Mobile is re-writing all the rules

EVERYWHERE

Bob Egan – CEO, Sepharim Groupbob@sepharim.com+1 508-289-1001

Sepharim GroupConnected Intelligence

Sepharim Group is a boutique research and advisory that firm that is focused on mobility and its related eco-system. Mobility is creating seismic shifts about how consumers interact and transact with each other, their banks and retailers and how people live, work and play. Our team helps executives gain the needed insights to make critical product and business decisions with the objective of creating tomorrow’s advantage, today.

WWW.SEPHARIMGROUP.COM

People on the planet6.8 Billion

77% of the population with mobile devices

5.3 billion

The heartbeat of everything is accelerating

Business model Tensions and Disruptions

5 billion consumers X 10 connections = 50 Billion connections by 2020

Near Free Platforms

Low Cost Components

High Speed, Ubiquitous Access

= Perfect Storm?

mobile first

web first

Deterministic Anticipative

As digital economy migrates from the web to mobile, the next major growth hormone will be driven by anticipating the needs of the consumer.

How Credible Are You?

Available

Connected

On-Demand Business

Anywhere

Seismic Shift

The jungle of connectivity options must be made transparent to the consumer but visible to the supplier

What should I do?Who should care?How can I monetize?

Yesterday’s richest mobile companies have become the poorest …

Will incumbent FSI’s suffer a similar fate?

while unknowns become the new rich

Important dynamics of the global payments industry

• Protracted Recession Creates Uncertainty• Expect further consolidation in 2011• Extreme pressure to control costs

• Significant Shift in Credit & Debit Card Industry• Tighter lending standards• Battered card issuers• Focus on regulatory compliance

• Prepaid Products Growing Faster than Credit & Debit• Quasi-bank relationship• Alternative channel• Limited barriers for use

What should concern banks?

• Satisfying regulators, stockholders, and other overseers• Predictability• Defensibility• Stability

• Risk & Legal have banks paralyzed• Innovation going in circles trying to satisfy risk• Newness of mobile, alternative payments terrifying• Uncertainty of risk rules with new types of partners

• Losing customers• Disintermediation• Trust and perception issues among customers

The Business Drivers of MobilityFive Key Business Drivers

Connected cultureCustomer “needs of now”

Biz process innovation

Manage Risk Contain costs

• Proliferation of Devices• Ubiquity of Broadband• Connected Socialization

• Business Asset Risk• Reputational• Compliance• Talent

It’s 10pm- Do you know where your assets are?

Cloud

Lost/Theft Protection

Anti-SpamAntivirusPersonal

FirewallDevice Monitoring

and Control

Mobile Payments are an Attack on Cash and Checks

Mobile has the potential to impact $55 billion of the

check market

Mobile has the potential to impact $163 billion of the

cash market

$3 Trillion

$1.1 Trillion

$1.5 Trillion

20

CAGR= 18%

CAGR= 50%

CAGR= 9%

(In billions of transactions)

Global Payments Transaction Volume

Cash-to-Card Migration in the General Consumer Population While New Consumers Bypass Cash

Bank Centric• Payments

processed directly through bank

Collaborative• Joint venture

between carriers and banks

Independent• Payments

processed independently from bank or carrier

Carrier Centric• Payments

processed through carrier contract

High Bank Involvement

Low

High

Low

Carrier’s Involvement

HighCarrier Involvement

Through 2015, the bulk of NFC use will be for Connections, not Transactions due to an immature payment biz model

• Set up wireless homeoffice connections

• Access buildings and events

• Touch your camera to a printer to print

• Read smart posters

• Share business cards

• Pay for goods and Services

• Buy transit tickets, and access trains,

planes, etc.3

NFC Connect

NFC Access

NFC Transactions

BanksIs the solution open? Probably Yes No? Yes? Yes ?

Who controls the secure element?

ISIS FDC Apple? ? ? ?

How do they make money? Fees Ad’s Fee’s ? Fee’s Interchange

What rails are used? MC/V/D Open ? ? Open Open

Is the solution bank friendly? Yes but… Yes ? ? Yes Neutral

How will banks play? Banks as ISIS issuers

Banks as traditional issuers

? ? Banks as traditional

issuers

Banks as traditional

issuers

Is the solution Merchantfriendly?

Yes, but.. Yes, but No? ? Yes Neutral

In 2011 mobile commerce will be big on noise yet tiny on transaction volumes.

Source: mFoundry, industry sources, Sepharim Group

24

Merchant

Financial Institution

Mobile Operator

Consumer

Handset Manufacturer

Mobile Payments

Additional interchange revenue and maintaining brand relevance

Cost to upgrade vs. revenue boost and lower cash handling costs

ConvenienceCostSafetyAccess

Increased ARPU from fees and lower churn

Need-based handset sales

New customer acquisition and protection of payments business

Card Association

Mobile Payments Pave the Way for Niche to Mainstream Play

Will ownership and control be at odds?

Micro-blogging

Location

VideoVoice

TextPhotoSearch Intelligence

Cloud

Transaction Cloud

Retailers

Banks eMerchants

Connectivity

Distribution Cloud

“the new network”

Mobile Operators

Questions

SepharimKnowledge for leaders

+1 508-289-1001

Bob@Sepharim.com

BOB EGANCEO – SEPHARIM GROUP+1 508-289-1001

Thank you !!

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