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Payments from the Future Backwards Will Your Bank Play in the Way Consumers Pay?
September 20, 2012
1
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
@leewetherington
Lee Wetherington, AAP Director of Strategic Insight ProfitStars®
Lee Wetherington Director of Strategic Insight
2
• Develops actionable insight and strategy for the financial services industry
• Delivers keynotes nationwide • Technology Faculty Chair and guest
lecturer for graduate banking schools • Authors articles for industry trades • Degrees in Economics and English
from Duke University • Accredited ACH Professional (AAP)
Presenter
@leewetherington
Agenda
• Trends 2013 – The Future of Payments – Checking; Churn; Demographics; “FPM” – 3 Things You Need to Know
• Mobile Payments – Things We Know – Things We Don’t
• How FIs Win the Mobile Wars – Leveraging Data You Have That They Don’t – What That Looks Like – Integrity, Integrity, Integrity
April 17, 2013
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
3
The future of payments isn’t so much about the
payments…
The future of payments is more about data than
payments…
Payments Data = New Revenue
SO
UR
CE
: McK
inse
y P
aym
ents
Pra
ctic
e
Top Payments Trends in 2013
1. New alternatives at the Point-of-Sale
2. Banks’ position of trust threatened
3. Mobile wallets will be hybrids (NFC/cloud)
4. Retailers challenge payments stakeholders
5. FIs must master their data
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“10
Tren
ds fo
r Fin
anci
al S
ervi
ces
in 2
013:
Fo
rgin
g a
New
Fro
ntie
r for
Ban
king
, Pay
men
ts, M
obile
, and
Sec
urity
”; Ja
nuar
y 20
13
Death of Checking Emergence of the “DeBanked” & the Rise of “NeoChecking”
9
Check Use Declines
61% 56 %
51 % 47 %
38 % 34 %
31 % 30 % 26%
23 %
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Fiserv 2011 Consumer Trends Survey
Percent of payments paid by check
Overdraft Volumes Remain High
Source: Moebs Services, FDIC, NCUA, OCC, Federal Reserve
$0
$10
$20
$30
$40
2007 2008 2009 2010 2011
Overdraft Revenue (US$ billions)
SO
UR
CE
: Aite
; “Tr
ends
in R
etai
l Ban
king
”; R
on S
hevl
in; M
arch
201
3
2009: Worth Switching to Prepaid?
$(2,100)
$(1,600)
$(1,100)
$(600)
$(100)
$400
$900
$1,400
$1,900
Potential savings to checking account holders from switching to prepaid debit cards
18% would save
Median savings (US$)
Source: Aite Group
82% would be worse off
SO
UR
CE
: Aite
; “Tr
ends
in R
etai
l Ban
king
”; R
on S
hevl
in; M
arch
201
3
Monthly Account Fees Up…
Source: Bankrate.com
$ -
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
1998 2000 2002 2004 2006 2008 2010 2012
Average Monthly Service Fees on Checking Accounts
SO
UR
CE
: Aite
; “Tr
ends
in R
etai
l Ban
king
”; R
on S
hevl
in; M
arch
201
3
ATM Fees Up…
Average ATM Fees on Non-Customers
$ -
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
Source: Bankrate.com
1998 2000 2002 2004 2006 2008 2010 2012
SO
UR
CE
: Aite
; “Tr
ends
in R
etai
l Ban
king
”; R
on S
hevl
in; M
arch
201
3
…and interest rates are down
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
2001 2003 2005 2007 2009 2011
0.79%
0.08%
Source: Bankrate.com
Average Checking Account Yield
SO
UR
CE
: Aite
; “Tr
ends
in R
etai
l Ban
king
”; R
on S
hevl
in; M
arch
201
3
The “Debanked”
Mainstream consumers who willingly opt out of the traditional banking system
SOURCE: Aite; “Trends in Retail Banking”; Ron Shevlin; March 2013
“NeoChecking” Accounts
Characteristics of “NeoChecking”
• Mobile-first design • PFM the focus, not the add-on • Blending prepaid, debit, and credit
– Functions/transitions from one to the other do not require closing/opening of accounts
SOURCE: Aite; “Trends in Retail Banking”; Ron Shevlin; March 2013
Branch Facts
• Self-service reduces branch traffic dramatically
• Deposits are 25-30% of image ATM transactions
– 40% of deposit-taking ATMs are image enabled
• Daily per-branch deposits will decline from 250/day to 50/day by 2016. (Celent)
• 23% of banks expect branch contraction over the next five years
– No credit unions expect branch contraction
SOU
RC
E: C
elen
t; “T
OP
TREN
DS
IN R
ETAI
L B
ANK
ING
201
3”
By
Bar
t Nar
ter a
nd th
e C
elen
t Ban
king
Tea
m; D
ecem
ber 1
2, 2
012
Online Banking & BillPay Forecast
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“201
2 O
nlin
e B
anki
ng a
nd B
ill-P
aym
ent
Fore
cast
:: H
ow to
Boo
st P
rofit
abili
ty W
hen
Faci
ng F
lat-L
inin
g A
dopt
ion”
; Aug
ust 2
012
60
81
92
32
44 52 41
47
-
10
20
30
40
50
60
70
80
90
100
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Milli
ons o
f Onl
ine
Hou
seho
lds
Actual Forecast© 2012 Javelin Strategy & Research
Banked online
Actual Forecast© 2012 Javelin Strategy & Research
Paid at biller site
Paid at FI site
Banked online
53
Mobile Banking
77% Adults Own Smartphones by 2017
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“201
2 M
obile
Ban
king
, Sm
artp
hone
, and
Tab
let F
orec
ast:
M
obile
Ban
king
Gai
ns 1
0 M
illio
n U
sers
as
Sm
artp
hone
and
Tab
let A
dopt
ion
Soa
rs”;
Dec
embe
r 201
2
Forecast of U.S. Adults’ Smartphone Adoption, 2009–2012
Mobile Banking Rides Smartphone Rev
Jave
lin S
trate
gy &
Res
earc
h: “2
011
Mob
ile B
anki
ng, S
mar
tpho
ne a
nd T
able
t For
ecas
t: M
obile
Ban
king
Mov
es M
ains
tream
to M
id-s
ized
, Com
mun
ity B
anks
and
Cre
dit U
nion
s”; D
ecem
ber 2
011
202182
202 205 209 212 216 219
36 35
5768
7989
99111
43
66
90102
114127
142158
0
50
100
150
200
250
2009 2010 2011 2012 2013 2014 2015 2016
Mobile users (in millions)
Mobile banking users in the last 12 months
Smartphone owners
Base: US adults with mobile phone.© 2011 Javelin Strategy & Research
Actual Forecast
Num
ber o
f mob
ile p
hone
use
rs (i
n m
illio
ns)
U.S. Mobile and Mobile-Banking Users, 2009–2016
Android Widens Lead in Mobile OS
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“201
2 M
obile
Ban
king
, Sm
artp
hone
, and
Tab
let F
orec
ast:
M
obile
Ban
king
Gai
ns 1
0 M
illio
n U
sers
as
Sm
artp
hone
and
Tab
let A
dopt
ion
Soa
rs”;
Dec
embe
r 201
2
Forecast of U.S. Adult Smartphone Owners by Device OS Type, 2009–2017
Mobile Bankers Double in Next 5 Years
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“201
2 M
obile
Ban
king
, Sm
artp
hone
, and
Tab
let F
orec
ast:
M
obile
Ban
king
Gai
ns 1
0 M
illio
n U
sers
as
Sm
artp
hone
and
Tab
let A
dopt
ion
Soa
rs”;
Dec
embe
r 201
2 Forecast of U.S. Adults’ Mobile Banking Adoption, 2009–2017
Tablets: 52% of Mobile Adults by 2017
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“201
2 M
obile
Ban
king
, Sm
artp
hone
, and
Tab
let F
orec
ast:
M
obile
Ban
king
Gai
ns 1
0 M
illio
n U
sers
as
Sm
artp
hone
and
Tab
let A
dopt
ion
Soa
rs”;
Dec
embe
r 201
2 Forecast of U.S. Mobile Adults Who Use Tablets, 2011–2017
Switchers: Sizing Churn
& Opportunity
Big Banks Vulnerable to Switching
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“Onl
ine
Ban
king
and
Bill
Pay
For
ecas
t Rev
iew
201
2”; S
epte
mbe
r 201
2
Javelin Benchmark™: Likelihood to Switch Primary FIs in Next 12
Potential Switchers • 11% of consumers in 2012 plan to switch FIs
– 25% of Citibank customers; 21% of BoA customers
• Maintain 30% more deposits than consumers who do not plan to switch – Represent $675B in deposits
• Willing to pay $92M in fees – Money orders; cashier’s checks, safe deposit boxes, and
mobile remote deposit.
• Place a premium on personal finance and simplicity (Javelin Strategy & Research)
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“201
2 O
nlin
e B
anki
ng a
nd B
ill-P
aym
ent
Fore
cast
:: H
ow to
Boo
st P
rofit
abili
ty W
hen
Faci
ng F
lat-L
inin
g A
dopt
ion”
; Aug
ust 2
012
“Generations impact the economy.” John Augustine, CFA Chief Market Strategist Fifth Third Bank
Gen Y.1 Gen Y.2
18-24 25-34
PFM Demand by Age
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“21s
t-Cen
tury
PFM
for a
Mas
s A
udie
nce:
H
ow to
Bui
ld E
very
day
Onl
ine
and
Mob
ile P
FM’;
Febr
uary
201
3
PFM Demand by Income
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“21s
t-Cen
tury
PFM
for a
Mas
s A
udie
nce:
H
ow to
Bui
ld E
very
day
Onl
ine
and
Mob
ile P
FM’;
Febr
uary
201
3
PFM or FPM?
SOURCE: Ron Shevlin’s Snarketing 2.0 Blog; “PFM is Dead, Long Live FPM”; http://snarketing2dot0.com/2012/09/24/pfm-is-dead-long-live-fpm/
• Monthly fees
Costs Benefits
• Penalties
• Service fees
• Interest earned
• Rewards redeemed
• Savings generated
TBO: Total Benefits of Ownership
SOURCE: Aite; “Trends in Retail Banking”; Ron Shevlin; March 2013
“Account aggregation and budget creation/tracking is great, but unless it changes behavior…then the potential impact of PFM is unfulfilled. Too many consumer advocates focus on financial literacy. Knowledge without action, or change in behavior, is useless.”
SOURCE: Ron Shevlin; Snarketing 2.0; “Finance Dot Data Dot Gov”; http://snarketing2dot0.com/2012/09/28/finance-dot-data-dot-gov/
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“21s
t-Cen
tury
PFM
for a
Mas
s A
udie
nce:
H
ow to
Bui
ld E
very
day
Onl
ine
and
Mob
ile P
FM’;
Febr
uary
201
3
Moneyhawks and Gen Y.2 More Likely to Use Non-Bank PFM
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“21s
t-Cen
tury
PFM
for a
Mas
s A
udie
nce:
H
ow to
Bui
ld E
very
day
Onl
ine
and
Mob
ile P
FM’;
Febr
uary
201
3
16%20%
21%23%
29%29%30%30%31%31%
34%36%37%38%38%38%
49%
0% 10% 20% 30% 40% 50% 60%
Social-network shopping recommendations Archive business expenses
Investment toolsMotivational alerts
Automatic budget categorizationFinancial plannning tools
Cash-flow estimatorGPS-based merchant discountsCard-reward recommendations
Record cash purchasesPrice-change alerts
View finances on a calendar Comparison pricing
Personal finance alertsRewards reminders
Earn points or enter sweepstakes View all account balances
Percent of consumersQ17: Please indicate your likelihood of using the following products or services if they were available to you. Q18: Please indicate your likelihood of using the following products or services if they were available to you. Q19: New applications and services are becoming available, Please indicate your likelihood of using the following products or services if they were available to you.
August 2012, n = 3,000Base: All consumers.
© 2013 Javelin Strategy & Research
Tier 1
Q17: Please indicate your likelihood of using the following products or services if they were available to you. Q18: Please indicate your likelihood of using the following products or services if they were available to you. Q19: New applications and services are becoming available, Please indicate your likelihood of using the following products or services if they were available to you.
August 2012, n = 3,000Base: All consumers.
© 2013 Javelin Strategy & Research
Tier 4
Tier 3
Tier 2
Most Desireable PFM Features
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“21s
t-Cen
tury
PFM
for a
Mas
s A
udie
nce:
H
ow to
Bui
ld E
very
day
Onl
ine
and
Mob
ile P
FM’;
Febr
uary
201
3
49%
54%
54%
56%
57%
57%
57%
58%
62%
0% 10% 20% 30% 40% 50% 60% 70%
All consumers
Smartphone owners
$75,000 - $99,999
$150,000 or more
$100,000 - $149,999
Online Banking Loyalists
Tablet owners
Mobile bankers
Moneyhawks
Percent of consumers
Q18A: Please indicate your likelihood of using the following products or services if they were available to you: View all your account balances in one place. A: Probably would use/Definitely would use.
August 2012, n varies: 324 - 3,000Base: Moneyhawks; Mobile bankers in the past 90 days;
Tablet owners; Online banking loyalist; Consumers by income; Smartphone owners; All consumers.
© 2013 Javelin Strategy & Research
Who Wants It All in One Place?
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“21s
t-Cen
tury
PFM
for a
Mas
s A
udie
nce:
H
ow to
Bui
ld E
very
day
Onl
ine
and
Mob
ile P
FM’;
Febr
uary
201
3
38
50
52
58
0 10 20 30 40 50 60 70
Plan
Buy
Shop
Spend
Points (100-point scale)
Q21: Please rank the categories based on your likelihood of using the types of products and services included under them.
August 2012, n = 3,000Base: All consumers.
© 2013 Javelin Strategy & Research
Spend, Shop, Buy, Plan PFM Features Ranked by Financial Chores
SOURCE: Javelin Strategy & Research; “21st-Century PFM for a Mass Audience: How to Build Everyday Online and Mobile PFM’; February 2013
Spend, Shop, Buy, Plan
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“21s
t-Cen
tury
PFM
for a
Mas
s A
udie
nce:
H
ow to
Bui
ld E
very
day
Onl
ine
and
Mob
ile P
FM’;
Febr
uary
201
3
38%44%44%45%
51%50%
53%51%
52%53%54%56%56%57%
56%57%
62%
0% 20% 40% 60% 80%
Social-network shopping recommendations Archive business expenses
Investment toolsMotivational alerts
Automatic budget categorizationFinancial plannning tools
Cash-flow estimatorGPS-based merchant discountsCard-reward recommendations
Record cash purchasesPrice-change alerts
View finances on a calendar Comparison pricing
Personal finance alertsRewards reminders
Earn points or enter sweepstakes View all account balances
Percent of consumers
Moneyhawks
Gen Y.2
$100,000 - $149,999
All consumers
Tier 1
Tier 2
Tier 3
Tier 4
Q17: Please indicate your likelihood of using the following products or services if they were available to you. Q18: Please indicate your likelihood of using the following products or services if they were available to you. Q19: New applications and services are becoming available, Please indicate your likelihood of using the following products or services if they were available to you.
August 2012, n varies: 548 - 3,000Base: Moneyhawks; Consumers aged 25 - 34;
Consumers a household income of $100,000 -$149,999; All consumers.
© 2013 Javelin Strategy & Research
Moneyhawks: Highest PFM Interest
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“21s
t-Cen
tury
PFM
for a
Mas
s A
udie
nce:
H
ow to
Bui
ld E
very
day
Onl
ine
and
Mob
ile P
FM’;
Febr
uary
201
3
Post-Durbin Payments
IMAGE SOURCE: www.shutterstock.com
Lemons and Lemonade
• The Lemons – Dodd-Frank increases regulatory burden – Recession raises unemployment – Durbin amendment shifts power to merchants – Non-FI 3rd parties lead mobile payments evolution
• The Lemonade – Dodd-Frank targets biggest FIs – Unemployment creates churn in banking – Durbin creates competitive carve-out for FIs under $10B – Consumers prefer primary FI for mobile wallets/payments
IMAGE SOURCE: www.shutterstock.com
Interchange Wars: Drivers
• Interchange Lawsuit Settlement – A clear win for MasterCard and Visa networks
• Prevents future legal action against the 2 networks
• Enables merchant surcharging at the POS in 40 states where allowed
– Likely to deter further legal regulatory action – Merchants must address interchange expense
management in the marketplace
• Shifts in consumer and merchant behaviors – Movement to digital channel and mobile payments – Creates a conduit for new competitive entry at the POS
SO
UR
CE
: Aite
; “Tr
ends
in R
etai
l Ban
king
”; R
on S
hevl
in; M
arch
201
3
Interchange Wars: Outcomes
• Alternative payment acceptance providers gain traction in retail locations
• Merchants drop the surcharge banter
• Merchant MCX network formed
• Merchants will try to take control of the digital wallet environment
SO
UR
CE
: Aite
; “Tr
ends
in R
etai
l Ban
king
”; R
on S
hevl
in; M
arch
201
3
Payments Revenue
SO
UR
CE
: FD
IC =
Com
mer
cial
Ban
king
; Fi
rm P
aym
ents
Map
= P
aym
ents
; B
EA
= A
gric
ultu
re, H
otel
s, A
irlin
es, I
T, F
ilm/M
usic
1 Payments revenues are from 2011
Consumer DDA Profit Margins Down
SO
UR
CE
: McK
inse
y U
S P
aym
ents
Map
, Q3-
11 re
leas
e, B
ase
Cas
e sc
enar
io
Regs Cut $120B in Revenue thru 2016
1 Lost revenue assumes pre-regulatory interchange rates and NSF/OD occurrences
SO
UR
CE
: McK
inse
y U
S P
aym
ents
Map
, Rel
ease
Q1
2012
; Bas
e C
ase
scen
ario
Can’t Close Rev Gap w/ Tweaks SOURCE: McKinsey US Payments Map, Release Q1 2012; Base Case scenario
How much have exempt banks lost in debit fee income?
Debit Interchange Rates After Durbin
SOURCE: Oliver Wyman/PULSE 2012 Debit Issuer Study
Consumer Debit Card Usage/Spend Consumer Debit Card Usage and Annual Spend, 2010 and 2011
SO
UR
CE
: Oliv
er W
yman
/PU
LSE
201
2 D
ebit
Issu
er S
tudy
Debit Growth in 2012
SOURCE: Oliver Wyman/PULSE 2012 Debit Issuer Study
Biggest Opportunities: Exempt Issuers
SOURCE: Oliver Wyman/PULSE 2012 Debit Issuer Study
Prepaid & Gift Cards Grow Rapidly
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch:
“5th
Ann
ual O
nlin
e R
etai
l Pay
men
ts F
orec
ast 2
012–
2017
: M
obile
and
Alte
rnat
ive
Pay
men
ts A
re C
hang
ing
the
Gam
e”;
Nov
embe
r 201
2
Comparative Card Revenue Source Credit Debit Prepaid Basic Fees • Annual • N/A (most fees tied to
linked checking account) • Activation • Monthly
Other Fees • Sin (overdraft, late payment, returned payment)
• Int’l transx • Cash W/D
• Foreign ATM • ATM W/D • Load • Inquiry • Bill Payment • Card replacement
Interest • 0-35%+ (rate increases w/ delinquency)
• N/A • N/A
Interchange • Varies by type and volume
• ≈2% + $0.10/trx
• $0.21 + .05% (unless exempt, then ≈ 1.65% + $0.15/trx
• Varies by type (unless bill pay offered then same as debit)
• ≈1.5% + $0.20/trx
Other • N/A • Float (for linked checking account)
• Float • Break (≈8%)
Annual Revenue
• $175-$250 • $4.50-$5.00 • $100-$125
SOU
RC
E: N
ACH
A’s
The
Paym
ents
Inst
itutie
; “C
redi
t Car
ds v
s D
ebit
Car
ds v
s
Prep
aid
Car
ds”;
July
15-
18 2
012;
Uni
vers
ity o
f Tex
as a
t Aus
tin, T
X
Exemption Spawns Innovation
What class of payments networks were specifically exempted from Durbin?
Name the three companies who’ve made the biggest headlines in payments innovation in recent months.
• Visa’s PIN-Authenticated Visa Debit (PAVD) • Fixed Acquirer Network Fees (FANF) • EMV • Credit Card Surcharging • $7B “Swipe Fee” Settlement • Merchant Customer Exchange (MCX) • PayPal at the POS (via Discover partnership) • Discover in the News
– Offer Checking Accounts? – Discover Signature Debit Cards for FIs
Headwinds and Wildcards
Mobile Payments?
So some think the big question is…
Swipe, Dip, Tap
How to reduce “time suck”?
Time Suck?
Coffees, Burgers & Dongles, Oh My!
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
Evolution and The End Game
Mobile Banking
Mobile Payments
Mobile Marketing
Things We Know
Mobile Bankers Open to Mobile Wallets
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“Bat
tle fo
r Con
trol o
f the
Mob
ile W
alle
t”; S
epte
mbe
r 201
2
10%
25%
21%
38%
31%
27%
14%
6%
24%
4%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
All mobile consumers
Mobile bankers past
90 days
Percent of Mobile Consumers
Very likely Somewhat Likely Neutral (neither unlikely nor likely) Somewhat Unlikely Very unlikely
Q29_B: If a mobile wallet were made available to you, how likely would you be to adopt this technology in the next twelve months?
June 2012, n= 872, 3,492.Base: A consumers who have mobile banked in
the past 90 days, all mobile phone owners.©2012 Javelin Strategy & Research
Mobile Buys of Physical Goods Triples
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“Bat
tle fo
r Con
trol o
f the
Mob
ile W
alle
t”; S
epte
mbe
r 201
2
Purchasing Pattern on Mobile Devices
Mobile POS to Grow 25% Annually
SO
UR
CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“Bat
tle fo
r Con
trol o
f the
Mob
ile W
alle
t”; S
epte
mbe
r 201
2 Mobile POS Purchase Dollar Volume Forecast, 2011–2017
Financial, mobile, and retail ecosystems are converging…
SO
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CE
: Jav
elin
Stra
tegy
& R
esea
rch;
“Bat
tle fo
r Con
trol o
f the
Mob
ile W
alle
t”; S
epte
mbe
r 201
2
Note: The trust, innovation, and privacy scores for Isis were derived from averaging the scores for the three mobile network operators involved in the project, AT&T, T-Mobile and Verizon.
Biometrics converging with payments…
Speak & Pay
“Nina”
Face and Voice Authentication
April 17, 2013 85
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
What Voice Means for Payments
• Better design of User Interface/Experience
– Removing the need for the keyboard frees up more of the screen to display information
– You can speak and see simultaneously
• Voiceprints for biometric authentication
– Harder for thieves to grab voices than PINs
©2012 Jack Henry & Associates, Inc. All Rights Reserved.
86
Physical and virtual worlds are converging…
Mobile Converges Physical & Virtual
Physical Virtual
Physical & Virtual Collide!
Physical Virtual
Preference for Wallet Providers
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tegy
& R
esea
rch;
“Bat
tle fo
r Con
trol o
f the
Mob
ile W
alle
t”; S
epte
mbe
r 201
2
1%1%1%
2%2%
3%3%3%3%
4%4%4%
5%5%
6%6%
8%9%
13%15%
0% 10% 20%
FacebookCitibank
MicrosoftWal-MartU.S. Bank
AmazonDiscover
GoogleSprint
T-MobileApple
American ExpressWells FargoMasterCard
Bank of AmericaChaseAT&T
VerizonPayPal
Visa
All Mobile Phone Owners
Q29_A: If you were choosing a mobile wallet provider, which of the following would you be most likely to choose?
June 2012, n=3,492.Base: All mobile phone owners.
©2012 Javelin Strategy & Research
Consumer Use of PayPal Grows
SO
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elin
Stra
tegy
& R
esea
rch;
“Bat
tle fo
r Con
trol o
f the
Mob
ile W
alle
t”; S
epte
mbe
r 201
2
47%
52%
0% 10% 20% 30% 40% 50% 60%
2010
2011
Percent of Consumers
Q38. Which of the following types of alternative payments have you used for an online purchase? PayPal
August 2011, n=2,304, 4,998.Base: All consumers.
©2012 Javelin Strategy & Research
Things We Don’t Know
Which mobile payments techs, channels, and functions will prevail?
Bank’s Role in Mobile POS
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elin
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tegy
& R
esea
rch;
“Bat
tle fo
r Con
trol o
f the
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ile W
alle
t”; S
epte
mbe
r 201
2
FIs Play Different Roles in Different NFC Solutions
PROBLEM 1: Most likely NFC models
do not put banks in control.
PROBLEM 2: Complexity of NFC
models forestall their adoption.
NFC Requires Complex Collaboration
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elin
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tegy
& R
esea
rch;
“Bat
tle fo
r Con
trol o
f the
Mob
ile W
alle
t”; S
epte
mbe
r 201
2
© 2012 Javelin Strategy & Research 4
Secure Element(Credentialing)
NFC Chip(SIM or
Embedded)
Wallet(Rewards, Loyalty, Payments, Keys,
Tickets)
Merchant POS
Payment Networks
Issuer TSM
Secure Element
TSM
© 2012 Javelin Strategy & Research
NFC (SIM or Embedded) Model
Transact
Load
Acquiring Bank
Issuing Bank
PROBLEM 3: So what to do
before/while/if NFC arrives?
Mobile Wallet Tech Trajectory
Cloud NFC
The
BIG Question
Who will control and monetize mobile marketing of payments data?
Isis Wallet
Google Wallet
How much is at stake?
$1 Trillion
SOU
RC
E: “
The
Gre
at M
obile
Alli
ance
” by
Ste
ve M
ott;
Dig
ital T
rans
actio
ns; J
uly
& S
epte
mbe
r, 20
12
Mobile Wallet Demand Weak…
Source: Aite Group survey of 1,115 US consumers, Q2 2012
Discover
American Express
Apple
MasterCard
PayPal
Visa
Amazon
Very interested Somewhat interested
Q. How interested are you in having a mobile wallet from the following companies?
18%
18%
16%
15%
14%
12%
11%
11%
10%
21%
22%
22%
19%
19%
15%
16%
16%
17% SO
UR
CE
: Aite
; “Tr
ends
in R
etai
l Ban
king
”; R
on S
hevl
in; M
arch
201
3
…But Mobile Shopping Demand Strong
Source: Aite Group survey of 1,115 US consumers, Q2 2012
Q. Which of the following mobile shopping capabilities are important to you?
Connects to social networks
Offered by my primary bank
Shows product reviews
Offered by company I know/trust
Offered by stores I shop at
Offered by company I know/trust
Provides very steep discounts
Finds the lowest price 72%
72%
70%
70%
67%
62%
50%
34%
SO
UR
CE
: Aite
; “Tr
ends
in R
etai
l Ban
king
”; R
on S
hevl
in; M
arch
201
3
• 33% of all households and 50 percent of smartphone users are aware of e-wallet products.
• 25% of households hold positive views of e-wallets, 33% are neutral, the remainder are negative — generally due to concerns about e-wallet security.
• 20% of households that were previously aware of the products and 25% of existing smartphone users would use a digital wallet.
• More than 75% of interested users would prefer e-wallet services from their primary financial institution.
Digital Wallet Stats
109
SO
UR
CE
: “S
ettin
g th
e S
tage
for t
he M
-Com
mer
ce O
ppor
tuni
ty” b
y D
ebor
ah M
atth
ews
Phi
llips
, AA
P; J
HA
Mob
ile P
aym
ents
For
um; J
anua
ry 1
1, 2
013
Source: Study: Customers want their banks to offer e-wallets Mobile Payments Today
Big Data?
Big Data? No, FI Data!
• FIs must begin to understand their own data. – That’s where the value is.
• Transaction data can tell an FI... – …what other financials institutions customers use. – …what financial products/services they use. – …how much they pay to use other financial services. – …where they shop, how often, and how much they
spend.
• Behavioral analysis is already necessary to bolster security, why not tap the same analysis to better understand and serve customers/members?
Beware what happens to your
data.
Google Wallet: Merchant of Record SOURCE: Citi GPS: Global Perspectives & Solutions; “UPWARDLY MOBILE II A
Long and Winding Roadfor Mobile Payments – Eight Crucial Questions,
Answered”; November 2012
PayPal: Merchant of Record
SOURCE: Citi GPS: Global Perspectives & Solutions; “UPWARDLY MOBILE II A
Long and Winding Roadfor Mobile Payments – Eight Crucial Questions,
Answered”; November 2012
Your data uniquely enables you to provide value with
integrity…
…integrity
wins the race…
Who Wins the Mobile/Data Wars?
• Google? – “Here’s a business who sells what you’re looking for.”
• Amazon? – “Buy whatever you’re looking for from us.”
• Merchants? – “Buy, Buy, Buy!!!”
• Financial Institutions? – “We’ll help you decide whether, when, and where it
makes sense to buy the stuff you want…in real time.”
119
©2011 Jack Henry & Associates, Inc. All Rights Reserved.
“Help Me Decide”
“Account aggregation and budget creation/tracking is great, but unless it changes behavior…then the potential impact of PFM is unfulfilled. Too many consumer advocates focus on financial literacy. Knowledge without action, or change in behavior, is useless.”
SOURCE: Ron Shevlin; Snarketing 2.0; “Finance Dot Data Dot Gov”; http://snarketing2dot0.com/2012/09/28/finance-dot-data-dot-gov/
Lee Wetherington, AAP [email protected] http://discover.profitstars.com/leewetherington
http://twitter.com/leewetherington
http://www.linkedin.com/in/leewetherington