problem. Fix it.

2 - Find an opportunity. Exploit it.

Source: Ron Shevlin, http://marketingroi.wordpress.com/

Two secrets to survival & success

Merchant dissatisfaction is an opportunity. Exploit it.

Source: http://thehistoryof.net/history-of-credit-cards.html

1979 A turning point in the credit

card processing industry

“In 1979, magnetic stripes on the back of credit cards allowed retailers to swipe the customer’s card through an electronic dial-up terminal, which accessed the bank’s cardholder information.

“The advantage of this system, besides saving paper, was the increased speed of processing authorizations – one to two minutes. It also decreased credit card fraud.”

29 years

Internet payments

Mobile payments

Contactless Biometrics

Prepaid

Loyalty

Micropayments

EMV

P2P

NFC Mobile

banking

Contactless: a card innovation

that benefits merchants?

1 out of 133 “There are 6 million places where you can use your credit card, 45,000 (contactless locations) doesn’t excite me.”

John Suchanec, Bank of America

“Waving a card in front of a reader takes about as much time as swiping one through.”

Manager, Sheetz, Inc.

Contactless forecasts for 2007

230 million

Jupiter Report (2004)

37 million

Jupiter Report (2006)

25 million

Card Technology (June 2007)

“What problem does this innovation solve?”

“What pain does it alleviate?”

“What value does it deliver?”

“Who cares?”

The key questions

Source: The Paradox of Pain, www.chrisoleary.com

Five innovation themes that can help you

benefit from current market conditions.

Reduce your dependence on interchange as a source of funding for your loyalty program.

Find ways to develop deeper partnerships with merchants who can co-fund rewards.

1

“Earn 2 points for every Euro spent at other participating merchants (1,500 all across Greece).”

“Earn 1 point for every Euro spent everywhere else.”

“Earn 4 points for every Euro spent at the big Bonus Partners.”

“There is no doubt that banks can work successfully with merchants to attract and maximise the value of customer relationships, through the payment process, for the benefit of both parties.”

“Banks are generating a new revenue stream from such

arrangements.”

Cut the cost of running your loyalty program by finding ways to simplify the rewards

redemption and fulfillment process.

2

Pay by card. Receive bank statement.

Check points balance online or call bank.

Select reward and fill out redemption

form. Wait to receive voucher by mail.

Put voucher in wallet and take to store.

Give voucher to cashier. Get reward.

Pay by card. Get reward.

HOME & FASHION EMPORIUM

1234 Orchard Rd Singapore

(555) 222-1234

CUSTOMER RECEIPT

CREDIT CARD SALE

Card #552251020230**** Date: 7/4/2008 3:26 PM

Auth. #02718

TOTAL: $75.26

X___________________________

YOU HAVE 1,230 POINTS

REDEEM YOUR POINTS HERE !

-------- THANK YOU -------- COME AGAIN SOON !

Work with Visa, MasterCard and American Express to develop new card features that provide much more value for merchants.

3

Help merchants promote their co-branded store cards.

Merchants can reduce their total interchange costs, and you can win new business issuing

more co-branded cards.

4

“This customer shops regularly in your store. She has been here 4 times this month, but she doesn’t use your store card.”

POS messages help merchants communicate with customers who are otherwise invisible.

-----------------------------

Don’t miss out on

savings. Use your

Carrefour Visa card.

Don’t have one?

Apply now. Present

this voucher for a

special gift.

An attractive feature for merchants … and an incentive for the merchant to convert private label cards to co-branded cards issued by your bank.

Find new value added payment services which solve real problems for merchants.

5

“Introduce payment information value-added services to reduce pricing pressure from merchants and convince them of the real value of bank-sponsored retail payment networks.”

“The retailer will have a platform to deliver tailored promotions

at the POS.”

“The promotion or message can be delivered via a POS receipt.”

He has obviously been filling

up somewhere else.

----------------------------

Coupon

TRY OUR NEW EZ CAR WASH AND

ENJOY A COFFEE WHILE YOU WAIT

CAR WASH+COFFEE

SPECIAL $2.00

Expires Nov. 15, 2007

Since he is here now, why not print an offer at the bottom of his card receipt?

A feature that is simple, low cost and valuable for all types of merchants.

London Apr 2008

1st visit

----------------------

M---R---S--

Use your Visa payWave card at McDonald’s. When all the

letters above are filled,

win your McSurprise!

2nd visit

----------------------

MC--RPR-S--

Use your Visa payWave card at McDonald’s. When all the

letters above are filled,

win your McSurprise!

3rd visit

----------------------

MC--RPRISE-

Use your Visa payWave card at McDonald’s. When all the

letters above are filled,

win your McSurprise!

4th visit

---------------------- Coupon

MCSURPRISE!

Congratulations! Present this ticket to any clerk

and get your McSurprise!

Not valid with any other

offer. Expires 31 Jan 2008

Card receipts don’t have to be boring.

DID YOU KNOW ?

Promotional marketing is huge ($342 billion in the US alone!)

Europe Pakistan China

Promotional marketing is global and the same techniques are used everywhere

Newspaper ad, half page:

9,000 - 12,000

Co-op package mailing,

1 insert: 350

Local coupon book,

1 page: 350

Promo marketing is expensive (and rarely targeted because too difficult)

“The profit margin for solving the merchants’ commerce problems and delivering new customers and/or closed sales is two to three times that of the payments transaction fee.”

“Data shows merchants will pay 7-9% for delivery of a sale vs. 2% for merely processing the payment.”

Merchants advertise with Google get FREE payment processing

“For every $1 you spend on AdWords each month, you can process $10 in sales the following month for free.”

+

Copyright 2008 © Welcome Real-time

All rights reserved. Material in this presentation can be copied on condition that

“Source : Welcome Real-time” is included in a clearly visible fashion next to the copied material.

Thank you

Aneace Haddad

Chairman & Founder, Welcome Real-time

a.haddad@welcome-rt.com

http://aneace.blogspot.com

www.welcome-rt.com