mobile payments presentation - amazon web services… · apple pay samsung pay google wallet paypal...

Mobile Payments Certificate

Mobile Payments – The Inflection Point Is Now

July 2017

ATONRÂ PARTNERS SA 12, Rue Pierre Fatio – 1204 GENEVA – SWITZERLAND - Tel: + 41 22 310 15 01 http://www.atonra.ch


➢ As the mobile payment infrastructure and ecosystem are now in place, we enter the second phase

of growth: adoption of payment solutions by consumers

➢ Increasing marketing and improving ergonomics, security and value-added services (such as

rewards, loyalty and couponing) should give a major boost to consumer engagement as soon as

2017

➢ Mass adoption is not a question of if, but when:

✓ the example of e-commerce says it all: despite initial concerns around security, now most

consumers make online transactions

✓ new forms of mobile payments will expand the total addressable market: in-car

payments and VR shopping

➢ Government incentives for a cashless society are another major catalyst: increasing number

of limits on cash transactions all around the world

➢ The best way to capture this secular growth in the volume of digital payments is to get

exposure to payment processors, which handle all these transactions

Investment Case

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AtonRâ Mobile Payments Certificate details

3

Mobile Payments Certificate details

(EUR Institutional)

✓ Issuing bank: SG Issuer

✓ Calculation agent: S&P Opco

✓ ISIN: CH0239656462

✓ Currency: EUR

✓ Fees: 1.5% management fee + 15%

performance fee, high water mark

✓ Bloomberg ticker: IND1AMPE

Mobile Payments Certificate details

(EUR Retail)



✓ ISIN: CH0239656603

✓ Currency: EUR

✓ Fees: 2.0% management fee + 15%

performance fee, high water mark

✓ Bloomberg ticker: IND1AMPE

Mobile Payments Certificate details (USD Retail)



✓ ISIN: CH0239657494

✓ Currency: USD

✓ Fees: 2.0% management fee + 15% performance fee,

high water mark

✓ Bloomberg ticker: IND1AMPU

Mobile Payments Certificate 4

Tech giants

Biometrics & Security

Processors &Networks

Hardware vendors


➢ Mobile payments refer to all payment

transactions made from or via a mobile

device and debited either on a bank account

or on a mobile operator bill

➢ The rise of smartphones, tablets, and now

wearables has driven new means of paying

Mobile payments categories

The Mobile At The Heart Of Digital Interactions

Top 5: Smartphones penetration

Source: geoba.se/usnews.com/ emarketer

Web / In-app

Purchases

Person-to-Person

Payments

Mobile Proximity Payments

5


Smartphones Are Used To Pay, But Also To Get Paid (Merchants)

➢ All smartphones now allow contactless payments in a simple and quick way via an

electronic mobile wallet, and can also become POS terminals for merchants

NFC « Wireless exchange of data »

Mobile money (SMS)

QR Code/ Barcode

Mobile as a point-of-

sale terminal

6


➢ Mobile Payments are a solution for providing financial services to unbanked people:

➢ In Sub Saharan Africa, the mobile penetration in Africa is 70% but only 10% of the population

have a bank account

➢ Payments via mobile are the faster and cheaper way to send money to family. The SMS and

USSD technology is compatible with 99% of mobiles

➢ In China, under the impulse of e-commerce and due to the low use of bank cards online payment,

and especially mobile-commerce, has become a reality

Africa And China Are The Pioneers Of Mobile Payments

Over 100% Mobile penetration in top tier cities:

democratization of smartphones

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➢ New players enter the payment industry, already benefiting from a large customer base and

offering many online services: Internet and Tech giants such as Google, Apple, PayPal and

Amazon are providing new mobile payments solutions

➢ The legacy players (telecoms, banks, card networks…) must assert themselves. The need

for innovation is the opportunity to boost these institutions and offer them a new position in the

payment industry

Financial institutions

Internet Giants &

apps developers

RetailersPOS

terminals

-Payments services

-Processors

-ISO

-Acquirers

Telecoms operators

Networks

The Payment Industry: A Private Club?

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A Look At The Payment Industry Main Players (I)

Hardware / Issuance

Payment Card

POS /ATM Terminal

Card Issuance- Wirecard- First Data- TSYS

SIM card, Security- Gemalto- G&D- Oberthur

Semiconductor- Infineon- Samsung- STMicro

POS Terminal- Ingenico- VeriFone- NCR Corp

ATM Hardware- NCR Corp- Wincor Nixdorf- Diebold Inc

Hardware and Card Issuance: technology

providers

➢ Card issuance: credit and debit card

suppliers and software for banks

➢ Semiconductors: At the heart of IT

servers, network routers and

smartphones

➢ NFC technology, magnetic strip or EMV

chips for bank cards

Point of Sale terminals providers (PoS)

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A Look At The Payment Industry Main Players (II)

Acquiring Services

➢ The acquirer : providing the merchant the

services to accept a transaction. The acquirer

will route the encrypted transaction details to the

card association/network (Visa/MasterCard)

➢ Distribution and maintenance of PoS

➢ Most large acquirers do the processing part

Processors:

➢ The technological side of payment processing:

clearing and settlement

➢ Acquirers, processors and POS terminal

providers offer value added services to

merchants: reporting, fraud management,

loyalties program, big data analysis

Merchant Services

Acquiring Services

Acquirers differ depending on regions

(can be banks or financial institutions)

In US: - First Data- Global Payments- BOA

Terminal services- Ingenico- Many regional

banks offer these services to merchant

Processing

Some acquirers outsource the

processing to third party processors

- TSYS- Planet Money- WorldPay- IPPay

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A Look At The Payment Industry Main Players (III)

Connection

Payment Networks or Association

Credit cards- Visa- Mastercard- Discover- American

Express

Debit cards- Maestro- Visa Electron

➢ Identify which financial institution

issued the card and re-route the

information to the cardholder’s

issuing bank

➢ Set the interchange fees

Networks Connectivity

Phone line- AT&T- Sky- British Telecom

Internet- AT&T- Sky- British Telecom

Connectivity

➢ Mobile operators and internet:

provide connectivity and data transfers

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A Look Behind The Scenes

I- Banking data capture and authorization:

PROCESSING*

The acquirer and processor

II- Clearing and Settlement:

The merchant pays to the acquirer a "merchant discount“ of ~ 2.50%. How are these costs shared?

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Confidence, acceptation and adoption

Secure

68%

Fast 36%

Simple

71%

Loyalty programs

Rewards

Personalized AdaptConvenience

Security➢ The biggest challenge remains the change in consumer

habits. It has to be simple, intuitive and comprehensive

➢ Mobile payment requires better communication and

education

➢ Mobile payments allow the merchant to increase the

visibility on its brand, target consumers and increase

loyalty services (e.g. coupons)

➢ As illustrated by the recent success of Samsung Pay’s

loyalty program, rewards/couponing are expected to be

a major catalyst for mobile payments adoption

The User Experience Is Key In Mobile Payments Adoption

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➢ HCE «Host Card Emulation»: retains banking data in the cloud

➢ The Secure Element: retains banking data in the mobile

➢ Tokenization: replaces the card number with a single token

➢ Biometry: an other security layer

✓ With tokenization technologies and the emergence of biometrics, mobile payments become

more secure than contactless card payments

Security Concerns Need To Be Ironed Out

Secure ElementHost Card

Emulation

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Apple Pay Samsung Pay Google Wallet PayPal Bitcoin

AVAILABILITY

From Iphone 6From samsung galaxy

S6

Any device with the

app

Any device with the

app

Any device with the

app

HOW TO USE IT

Fingerprint OK for tap

to pay

Fingerprint OK for tap

to pay

Tap to pay . Send

money via app or mail

Send money via

phone number or mail Scan QR code

HOW IT WORKS

Uses NFC to send

your encrypted data

Uses NFC + Magnetic

fields (MST) on old

registers

Like a debit card

(recharge it). At new

registers uses NFC

Uses PayPal network

to transmit credit card

or debit transactions

Totally independent

money system

SECURITY

Most secure.

Retailers don't even

get your credit card

Banking data in the

Secure element +

tokenization

Most secure. Retailers

don't even get your

credit card

Banking data in the

Cloud (Host Card

Element) +

tokenization

Secure. Retailers

don't get your credit

card but google does

Banking data in the

Cloud (Host Card

Element) +

tokenization

Secure. Retailers don't

get your credit card

but PayPal does

Tricky, secure but

you are on your own.

Lose a password, get

hacked: your money

is gone

15


➢ To fight money laundering and tax evasion in 2014, Israel limits cash transaction between businesses

to 5,000 shekels (USD 1,400) and private transactions done in cash or by check to 15,000 shekels

➢ In most EU countries cash payments are limited :

✓ In 2015, France has limited the use of cash payments to EUR 1,000 from EUR 3,000

✓ In 2016, Italy has limited the use of cash payments to EUR 2,999

➢ India demonetized some of its banknotes at the end of 2016

➢ The European Union plans to launch a service by the end of 2017 that allows mobile payments

person-to-person to use the mobile phone number as a proxy for the IBAN

➢ Germany plans to impose a limit of EUR 5,000 on cash payments

Governments Around The World Push Towards A Cashless Society

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85

57.8

32.8 26.7

8.5 1.5

163.6

101.390.7

64

22.36

0

20

40

60

80

100

120

140

160

180

Asia/Pacific

Africa NorthAmerica

Europe LatinAmerica

MiddleEast

2012 2016

➢ The annual transaction volume via mobile payments in 2015 was $450bn and is expected to exceed

$1tn in 2019

+92%

+75%

Strong Growth Outlook

➢ Asia Pacific and Africa are early and faster adopters of mobile payments with more than 100

million mobile payments users

+177%+140%

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450

620

780

930

1080

2015 2016 2017 2018 2019

Annual transaction volume in US$ bn -Mobile Payments

Mobile Payments users by region (in mn)

Source: AtonRâ Partners, TrendForce, NFC World+ Source: AtonRâ Partners, Gartner Inc.

CAGR ~ 20%


➢ In-car payment solutions will allow drivers to

✓ pay for gas, toll fees or public parking

✓ without having to pull their credit card or

smartphone from their pocket

➢ Payments in virtual stores are another

exciting opportunity

✓ consumers wearing a VR headset will soon

have the ability to visit virtual stores and make

purchases

✓ Alibaba recently unveiled a VR mall called Buy+

in which consumers gaze at products long

enough to select them and nod their heads

to buy them

✓ Amazon is said to be working on a similar

initiative

The Future Of Mobile Payments Is Already Taking Shape (I)

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➢ The seamless checkout experience (pioneered by Amazon Go) will deal a final blow to cash

payments

✓ In an Amazon Go store, you just walk in, pick the groceries you need and walk out

without having to go through a checkout line

✓ Your Amazon account is automatically debited when you exit the store

✓ This revolutionary checkout experience is likely to be adopted by other major retailers in

the future

The Future Of Mobile Payments Is Already Taking Shape (II)

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97.8

167.1Mobile Payments

April 2014

Oct 2014 Dec 2015

Phase 1: technological development and hardware/software deployment

Phase 2: adoption by consumers and merchants: the inflection point is now!

323.6 mn

447.9 mn

Dec 2014

Number of Mobile Payments users:

Mobile should become even more essential in our everyday lives ...

AtonRâ allows you to invest in the players who build the history of mobile payments

Dec 2016

384mn

Source: AtonRa Partners, Gartner Inc.

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Jun 2017

DISCLAIMER

This report has been produced by the organizational unit responsible for investment research (Research

unit) of AtonRâ Partners and sent to you by the company sales representatives.

As an internationally active company, AtonRâ Partners SA may be subject to a number of provisions in

drawing up and distributing its investment research documents. These regulations include the Directives

on the Independence of Financial Research issued by the Swiss Bankers Association.

Although AtonRâ Partners SA believes that the information provided in this document is based onreliable sources, it cannot assume responsibility for the quality, correctness, timeliness or completenessof the information contained in this report.

The information contained in these publications is exclusively intended for a client base consisting ofprofessionals or qualified investors. It is sent to you by way of information and cannot be divulged to athird party without the prior consent of AtonRâ Partners.

While all reasonable effort has been made to ensure that the information contained is not untrue ormisleading at the time of publication, no representation is made as to its accuracy or completeness and itshould not be relied upon as such.

Past performance is not indicative or a guarantee of future results. Investment losses may occur, andinvestors could lose some or all of their investment.

Any indices cited herein are provided only as examples of general market performance and no index isdirectly comparable to the past or future performance of the Certificate.

It should not be assumed that the Certificate will invest in any specific securities that comprise any index,nor should it be understood to mean that there is a correlation between the Certificate’s returns and anyindex returns.

Any material provided to you is intended only for discussion purposes and is not intended as an offer orsolicitation with respect to the purchase or sale of any security and should not be relied upon by you inevaluating the merits of investing in any securities.

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