The document discusses whether contactless payments will change the global payments landscape. It notes that contactless adoption has been slow, with only 25 million contactless cards issued in the US in 2007 versus 300 million magstripe cards. Merchants have been reluctant to accept contactless due to the small number of contactless cards and users. However, the document argues that contactless payments could become irresistible to merchants if banks use contactless data to deliver targeted promotions and messaging to customers at the point of sale. This would provide value to merchants through low-cost promotional marketing and help increase merchant acceptance of contactless payments.

1. Will contactless change the
global payments landscape?
Aneace Haddad
Chairman & Founder
Welcome Real-time
London June 2007
Copyright 2007 © 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.

3. The main contactless promise:
“No more lines”

4. “No more lines.”
Does contactless deliver this promise?
Yes, if the shoppers in front of you also
have contactless cards.

5. 1 out of 12
25 million contactless cards will be issued in the US in 2007,
versus 300 million magstripe cards.

6. Only JPMorgan Chase
“Of the largest banks, only JPMorgan Chase has
begun a significant rollout, although it has only
put contactless chips on part of its portfolio.”
Card Technology, June 2007

7. Contactless
230 million
forecasts
for 2007
37 million
25 million
Jupiter Report Jupiter Report Card Technology
(2004) (2006) (June 2007)

8. Percent of spend in 2010
1.6%
US contactless payments forecast (Jupiter)

9. “A major obstacle is
persuading more merchants
to accept contactless.”
Card Technology, June 2007

10. 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

11. “Until you have a better
merchant coverage, there’s
clearly a problem .”
Leigh Malnati, American Express

14. “[We] haven’t moved aggressively to contactless
because there is little consumer demand – been
more of an issuer/association push.”
David Tryder
Dunkin’ Donuts
May 2007

15. “The contactless cards are not yet
affecting the parking lots. Get more
cards out in the market!”
Manager, Sheetz, Inc.
Source: American Banker

16. “Waving a card in front of a
reader takes about as much time
as swiping one through.”
Manager, Sheetz, Inc.
Source: American Banker

17. “Visa launches No Signature Required
program to boost card usage for small
purchases with traditional magnetic
stripe cards.”
April 11, 2006

18. Is this ad for contactless or
traditional magstripe cards?

19. “Because money shouldn’t
slow you down”

20. THE IRONY:
Contactless can deliver unique
features that are irresistible to
merchants … not just “Speed”.
(But the technology needs to be used to its fullest.)

21. Which brand offers irresistible
features to merchants?
An opportunity to differentiate.

22. How might contactless become
irresistible to merchants?
Bank-managed data could help retailers identify their
best customers and prospects.
[help] entice customers to visit the retailer - either for the
first time or for repeat patronage.
[banks can charge] direct fees or indirect/bundled pricing
e.g., in the form of higher interchange.
DiamondCluster, Dec 2005
[Couple] EMV technology and loyalty best practices …
(customer analytics … merchant-funded rewards …)
Mercator Advisory Group, Nov 2006

23. How might contactless become
irresistible to merchants?
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.
An EMV-compliant card would store cardholders' shopping
patterns on the chip.
– For example, how many times the cardholder has used a card at a specific
retailer or whether the person has shopped at that retailer.
The retailer will have a platform to deliver tailored
promotions at the POS. The promotion or message
can be delivered via a POS receipt.
Gartner, May 2007

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

25. France

26. Germany

27. Italy

28. Spain

29. Pakistan

30. Thailand

31. China

32. Co-op package mailing,
1 insert: €350
Newspaper ad, half page:
€9,000 - €12,000
Local coupon book,
1 page: €350

33. Make it possible for merchants to use
data hidden inside the card’s chip to
deliver targeted messages at the POS,
at very low cost.
Your cards will
become much
more valuable
to merchants.

34. Ex: Frequent Shopper Messages
Merchants can avoid giving high value promotions to all customers. They can
deliver increasingly valuable coupons encouraging the customer to come back
again soon. Customers are pleasantly surprised to get the offer.
Coupon at 1st visit Coupon at 2nd visit Coupon at 3rd visit
Dining & ----------------------------- ----------------------------- -----------------------------
----------------------------- ----------------------------- -----------------------------
Fast Food Coupon Coupon Coupon
Coupon Coupon Coupon
BUY 1 VALUE MEAL BUY 1 VALUE MEAL BUY 1 VALUE MEAL
BUY 1 VALUE MEAL BUY 1 VALUE MEAL BUY 1 VALUE MEAL
GET A FREE GET A FREE GET A SECOND
GET A FREE GET A FREE GET A SECOND
p DESERT HAPPY MEAL VALUE MEAL 2006
VALUE MEAL FREE
DESERT Expires Jan. MEAL
HAPPY 31, 2006 Expires Jan. 31, FREE
p p
Expires Jan. 31, 2006
Cosmetics
After 100£ After 200£ After 300£ After 400£
------------------------- ------------------------- ------------------------- -------------------------
------------------------- ------------------------- ------------------------- -------------------------
COUPON COUPON COUPON COUPON
COUPON COUPON COUPON COUPON
CHOOSE A SILVER CHOOSE A GOLD CHOOSE A PLATINUM CHOOSE A DIAMOND
CHOOSE A SILVER CHOOSE A GOLD CHOOSE A PLATINUM CHOOSE A DIAMOND
CATEGORY GIFT CATEGORY GIFT CATEGORY GIFT CATEGORY GIFT
CATEGORY GIFT CATEGORY GIFT CATEGORY GIFT CATEGORY GIFT
Expires Jan. 31, 2006 Expires Apr. 30, 2006 Expires Aug. 31, 2006 Expires Dec. 31, 2006
Expires Jan. 31, 2006 Expires Apr. 30, 2006 Expires Aug. 31, 2006 Expires Dec. 31, 2006

35. Ex: Competitive Shopper Messages
Merchants can avoid losing customers to the competition. They can recognize
occasional customers probably shopping elsewhere, and offer an incentive on the
next purchase, to encourage customers to shop more frequently.
Dining &
-----------------------------
-----------------------------
Coupon
Coupon
Fast Food
----------------------------
----------------------------
BUY 1 VALUE MEAL
BUY 1 VALUE MEAL
Coupon
Coupon
GET A SECOND
GET A SECOND
TRY OUR NEW EZ
TRY OUR NEW EZ
VALUE MEAL FREE
VALUE MEAL FREE
CAR WASH AND
CAR WASH AND
Petrol ENJOY A COFFEE
ENJOY A COFFEE Not valid with any other special
Not valid with any other special
WHILE YOU WAIT Expires Jan. 31, 2006
WHILE YOU WAIT Expires Jan. 31, 2006
CAR WASH+COFFEE
CAR WASH+COFFEE
SPECIAL $2.00
SPECIAL $2.00 ----------------------------
----------------------------
Coupon
Coupon
Expires Nov. 15, 2005
Expires Nov. 15, 2005
Cosmetics
LIMITED TIME OFFER
LIMITED TIME OFFER
CHOOSE ANY
CHOOSE ANY
SILVER GIFT SET
SILVER GIFT SET
ONLY £2.00
ONLY £2.00
AT YOUR NEXT VISIT
AT YOUR NEXT VISIT
Expires Nov. 15, 2005
Expires Nov. 15, 2005

36. Ex: Game Programs
Merchants can avoid the cost and trouble of complicated loyalty programs.
Instead, they can build continuity through games based on cumulative spending
or number of visits.
Coupon at 1st visit Coupon at 2nd visit Coupon at 3rd visit Coupon at 4th visit
----------------------
---------------------- ---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
Coupon
Coupon
Dining &
Fast Food MCSURPRISE!
M---R---S-- MC--RPR-S-- MC--RPRISE- MCSURPRISE!
M---R---S-- MC--RPR-S-- MC--RPRISE-
Congratulations! Present
Pay with your card at Pay with your card at Pay with your card at Congratulations! Present
Pay with your card at Pay with your card at Pay with your card at
this ticket to any clerk and
McDonald’s. When all the McDonald’s. When all the McDonald’s. When all the this ticket to any clerk and
McDonald’s. When all the McDonald’s. When all the McDonald’s. When all the
get your McSurprise!
letters above are filled, letters above are filled, letters above are filled, get your McSurprise!
letters above are filled, letters above are filled, letters above are filled,
win your McSurprise! win your McSurprise! win your McSurprise!
win your McSurprise! win your McSurprise! win your McSurprise!
Not valid with any other
Not valid with any other
offer. Expires 31 Jan 2006
offer. Expires 31 Jan 2006
1st fill-up 2nd fill-up 3rd fill-up 4th fill-up
Petrol
----------------------
---------------------- ---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
Coupon
Coupon
YESYOUWIN!
Y---O---N- YE--O-W-N- YES-OUW-N- YESYOUWIN!
Y---O---N- YE--O-W-N- YES-OUW-N-
Expires 31 Jan 2006
Game expires 31 Jan 2006 Game expires 31 Jan 2006 Game expires 31 Jan 2006 Expires 31 Jan 2006
Game expires 31 Jan 2006 Game expires 31 Jan 2006 Game expires 31 Jan 2006

37. What happens when merchants
prefer one brand over others?
A simple, merchant funded promotion helped a
Malaysian bank boost acceptance and usage of
it’s cards at Pizza Hut.
Maybankcard Purchases at Pizza Hut
+ 49%
Sep 2005 Oct 2005 Nov 2005

38. Payment brands see increased transaction
volume when they support targeted
merchant promotions
+150%
+121%
+96%
Avg
+80%
+ 75%
+71%
+50%
+49%
+30%
+27%
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39. An opportunity to differentiate
And an opportunity to address major pains which
cannot easily be addressed with magstripe cards.

40. The problem must be solved at
Payment schemes will find it more and more
the payment network level
difficult to attract issuers if they cannot
promise higher
interchange.
Show issuers that the scheme’s new generation
payment products provide more structurally stable
interchange revenues.

41. The problem and regulators will continue
Merchants must be solved at
the payment the interchange model if
challenging network level
schemes don’t
provide more
value.
Change perceptions by demonstrating to merchants
and regulators that the payment scheme provides
major new innovation for the benefit of merchants.

42. The problem must be solved at
the payment network level
Important scheme initiatives (contactless,
mobile, EMV …) can fail without active
merchant participation.
Get merchants to see the scheme’s emerging payment
technologies as an integral and strategic part of their
communications and marketing activities.

43. Thank you
Aneace Haddad
Chairman, Welcome Real-time
a.haddad@welcome-rt.com
http://aneace.blogspot.com
www.welcome-rt.com
Copyright 2007 © 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.