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Mobile financial services,

NFC &

HCE positioning

June 2014

Susanne Molkentin-Lacuve, Head of Solutions Marketing

July 1st, 2014

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OT, A WORLD LEADER IN DIGITAL SECURITY SOLUTIONS FOR THE

MOBILITY SPACE

EVERY YEAR

650 MILLION SIM

CARDS PRODUCED

500 MILLION BANKING

CARDS PRODUCED

HIGHLY

SECURED

LOGICAL & PHYSICAL

FACILITIES CERTIFIED

BY VISA,MASTERCARD,

DISCOVER &

AMERICAN EXPRESS

TELECOM

>400+ MOBILE OPERATORS (INCL.8 OF TOP 10)

IDENTITY

>100+ REFERENCES

PAYMENT

>2 000+ FINANCIAL INSTITUTIONS

>140+ SOLUTIONS REFERENCES

SECURE END-TO-END SOLUTIONS

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• TRENDS FOR MOBILE FINANCIAL SERVICES

• NFC DEPLOYMENTS AND CURRENT STATUS

• WHY HCE IS DISRUPTING NFC SE MODELS

AGENDA

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MOBILE FINANCIAL SERVICES ARE GAINING MOMENTUM

Cloud Wallets

Tokenization Framework

SIM eSE HCE

$721B MOBILE PAYMENT MARKET

BY 2017 (1)

1.2B NFC-ENABLED PHONES SOLD

BY 2018 (3)

300+ Mobile initiatives

around the world (2)

(1) Source: Gartner, 2013 (2) Source: Mastercard 2014 (3) Source: HIS Technology, 2014

40 M users of Mobile Money

in Africa 60% lack access to banking services in Latam, while mobile penetration is >90%

$1 bn worth of transactions generated by Starbucks mobile wallet in 2013

> 50% countries with NFC initiatives

are in Europe

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DIFFERENT APPROACHES FOR DIFFERENT MARKETS

Mobile Money & Mobile branchless banking

EMV emulated proximity payment

(mainly NFC, secure element based)

Alternative Payments (cloud based,

QR codes, HCE etc.)

Mature markets: to revamp the shopping experience

Developing economies: to expand banks reach and develop usage

of commerce services

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MOBILE SHOPPING IS NOT ONLY MOBILE PAYMENT:

IT COVERS THE WHOLE SHOPPING CYCLE

Product search (Extended packaging)

Price comparator

Self-scanning

Mobile e-commerce

pre-ordering

Mobile Payment

Mobile Check-out

Mobile Loyalty card

Mobile advertisement and couponing

Mobile shopping list

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• Multiplication of Mobile payment initiatives and Omni-channel shopping

• Online wallet for one-click payment

• Growth of prepaid market and need to increase reach to under banked

• Rise of simple p2p / money transfer solutions

• Margins shrinking and need to play OTT

• Multiplication of Mobile Money deployments

• High mobile penetration - need to develop customer stickiness

• Customers taking the mobile turn (banks and retailers)

• Merchant closed-loop programs with embedded loyalty and rewards

• Need to address growing under banked and prepaid markets

• Omni-channel shopping

• Multiplication of closed-loop programs

• Increasing usage of mobile marketing services such as couponing, loyalty and localization

Banks Mobile Network Operators

CHALLENGES AND TRENDS THE MFS ECOSYSTEM IS FACING

Processors Retailers

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• TRENDS FOR MOBILE FINANCIAL SERVICES

• NFC DEPLOYMENTS AND CURRENT STATUS

• WHY HCE IS DISRUPTING NFC SE MODELS

AGENDA

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NFC MARKET INSIGHTS

MNOs taking the

lead

BANKs starting

deployments

• Commercial launches in major NFC markets (France, Spain, US)

•Revenues expected…

•Pilots for alternative models?

OEMs are coming

•After SAMSUNG, Meizu, Xiaomi, ZTE

•Europe : Prepaid initiatives by MNOs (Orange Cash, Vodafone SmartPass, TIM)

•GSMA Working stream

Alternatives

& risks

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2012: 125 Mu 2013: 276 Mu

Source: ABI

+125%

+62%

NFC eSE 2012: 105 Mu 2013: 170 Mu

Source: Eurosmart + OT estimation

NFC SIM 2012: 38 Mu 2013: 85 Mu

+224%

Source: SIM alliance + OT estimation

IMPORTANT GROWTH IN NFC SIM ROLLOUT

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Source: Visa NFC World Congress Sep. 2013 12

Europe

CONTACTLESS PAYMENT STILL A MASSIVE TREND !

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OT offers a complete range of NFC solutions

Wallet

Manager

TSM for MNOs TSM for SPs

KMS for OEMs TSM

“standalone”

Embedded

Secure Elements

& NFC SIM Card

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• TRENDS FOR MOBILE FINANCIAL SERVICES

• NFC DEPLOYMENTS AND CURRENT STATUS

• WHY HCE IS DISRUPTING NFC SE MODELS

AGENDA

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CONTEXT

Rise of alternative

models in the mobile

payment space

• Several recent cloud-based wallet launches provide alternatives to traditional proximity payments

• EMVco recently announced framework to support QR codes, Bluetooth…

• HCE is another step towards the cloud and is gaining momentum

Genesis of HCE

Google announcement

November 2013

• Support of Host Card Emulation (HCE) as a standard feature of Android 4.4 “Kit-Kat”

A LOT OF UNCERTAINTIES IN

THE MFS SPACE

• How to make the right technical choice?

• How to build a future proof solution?

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HCE IS DISRUPTING NFC SE MODELS

Service providers can deploy NFC applications without physical Secure Element, hence without contracting with SE issuers (MNO or OEM)

NFC controller

Traditional NFC implementation

Without HCE

Mobile app linked to the NFC application located in the SE

NFC transaction for card emulation performed by the Secure Element, whether SIM or Embedded

NFC Controller NFC controller

New implementation With HCE

NFC transaction for card emulation performed by the Mobile App on the Mobile OS

Mobile app directly linked to the NFC module

17 7/2/2014

Processors getting ready HCE rejected by MNOs

“We obviously wouldn't be doing this technology if we didn't feel comfortable with the security”, Visa SVP Digital "We don't know what that last inch will

be and this is why we went with Secure Cloud as opposed to the SIM,” RBC EVP

“HCE will help distribute NFC in mobile payments”, CEO

“For the first time ever, I saw a glimmer of hope for NFC in some configurations”, President

Contrasted ecosystem’s reaction to HCE

from extremely favorable (FIs) to negative (MNOs)

MARKET INSIGHTS

" NFC SE based is not scalable”

“HCE provides a very attractive way forward to launch an increased number of NFC-based offerings”

“good but not for payment”, “not mature”

“we will force Google to de activate HCE in Orange devices”

“we don’t, and won’t, block services, including HCE.”

HCE endorsed by schemes Banks interested by HCE

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OT POSITIONED AS SECURE CREDENTIALS MANAGER

OT trusted by 2000+ Financial Institutions

Sensitive Data Transfer Secret keys, payment credentials

SECURE ELEMENT TYPE AGNOSTIC:

PLASTIC/ MOBILE/ CLOUD

EMV Chip Card Mag stripe Card

Hardware Secure Element (SE)

Secure Element (SE) in the cloud

Host Card Emunation (HCE)

Mobile SE

Plastic SE

Cloud SE

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THANK YOU

Susanne MOLKENTIN – LACUVE, Head of Marketing, SBU

s.molkentin-lacuve@oberthur.com