The Anthemis Newsletter: Trends in Mobile Payments

the anthemis newsletter: trends in mobile payments
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Part I: Market Overview
issue 02 | October 2013
Mobile First: Changing the Face of Banking by Brett King

Brett King is the bestselling author of Bank 2.0 and Bank 3.0 and the founder of Moven, the first fully digital, mobile-direct banking service based in the US. Brett has been a public speaker , industry commentator and advisor to leading financial institutions for over 20 years. He has featured as an industry expert on titles such as CNBC, Bloomberg, FT , The Economist, ABA Journal, Bank Technology News, the Asian Banker Journal and The Banker Magazine. In 2009, I was visiting the head of retail for a major retail-banking brand headquartered in Asia. Two years before, Apple had launched the phenomenally successful iPhone, and by this stage the iTunes store had close to 100,000 apps and had surpassed a billion downloads. Asians were clamouring to get the iPhone with unlocked greymarket phones available everywhere you looked in Hong Kong, Shanghai and Singapore because Apple had not yet launched the iPhone anywhere in Asia except Australia. But sitting in this executives office, youd never realise that mobility was happening. I told him about the impact mobile and social media were having on behaviour and how dominant apps would become, the means consumers would use to conduct their banking over the next three to five years. I discussed the breakout success of Bank of America, the first bank in the US to launch mobile banking with millions already using the app daily to access their bank. But he dismissed my predictions out of hand. He insisted that nothing the bank was seeing was showing a shift in behaviour; if anything, he said, the branch was getting stronger and Y-Gen was just like any other demographic. Within two years, this bank was in serious trouble with its mobile positioning. Well behind the competition on the mobile and social front, the banks shrinking acquisition stats and struggling cross-sell on the retail side were early warning signals: It was not only out of touch, but its historical business model was under threat. Unfortunately , this same pattern repeated itself across the world. In 2009, just 3% of the top 100 banks in the US had mobilebanking propositions. Even though this has increased to 80% today , we just cant afford to wait five or six years before mobile technologies are the norm
// Table of contents
Part I: Market Overview
100.0 % 1.Mobile First: Changing the 80.0 % Face of Banking 60.0 % by Brett King 40.0 %
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61.2%
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20.0 %
38.8%
44.1%
2.Sizing the opportunity and barriers 55.9% to widespread adoption
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2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E
0.00 %
3.mPayments in Smartphones the developing world: a tough act to follow
Traditional Handsets
4.Emerging Players: Paying with a Click
p5
p6
5.Recent M&A: Featuring Visa & Zapp
6.Infographic: Promise of mPayments
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Part II: Anthemis Talks

7.mPayments Barometer 8.Show me the money
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p19
9.Revolutionising Shopping Habits
10. Software Solutions: Experimenting, Tinkering, Developing and Adapting
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11. Interview: Lets hear it from the movers & shakers
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12.Anthemis news: What have we been up to?
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the anthemis newsletter 02//1. Mobile First: Changing the Face of Banking
//Editors Note
Its been a long time coming, but mobile payments have finally arrived. Established payments companies are innovating constantly; start-ups are disrupting the status quo by targeting niche marketscreating new markets even, as in the case of Square and SumUp targeting micro-merchants. But we havent yet seen any truly ground-breaking innovation nor a resounding success that has been replicated across multiple target audiences or geographies. This is partly due to security and regulatory concerns and, of course, an ever changing landscape. What is evident however is that without consumers and merchants buying in, success in mPayments will elude the MNOs, Telcos, banks and payment companies irrespective of their efforts and innovations. In our newsletter , we set the scene with an introductory note from Brett King (founder and CEO of Moven) followed by a birds eye view of the mPayments space, the players and what they are up to, the barriers to success and how they are being negotiated. And like all good mPayments experts, we speculate on its future. We map out the important M&A trends and activity in mPaymentsalways a reliable indicator of confidence in the sectorand follow it with a case study on Visa. Another case study focuses on Zapp, a major new mobile payments initiative launched by Vocalink in the UK that Anthemis helped bring to life. When it launches in 2014, Zapps aim is to allow consumers to make real-time, 24/7 payments at retailers and businesses directly from their bank accounts using their mobile phone. Our inhouse experts weigh in with some interesting insights: identifying the top five ways to pave the way for mPayments success, debating how and if mPayments can be profitable, and how they are changing our lives, one transaction at a time. From there, we examine how financial service providers are now turning to software-based solutions. Given the contested nature of mPayments, we have interviewed three industry experts, covering topics ranging from the future of NFC to the shining promise of emerging markets. Although each comes on board with different viewpoints, the consensus is that the current scenario of M&A and experimentation is just part of the growing-up process. As usual, we end with an update on what the Anthemis portfolio companies have been up to and what has been happening at Anthemis HQ. Wishing you a profitable read!
Today, the iPad is growing at three times the rate the iPhone grew in its first three years. Through the success of phones like the Samsung Galaxy III, Android smartphones are now growing at six times the rate the iPhone did during its early dominance of the industry.
This is not a phenomenon limited to the affluent masses of the Westthis is a global phenomenon. Retail banking will be fundamentally changed. For the 60% of the worlds population that today does not have a bank account, their mobile phone will likely be their first banking experience. In markets like Kenya and the Philippines, the majority of the people have had their first electronicpayment experience via their phone. The same will soon be true for India, China, Indonesia and other such emerging markets. By 2020, the worlds bank account will be characterised by a mobile phonea device that allows you to access your money (in the form of an available balance), to send and receive money , to pay at a store or online, and to exist in the world of commerce. We tend to characterise our bank account by its form factor: in the old days a pass book, then a cheque book, and today a debit card. Tomorrow it will be the mobile phone. In retail banking, the mobiles impact on the way well do our banking from this point forward has been consistently and utterly underestimated. The lack of enthusiasm and adaptation by major banking players is opening up doors for new non-banking players to own the emerging banking and payment experiences on the mobile. And with mobile dominating the future of banking, banking wont look much like it does today in a decades time. Sources:
http://148apps.biz/app-store-metrics/, http://www.androidtapp.com/androidapps-statistics-summary-for-2010/, http://techcrunch.com/2012/05/07/ google-play-about-to-pass-15-billiondownloads- pssht-it-did-that-weeks-ago/, http://venturebeat.com/2011/01/26/ mobile-app- revenue-2011/ and http:// bits.blogs.nytimes.com/2012/06/11/ apples-stash-of- credit-card-numbers-isits-secret-weapon/
in the financial-services industry . But in todays fast-paced world of mobile technology , the financial-services industry is just getting started.
Rushing into the Future

Before the launch of the iPhone, wed never even heard of apps, and yet just four and a half years later, there are: 1,000,000 apps for
Apple and close to 700,000 for Android more than 40 billion downloads for Apple, and already 25 billion for Google Play (previously known as the Android Marketplace) 48.6 million per day of daily downloads for Apple Over the next years, mobile will continue to dominate and will become increasingly accessible to all parts of the economy .
By 2016, the average low-end smartphone will cost less than $20, and basic Internet access will come bundled in your monthly plan at no cost; by the end of the decade, 80 to 90% of the worlds population will have Internet access via a smartphone.
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the anthemis newsletter 02//2. Sizing the opportunity and barriers to widespread adoption
Sizing the opportunity and barriers to widespread mobile adoption

Call it a leash around your neck, or something that youd feel naked without, theres no denying that we live in a mobile-mad world. It is estimated that by 2015, 5.3 billion mobile phones will be in use throughout the world, with 350 million of those in the US alone. Such staggering statistics are the reason why players of many different shapes and sizesMNOs, handset manufacturers, retailers, banks are all scrambling for a slice of the mPayments pie. the mobile handset a connected multi-media and multi- application device. And this versatility is only set to increase, bringing many players into the mPayments arena, some for the first time. Starting with mobile marketing and mobile banking, financial institutions have finally moved into mPayments. But because they waited while others got in on the action, the banks have lost a sizable market share to online players. Banks need to aggressively get on the offensive as mPayments open new opportunities to service underbanked and unbanked customers, reduce cash-reliance and its associated costs, and lower the cost of customer acquisition. And merchants should not be far behind if they want to continue to own the customer and streamline the cost of payments. Wisely, they are helping themselves, as illustrated by the establishment of the Merchant Customer Exchange (MCX) in Dallas, Texas, on 15 August 2012a joint venture amongst 40 leading merchants in the US with the goal of creating a mobile wallet platform available on all smartphone operating systems. The MCX will match and minimise the prevailing high scheme interchange fees and provide consumers with an integrated mCommerce platform, without eliminating the convenience of paying at merchant partners retail locations. The importance of this initiative is brought home by the fact that the initial members of the MCX account for some $1 trillion in annual sales. The core mobile application is still being developed, focusing on a flexible solution to provide merchants with a customisable platform. Mobile Network Operators (MNOs) are naturally in the race to monetise mPayments. They are aiming to diversify their revenue base and achieve synergies with their core business by leveraging their existing IT infrastructure and cross/up-sell to an existing customer base. This model is especially prevalent in emerging markets where the underbanked and unbanked comprise a large percentage of the total population and where traditional financial institutions are unable or unwilling to tap into this growing and profitable customer segment. As with any technologyled development, mPayments hold a lot of promise for technology vendors and systems integrators. These organisations are well positioned to provide the infrastructure and messaging for mPayments and, in the process, act as a trusted intermediary between the banks and the MNOs. The last players in the global game of mPayments are the traditional payments industry incumbents. They are overcoming their initial wariness and are increasingly looking at mPayments as a hedge against a potential deterioration of their core business.
Sizing up the players: Overview

Over the last decade, the mobile handset has metamorphosed from a clunky, heavy device for transmitting voice and texts to a light, musthave portable computer. Memory capacity has increased from a few megabytes to over 60 gigabytes, making
//Global share of traditional handset and smartphone shipments

100.0 % 80.0 % 61.2% 60.0 % 40.0 % 20.0 % 0.00 % 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 38.8% 55.9%
44.1%
Smartphones
Traditional Handsets
Source: Oppenheimer estimates, Anthemis research
As mPayments lead to a reduction in the use of cash, incumbents have much to gain by supporting their growth and ubiquity.
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the anthemis newsletter 02//2. Sizing the opportunity and barriers to widespread mobile adoption
//Mobile payment volume market opportunity

Airtime Top-Ups 5% Bill Payment 2% Airtime Top-Ups 4% Others Bill Payment 1% 2% Merchandise Purchases 32%
Others 1%
42% CAGR
Merchandise Purchases 42%
Ticketing 1% Money Transfer 59%
Money Transfer 50%
Ticketing 1%
2011 $106B
Source: Gartner research
2016E $617B
projected. Different access technologies, business models, partners and regulatory conditions mean solutions more often than not need to be customised to satisfy local market requirements. SMS is the dominant access technology in developing markets due to the constraints of the mobile devices used and the ubiquity of SMS. We expect this to continue to be the case for some time although the rapid decrease in the cost
Barriers to widespread adoptionResistance to change

After five plus years of hype, the mPayments landscape is still fragmented and adoption has not yet reached the levels once breathlessly
of smartphones could accelerate their adoption in these markets. Mobile internet, on the other hand, is the preferred access technology in the developed world. While retail purchases (eCommerce and in-store purchases) will drive transactions in North America and Western Europe, P2P transactions will drive mPayments in the developing world. The mobile application experiments of major e-tailers like Amazon and eBay, have delivered significant revenue generation. For in-store purchases, we expect an increasing number of merchants to introduce their own mobile payment services, in a bid to emulate Starbucks success.
Reluctant Partners
The players in the mPayments race are at their core, competitors, some encumbered with legacy infrastructures. Each wants ownership of the technology , the merchant, and the consumer . Each is possessive about its customer data. Unsurprisingly , negotiating partnerships is complicated and time consuming. Add to this the need to satisfy two very different groups of end-users - merchants and customers - and the challenges of standardising different payment systems, and the task of building a successful mPayments ecosystem sometimes seems like an impossible task.
//Mobile payment ecosystem

Scheme
Handset manufacturer
TSM
Issuer
Authoristation Response
Acquirer
T en he tra cryp data ns fer ted a is red nd OT A
MNO
Agreement for payment
Financial Network
UICC manufacture
Su bs Ha cri nd pti se on inf ts ra + n str e uc tw tur ork e
QR Code Geo-fencing NFC Card Reader
Customer
Merchant
Clearing settlement and payment transaction
Authorisation Request Authorisation request
POS Provider
Source: Anthemis reasearch
Merchants and customers

As in any two-sided market, the biggest challenge is satisfying
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the anthemis newsletter 01//3. mPayments in the developing world - a tough act to follow
both the merchant and customer. In developed markets, improved and additional functionality isnt sufficient to drive merchants to invest in mPayments: faster throughput could also be achieved through contactless cards while the value to consumers of realtime marketing messages is still unproven. However, remote mPayments are an attractive proposition for merchants as they reduce servicing costs, especially if the channel can gain widescale adoption at lower costs than existing channels. From the perspective of the customer, regardless of the fact that the mobile has achieved permanent share of pocket, its all about reducing friction, or rather the friction that most mPayment solutions dont seem to be reducing. Are mPayments really that much smoother or easier than paying with card or cash? And how secure are these mPayments? So how does one persuade consumers of the benefits of using mPayments while assuaging their concerns with respect to security? It depends on several factors - geography, age, mindset... Generally speaking, in developed countries those born after 1980 and early adopters of all ages are very comfortable using smartphones and happy to experiment with new applications including payments. Whereas in developing countries, the challenge of displacing a card-based payment culture doesnt exist and consumers have pretty much jumped straight to using their mobile phone.
There is no reason why mPayments should be considered less secure than debit and credit cards, when it has the potential to be more secure while retaining ease-of-use.
//Banked population penetration (2011)

98% 98% 97% 88%
64% 51% 55% 45% 39% 18% 56% 48% 33% 24% 35%
mPayments in the developing world a tough act to follow

In developing economies, an estimated 2.5 billion people are without a bank account, but mobile penetration is high and rising. These two factors, combined, mean that mCommerce and mPayments have been adopted much faster there and have opened up huge opportunities to increase micropayments as well as welfare payments through cost effective mPayments and generally mobile financial services (MFS), which in essence, promote financial inclusion. Rather than just being convenience driven as they are in the developed markets, the benefits of mPayments in developing markets are much more life style enhancing, they increase productivity for rural customers, reduce
ld or W
Source: World Bank
a a il ia n re ny a c ia ric sia hin Ind az sia ea ci po rma ric As Af C Br Rus l A ibb Pa Af th ga e an h u tra ar G in r t o r n S C ia e o S ha As & C a & & N Sa st t bic e er Eas Ea rop Su m Eu in A dle t id La M &
UK
US
the need to travel to ones bank and to carry cash, and make it easier and cheaper to receive and send money through global remittancesan estimated $500 billion per year market. With this technological availability and the growing appetite of consumers for financial access, we view MFS as a key growth area and believe that developments to date are only the start of the paradigm shift in banking in the developing world. Yes, financial services across the spectrum have not yet penetrated the emerging markets deeply enough but with
increased demand, MFS providers will grow on the back of other facilitators unique to emerging markets, such as trust in the mobile device and security concerns. By 2017, it is estimated that the 876 million MFS users in emerging markets will account for 86% of all MFS users globally, making this market worth $29.8bn to service providers. Because no single global player has yet to successfully offer a full suite of MFS, the time is ripe for strong partnerships to establish an effective MFS ecosystem across multiple markets.
//Mobile money: 2017E top five emerging markets
CHINA INDIA BRAZIL

42.2m users $981m revenues 148.8m users $5.72b revenues
151.3m users $5.82bn revenues
KENYA
26.6m users $880m revenues

Source: Anthemis research
INDONESIA
51.8m users $1.99bn revenues
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the anthemis newsletter 01//4. Emerging players: Paying with a Click
Emerging Players: Paying with a Click

Loyalty and oers
Google Anity Solutions Groupon Visa MasterCard LivingSocial PayPal Amazon LevelUp Alliance Data MCX Square Cardlytics Note: Lighter-coloured names are generally new to payment mPayments.
Mobile Wallet
Google PayPal V .ME Square VeriFone Revel iZette
Point of Sale Device

Groupon Ingenico Payleven Square BAMS Square Vantiv Cielo
Acquirer
Chase Global Payments First Data WorldPay PayPal
MERCHANT
CONSUMER
Mobile Wallet Software

Google Monitise PayPal V.Me PayPass Square Gemalto
Wallet Instrument Issuer

Chase ICBC American Express PayPal Citi Capital One Bank of America Western Union Barclays
Payment Network
MCX MasterCard American Express Discover China Unionpay Visa ACH PayPal
Carrier Direct Biller

Bango PayPal Amdocs Boku OpenMarket AT&T Vodafone
Telcos
China Mobile Verizon Sprint Telefonica First Data Fiserv
Processor
Vantiv FIS
1. Payment networks
Payment networks roll-out their wallet strategies Payment networks play a key role in acceptance and adoption. Most of the international payment networks have announced their own cloud-based mobile wallet, each implemented with a different strategy and different technologies. Visa is focused on promoting its V.me digital wallet. It has partnered with Google and Isis and plans to leverage payWave contactless technology as well as the CYBS, Fundamo and PlaySpan acquisitions. MasterCard is interested in using its partnerships with merchants and issuers. MasterCards focus is on creating a network of wallets that is being distributed primarily through partnersmerchants and financial institutionsas a white-label solution, driven by ease of integration. Discover, the first payment network to partner with Isis and Google, is leveraging these partnerships, as well as and, most importantly, PayPal to advance its mPayments position. American Express has launched Serve, building on the Revolution Money acquisition; the Serve mobile wallet is a digital account and reloadable prepaid card that enables physical, online and mobile purchases as well as P2P payments.
//Visa
Visas cross-channel digital wallet was announced in May 2011, with branding announced November 2011. In May 2012 it launched its beta product in North America, initially with two online merchants and exited beta in Nov 2012 with 23 online merchants including 1-800-Flowers, Shoebuy .com, Buy .com and MovieTickets.com. The service also currently has 50 banking partners including PNC, US Bank and Bank of America in the US and also RBS (includes Natwest) and Nationwide in the UK and BBVA in Spain.
//Mastercard
Paypass is a contactless acceptance network that supports NFC payments. The MasterPass wallet was unveiled as an extension to MasterCards PayPass network of contactless-enabled terminals at the POS. Like Visas V .me, the PayPass wallet is open and will support MasterCard, Visa, AmEx and Discover cards, as well as credit, debit and prepaid cards. Established in the US in May 2012, with branding announced in February 2013. A simplified online transaction experience is offered and in-store transactions are supported through mobile devices via NFC and QR codes.
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2. Technology providers
//American Express
Serve allows consumers to make personto-person (P2P) payments via mobile phones, as well as make physical payments where AmEx cards are accepted. Serves reloadable prepaid card (linked to the wallet) can be used to withdraw cash from ATMs. Established in the US in March 2011, it provides consumers a digital payment and e-commerce platform. The wallet can be loaded with cash, through GreenDot moneyPak, a bank account, or a credit/debit card. With so many key advantages - mobile phone dominance, brand recognition and technology leadership - to leverage, technology providers are already at the party. Following the failed Google Checkout experiment, Google has actively partnered with the payment networks. Because Google Wallet 1.0 faced resistance from operators and issuers alike, Google Wallet 2.0 was moved to the cloud. The fact that it still has a prepaid card in the phone, however, continues to antagonise mobile operators. Google has also launched SingleTap, a loyalty program accessible, as the name suggests, with a single tap. We believe that design challenges and hurdles to NFC adoption were key reasons for Apple to omit NFC in the iPhone and instead focus on the QR-code- based Passbook application. Although Passbook does not support payments, its a stepping stone, we think, because it allows iPhone users to save boarding passes, movie tickets, retail coupons and loyalty cards. Facebook has entered the mPayments landscape through carrier billing that enables consumers to charge any digital download to their phone bill. Facebook has partnered with Bango to offer the service in US, UK and Germany.
//Google wallet
In the summer of 2011 in the US, Google, Citi, MasterCard, First Data and Sprint jointly launched an app that turns NFCenabled handsets to mobile wallets using MasterCards extensive network of contactless POS terminals. At launch, the service originally supported only two funding options: a PayPass eligible Citi MasterCard and a virtual Google prepaid card (which could be funded with any payment card); as of August 2012, the service has expanded to support all credit and debit cards from Visa, MasterCard, American Express and Discover. Payment card details now stored in the cloud, from previously being stored on devices directly. Service originally conceived to target only physical retail because of the NFC requirement, but has now expanded its focus to become a broader digital wallet for digital media verticals. Rumoured plans to launch a physical card that links to the wallet for payments at physical POS using Discovers acceptance network (as an alternative to NFC) were scrapped ahead of I/O. At its 2013 I/O developer conference, Google announced P2P payment functionality via Gmail.
//Apple
iTunes is a media player and media library application developed by Apple, used to play, download and organise digital audio and video. The application also stores debit and credit card details that can be used to buy digital content on Apples iTunes and App stores. Launched in 2001. Users cards charged with every digital content purchase (back-to-back transactions), with the account also able to hold funds that have been transferred through the stored cards. Accounts can also be used to purchase physical products from the online Apple Store. Accounts can also be used to buy goods in physical Apple Stores through a mobile application available for Apples mobile devices. As of January 2013, there were more than a half-billion active iTunes accounts linked to credit cards.
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3. Aggregators
Aggregator Model and the mPOS
Square, Groupon, PayPal and others are increasingly leveraging the aggregator model. This poses a risk to the Independent Sales Organisation (ISO) business model and can potentially impact the acquirers as well. An aggregator , as opposed to an ISO, is the merchant of record and hence is the one that assumes the risk of the merchants. Aggregators merchant on-boarding process is cheaper and faster , which has allowed them to tap into the micro-merchant and SME customer base. Their main advantage, as opposed to ISOs and merchant acquirers, is a simple and transparent fee structure. But to transition to the aggregator model, players have to engage in considerably more activities than traditional ISOs, including transaction switching, funds settlement, reporting and business intelligence. Examples of such aggregators include PayPal, Square, Groupon, Intuit and LevelUp. PayPal Heres mPOS service charges 2.7% of the transaction amount and 1% cash back for using debit card linked to the account. Square has launched Pay With Square, which is based on the geofencing technology that eliminates the need for POS terminals. From its inception, Square has targeted the micro-merchant segment and has used a simple pricing scheme (2.75% of the transaction amount) with a free dongle. It is now aiming to also target SMEs by charging a flat monthly fee ($275) for annual volume under $250K. Other aggregators are also bundling loyalty and data analytics into their offering as that is where they see true merchant stickiness coming from. Groupon charges lower fees for merchants running Groupon deals (1.8% plus $0.15 per transaction), while the Groupon Merchants app offers the ability to scan and redeem Groupon and has real-time analytics. LevelUp has taken the concept one level up: Instead of charging a transaction fee, it simply rakes in 35% of each dollar spent through the merchants loyalty program.
//Skrill
Skrill is one of the worlds largest online payments and digital wallet providers with over 20 million account holders. Its worldwide payment network offers businesses access to more than 100 payment options, with 41 currencies covering 200 countries through just a single integration. More than 100,000 merchants use Skrill globally, including eBay, Skype and Facebook. Founded in 2001 as Moneybookers and based in London. In Nov 2010, changed its name to Skrill Holdings Ltd. Digital wallet allows customers to make online payments securely without revealing personal financial data, as well as send and receive money using just an email address.
//LevelUp
LevelUp charges 0% interchange fees in exchange for running customised loyalty propositions. Established in the US in 2011. Processes $1m per month in transactions. Takes 35% of each dollar spent through the merchants loyalty program.
//PayPal
PayPal enables users to send and receive payments online across various locations, currencies and languages through credit cards, bank accounts, promotional financing and stored balances. Founded in 1998 and based in San Jose, California. Provides online payment solutions for individuals and businesses worldwide.
//Square
Square is a merchant aggregator that allows users to accept payments on their mobile phone or tablet through a mobile card reader. Founded in 2009 and launched the first application in 2010. Based in San Francisco, US. Offers merchants free card readers to allow acceptance of debit and credit cards and charges 2.75%transaction fee.
Offers products and services, including integration centre, recurring payments, request money, multi-user access, reports and invoicing. As of October 3, 2002, operates as a subsidiary of eBay Inc. Partners with MoneyGram to give PayPal users offline access to their cash through many of MGIs 284,000 global locations. Acquired payments gateway Braintree for $800mn cash in September 2013 to enhance online checkout business.
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//Groupon
Groupon is a daily deal provider that offers customers discounted products and services. Groupon payments is an aggregator that offers card processing services. Launched in 2012 in the US. Businesses can benefit from lower pricing on payment services due to bundled services, partnered with Breadcrumb.
//Neteller
Provides digital wallet and online money transfer services with a prepaid offering. Established in 1999. Parent company , Optimal Payments, is AIM listed.
//Verifone
4. Payment terminal vendors

Payment terminal vendor providers
With the proliferation of mPayments, payment terminal vendors are facing two scenarios: under the worstcase scenario, the threat of complete extinction; and under the best-case scenario, cannibalisation of their market share and complete exclusion from the profitable SME and micro-merchant space. It isnt surprising, then, that they have been quick to develop their own mPOS solution. Verifone, Ingenico, Micros and NCR have all developed their respective mobile terminal alternative. To their credit, they also realise that payments is just a small part of the bigger picture and its the add-ons that make a difference and inspire adoption and loyalty . To a different extent, each has either partnered with or acquired an innovative mPayments startup or has developed VAS such as cloud- based POS software platforms that enable retailers to manage transactions, track sales and inventory , process credit cards and market to customers on both POS touchscreen terminals and Apple mobile devices.
Verifone introduced PAYware solutions to offer mobile payments through card readers for smartphones and tablets. Launched in 2010 in US. In 2012, services were launched in UK and Ireland.
//RoamData
RoamData serves payment processors, direct sales companies, software-as-a-service providers, and systems integrators. Its offers payment applications, peripherals, end-toend security, payment gateway and support services. Founded in 2005 and head-quartered in Boston. Since February 2012 it operates as a subsidiary of Ingenico. Provides development platforms to create and update commerce applications that run on mobile devices.
5. Private vendors
Loyalty and other Value-Added Services Loyalty and VAS are becoming the main avenues of monetising the mPayments opportunity .
LevelUp and Groupon are just a few of many providers that are putting loyalty at the centre of their payments platform. Bank of America has partnered with Cardlytics to launch an online/mobile offers program called BankAmeriDeals that works with about 200 other banks. FreeMonee has taken a different route to market; it analyses the consumer purchase database from the issuer, including spending history , frequency of purchases and distance from the store, to calculate a score for customer spending levels at specific stores and then offers relevant gifts.
//Lemon
Lemon provides real-time account balance updates and special offers in order to track spending and monitor transactions. Established in the US in 2011. Captures digital copies of cards, IDs, insurance, loyalty or payment cards.
//Click and Buy

Click and Buy provides digital wallet and billing services to mainly small- and medium-sized merchants. Established in 1999. Currently part of Deutsche Telecom. Focused in the gaming sector and Germany.
www.anthemis.com
10
//Sum up
Sumup offers card readers that connect through the smartphones or tablets 3.5mm headphone jack. Founded in 2011 and based in Dublin, Ireland. Provides card processing solutions. Processes Visa and MasterCard credit and debit card payments on mobiles, including Apple and Android smartphones and tablets.
//Boku
Boku mobile billing provides merchants and consumers the ability to make purchases using their mobile number and be charged to their mobile bill. Founded in 2009 and based in the US. It was launched in 2010. Offers its services in 66 countries through more than 240 mobile carrier partners.
//Orange
In 2012 , Orange partnered with BarclayCard to offer Quick Tap mobile wallet that allows customers to make NFC payments from their smartphones. Uses NFC technology that allows for customers to make secure and fast payments. The wallet can be funded with any MasterCard or Visa cards.
//iZettle
iZettle offers person-to-person and businessto-consumer commerce through an app and a mini chip card reader. The service works with iPhone, iPod Touch and iPad devices. Founded in 2010, and headquartered in Stockholm, Sweden. The main differentiation with Square is that iZettle allows users to take credit card payments from chip-enabled cards.
7. Merchants
Merchants influencing mPayments
Retailers have also been directly involved in mPayments. McDonalds, Starbucks and WalMart have entered the mPayments space with their individual payment innovations. Under the current interchange logic, retailers had limited opportunity to optimise their current cost of payment acceptance. This, coupled with their early-mover advantage, has encouraged retailers to leapfrog their competition and attempt to create a differentiated, cost-effective, smooth retail experience with digital being at the heart of commerce.
//MCX
MCX is a joint venture between leading merchants in the US formed to create a mWallet platform for their customers. Established in Dallas, U.S. on 15 August 2012. The MCX is an alternative payments initiative by influential US merchants that aims to cut schemes and their high interchange fees directly out of the payments value chain. Development of the core mobile application is underway, with the initial focus being on a flexible solution that will offer merchants a customisable platform.
//Starbucks
In the UK, Starbucks offers a mobile-based wallet that allows customers to pay in Starbucks stores, check their balance, view transaction history and track their loyalty rewards. The Starbucks wallet also allows users to browse Starbucks menu information and store hours. Launched January 2012. Uses barcodes to make POS transactions. Can be funded with stored credit cards and through Starbucks own prepaid card. Has auto top-up functionality. Available for both iPhone and Android platforms.
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//Amazon
Amazon Payments enables customers to pay for items on Amazons eCommerce platform using payment card details stored in their user accounts. Launched in 2007. Payment method focuses on providing consumers a fast and convenient checkout experience, with a 1-click payment option also provided; consumers do not have to repeatedly enter their billing and shipping information. Service can also be used across a number of non-Amazon eCommerce merchants in the US and UK, where consumers are provided the same checkout experience available on Amazons own websites. Customers can also make P2P transactions with other Amazon Payments customers.
//Merchants are implementing an omni-channel strategy

Single channel Multi channel Cross channel Omni channel
2003
Customer
.com and physical
2008
multi chanel
2012
and beyond digital Brand holistic customer experience
Single touchpoint through the web
Multiple touchpoint acting independently
Multiple touchpoint with an ambition of a contiguous brand experience
8. TelCos
Mobile operators leveraging their base
The US mobile operator market is unique in that mobile operators tightly control the mobile handset market (except for Apples iPhone). In this capacity , they have been able to capitalise on the opportunity by forming Isis and, as already discussed, by bringing the banks and brands into the fold. T o promote Isis, mobile operators in the US have been the biggest barrier to other wallet providersincluding Google Walletand to NFC adoption. However , all is not well with Isis either . Recently , one of their three primary credit card partners Capital One pulled out of the joint venture, putting a question mark on the survival of Isis. Vodafone UK, Everything, Everywhere (owned by Deutsche T elekom AG and France T elecom SA), and O2 (owned by T elefonica UK) won EUs approval to form an mPayments venture in the UK dubbed Project Oscar . Although each operators mPayments offering will remain separate, the joint venture aims to create a single mCommerce model where retailers can connect to the service once and then accept payments from any service provider , making mCommerce according to the networks more secure.
//ISIS
Isis is an NFC-based mobile payments joint venture by AT&T Mobility , T-Mobile USA and Verizon Wireless (three of the four MNOs in the US). Established in October 2012 in the US. Currently only accepted in c.1,600 locations across Salt Lake City , Utah, and Austin, Texas, where MasterCards PayPass contactless terminals are available. Can only hold AmEx and the Chase Freedom card, and users also receive a reloadable Isis Cash Card that can be used at non-NFC POS terminals. Offers and loyalty cards expected to be made available. * One of its three primary credit card partners, Capital One, pulled out of the partnership. This puts the chances of Isis becoming a dominant player in the mPayments space in jeopardy .
www.anthemis.com
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//O2
Offers a mobile wallet that allows for customers to make payments via their mobile and fund their account with debit and credit cards as well as a physical Visa prepaid card. Initially O2 mobile wallet was launched in 2011. In 2012, O2 started offering money transfers on UK numbers. Offers a search engine that compares prices of products from over 100 merchants.
//Weve
The wallet was founded with the aim to eventually allow UK consumers to purchase goods and services from physical and online stores, but seems more focused on providing integrated mobile marketing services. Established in October 2012 in the UK, though is yet to launch. Weve is a joint venture between UKs three largest MNOs: EE, Telefonica UK (O2) and Vodafone UK. Is intended to store loyalty cards, coupons and payment cards, but no compatible cards have been announced yet.
9. Financial institutions
//Pingit
Pingit has a mobile app that allows usersnot necessarily Barclays account holdersto transfer money through smartphones, with the recipient only needing a mobile phone that accepts text messages. Founded in 2012 by Barclays Bank. Free to download and use without to seting up payees, and sending money is secure and instant. International payments can be made to Kenya, Botswana, Ghana, Mauritius and Zambia (min. of 25 and max. of 750).
//Moven
Moven is the first direct banking model that has been built from the ground up for the mobile and social generation. Founded in 2011, Moven is an Anthemis portfolio company , based in the US. its CREDScoreTM, a financial wellness and credibility scale that analyses spending information and financial behaviour to provide a gameable metric to help customers improve their financial health, control and awareness through feedback on day to day spending activities . Their spend, save, live approach to personal financial management helps their customers to make better spending decisions in real-time at the point of sale. Moven won Best of the Show at Finovate 2013 in February .
//Fidor
Fidor offers internet and phone banking, precious metal trading, insurance services, peer-to-peer lending and deposit- taking services (not only for Euros but also for virtual online game currencies). Founded in 2009, Munich based Fidor Bank is an Anthemis portfolio company. Listed on the open market of the Frankfurt Stock Exchange, Fidor Bank AG has about 160,000 community registrations, 20,000 full KYC customers and a 200 million balance sheet, supported by 35 staff and no branches. It has a full German banking licence and is regulated by BaFin. Fidor Bank was one of the four winners of the 2013 Bank Innovation Awards, set up by the Bank Innovation blog.
//FNB
FNB eWallet was initially launched in S. Africa in October 2009. In December 2012 it was re-launched, to allow cash deposits at FNB ATMs. Working with mPowa towards introducing a mobile payment device to its merchant services. Designed and geared towards the local market.
www.anthemis.com
the anthemis newsletter 01//5. Recent M&A: Featuring Visa & Zapp
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//Zapp
Zapp will offer direct access to customers bank accounts and enable real-time payments through their mobile phone. Expected to launch in the UK in 2014 by Vocalink. Payments will be processed by linking a mobile phone number to a bank account and customers will be able to check their balance.
//Simple
Simple replaces traditional banking experience with a beautifully designed end-to-end experience. Through Simple, customers can make purchases with a Simple Visa Card, deposit cheques using smart-phones, set up direct deposits, earn interest, pay bills, transfer money, withdraw cash from over 40,000 ATMs, and more. Founded in 2009, Simple is an Anthemis portfolio company based in the US. Simple offers clever web and mobile apps, no surprise fees and real, personalised customer service. Simples flagship safe to spend balance fundamentally changes the way people experience and manage their day-to-day finances.
//Conclusion: Mobile payments value chain: The hallmarks of an industry at its inception - fragmented and crowded
Mobile infrastructure provisioning
Hardware Manufacture
Order management
Payment processing
Customer registration and services
Engagement
Ad networks/ analytics
Debit/credit accounts
Manage application lifecycle
Distribute/ Develop application
Account managment services
Route transaction
Handset manufacturer Acquirer
Mobile operators
Mobile operators
Technology providers Network
Issuer
Network
Merchants
New intermediaries
New intermediaries
New intermediaries
www.anthemis.com
CRM and loyalty
Activate service
Customer KYC
Initiate order
Aggregate
Scheme
Virtual currencies
Acquire payment
Deliver product
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Recent M&A
Banks and financial institutions, MNOs, handset manufacturers, large corporations and financial investors are all trying to exploit the mPayments opportunity , with M&A announcements in the media on an almost daily basis. Here we examine the main factors driving the robust M&A activity . Establishing a geographic footprint in emerging markets is one of the key themes characterising M&A activity . Mobile payments are cost-effective and secure when compared to traditional financial services infrastructure, and provide financial services access to the underbanked and the unbanked. Ingenico has been active in diversifying its operations. A particular area of focus is alternative payments via the gradual acquisition of its 84% controlling interest in mPOS provider ROAM Data and the c. $485m acquisition of online PSP Ogone in January 2013. Keen to expand into the Africa market, Ingenico entered into a strategic partnership with T agattitude, an Africa-focused mobile money software vendor , in September 2013. In February 2013, MasterCard announced its plans to launch its first NFC payment project in Latin America. T eaming up with market incumbents across different industries, such as Brazilian bank Ita, wireless carrier TIM, payment processor Redecard, and digital security company Gemalto, the new service will allow consumers to pay by tapping their PayPassenabled smartphone on NFCenabled POS devices. Operating in the same region, iZettle announced the launch of its mobile payments services in Brazil as part of its global partnership with Banco Santander , in August 2013. The announcement came weeks after iZettle opened up its doors for business in Mexico Enhancing the mPayments transaction with value-added services, such as customer retention, loyalty , rewards, coupons, personalized and localised advertising, and data analytics, is something that the players understand will grab the merchants attention. Customer loyalty space is heating up. Case in point: Chicago-based loyalty app Belly announcing a Series B round funding of $12m in August 2013, which brings the total capital raised to $28m for the two year-old startup. Another notable deal is the acquisition of locationbased social platform Loopt for c. $43m by prepaid card issuer Green Dot announced in January 2013. Along similar lines, MasterCard announced the acquisition of loyalty platform T ruaxis in September 2012 for an undisclosed amount. This was part of its efforts to deliver enhanced shopping experiences by also leveraging its own PayPass digital wallet. Proactively innovating and trying to come up with the next big thing that will disrupt the industry as a whole is also driving mPayments partnerships. June 2013 saw a lot of excitement with mPayment startup Clinkle announcing a $25M seed financing round that included a veritable whoswho of venture and payment luminaries, including Intuit and PayPal founder , Peter Thiel. Although the exact details and functionality of the companys app have not been revealed, the company is planning to shake up the industry by introducing a revolutionary phone payment method via ultrasound exchanged on the device. Paypal acquired Braintree for $800mn cash, at the end of September 2013 to boost its online checkouts and also reinvigorate in-house innovation and product development with fresh talent. Earlier in May , Paypal had underpinned its continued commitment to innovation and experimentation by acquiring the mobile development company Duff Research to deepen its mobile payment talent pool. Duff Research is an innovative provider of full- service mobile app development for some of the worlds leading brands and startups. PayPal had in June 2012, acquired card. io, a company that allows developers to capture credit card information by using a smartphones built-in camera. Square is still flying high and, in September 2012, closed a $200m funding round that valued the company at c. $3.3bn. Just recently , two Square clones, SumUp and Powa, raised significant funding. SumUp landed a double-digit million euro round, where investors included Groupon, American Express and BBVA Ventures. Powa Technologies, a mobile payments startup in the U.K., raised a huge $76m first funding round. The company is looking to revolutionise mCommerce with the launch of PowaTag, a mobile technology that can detect any product from its picture. Going forward, we expect significant activity driven by todays nature of the mPayments space diverse and fragmented, comprised of sub-scale companies offering coexisting and overlapping mobile products and solutions with shallow commercial value. Which leads us to anticipate various players engaging in M&A activity in an effort to create market champions and achieve the necessary scale for further growth. An example of this is the FIS acquisition of mFoundry: At the beginning of 2013, FIS, the worlds largest provider of banking and payments technology , announced it had acquired mFoundry ,a provider of mobile banking and payment solutions for financial institutions and retailers, for c. $120m. Its objective was to create one of the leading mobile entities in the financial services space and simultaneously to enable FIS to leverage its technology assets across a broader client base.
We anticipate players engaging in further M&A activity in an effort to create market champions and achieve the necessary scale for further growth.
www.anthemis.com
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Case studies
Visa: Aggressively expanding into non-traditional elements of the payments value chain
Visas various strategic initiatives over the last three years are in line with its long-term strategy to enable consumers to transact wherever and whenever they choose, using a card, a computer or a mobile device with Visas reliability , security and global acceptance. The companys focus towards alternative payments began with the c. $2bn acquisition of CyberSource, a leading enabler of eCommerce transactions, in April 2010. An additional bolt-on acquisition of Playspan, a virtual-goods monetisation platform, for c. $220m in February 2011 further enhanced Visas growth prospects in the digital commerce space. And the acquisitions and investments made by Visa over the past couple of years emphasise this mobile payments focus of Visas strategic agenda. Fundamo, an emerging markets-focused enterprise mobile financial services platform, deployed in more than 34 countries across Africa, Asia and the Middle East was acquired by Visa for $110m in June 2011 to expand Visas geographic footprint in a key growth area. Visas investment in Square, in April 2011 allowed the company to gain access to micro-merchants, who have traditionally refused to accept cards because of the high transaction costs associated with them. Furthermore, the company hedges against the risk associated with the exponential interest of merchants for such devices, as they jeopardise the dominance of the traditional POS readers. A c. 45m investment in Monitise, a developer of financial services mobile platforms, in August 2012 helped Visa establish a strong relationship with a strategic development partner with undisputed commercial success in an industry where companies have generally failed to achieve scale. And furthermore, Visa has gained indirect exposure to the space via Monitises bolt-on investments, including the 39m deal for mobile app developer Grapple in September 2013 and the $173m deal for US-based mobile platform provider Clairmail in March 2012.
Zapp: the inside story

It is precisely this reach that makes the Zapp proposition so powerful, to potentially become the new standard for mobile payments in the UK. Convenience, security and transparency are being billed as the main consumer benefits of Zapp. T o make this happen, Zapp will be integrated directly into consumers existing mobile banking apps and will provide consistent consumer-tobusiness payment capabilities across all commerce channels-mobile, online and in-store. For merchants, Zapps main benefit is instant interbank mobile fund transfers that speed up payments, alleviating cashflow problems that small businesses and micro-merchants in particular , may currently experience. And the simplicity of the Zapp payment process may also lead to fewer abandoned shopping carts and higher customer conversion for retailers. Zapp also favours merchants by sidestepping the traditionally high rates of interchange with its direct bank-to-bank connectivity , which translates into a potentially cheaper means of accepting payments. This is similar to what we are currently seeing in the US with the MCX initiative, but the difference is that MCX has been retailer led. Zapp will remain open to integration with all relevant POS technologies (NFC, QR code or any other retailer system), and it is VocaLinks real-time bank-to-bank platform that remains the focus for user adoption and ubiquity . David Yates, CEO of VocaLink, says, The UK
On 25 June 2013, VocaLink, the operator of the UKs national payments infrastructure, unveiled Zappa major new mobile payments initiative that will allow consumers to make real-time, 24/7 payments to retailers and businesses directly from their bank accounts. VocaLink is responsible for the Faster Payments real-time payments service alongside the Bacs and direct-debit schemes, as well as for the switching infrastructure behind the LINK scheme that connects over 65,000 ATMs. VocaLinks systems currently process more than 90% of salaries, more than 70% of household bills and almost all state benefits within the UK.
financial system has a rich history of speeding up the movement of money and Zapp is the next evolution. Zapp has recently announced a strategic partnership with the UKs largest merchant acquirer , WorldPay , which moves it one step closer to a consumer launch in early 2014, with participating financial institutions and retailers currently being signed up. Anthemis played a key role in making Zapp a reality . We were involved in identifying mobile as a significant opportunity for VocaLink, and shepherding the idea through from a high-level concept to a defined product proposition. Zapps ultimate aim is to bring mobile payments to the mainstreama first for the UK.
www.anthemis.com
Startups
Banks
Infrastructure Providers
Schemes
Retailers
Governments
Mobile Network Operators

(MNOs)
Source: Anthemis research
COMPANY
TECHNOLOGY
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the anthemis newsletter 02//6. mPayments barometer
Part II: Opinion
mPayments Barometer
Mobiles payments are not it yet... Clickety-boo
We live in a one-click, one-swipe world. A mobile payment feature requiring multiple entries on each side of the transaction is doomed. Unless were playing games and earning points along the way, every extra step to transaction completion raises the probability of transaction abandonment.
Mobiles payments can succeed if.. Governments promote cashless transactions

The lack of POS infrastructure in most of the developing countries has propelled mPOS solutions and enabled rapid acceptance and use by consumers and merchants. Further incentives by government, telcos and financial-services providers will ensure sustainable long-term success in these markets
Wallet ubiquity
Everyday a new wallet or wallet app pops up. It is confusing and overwhelming to say the least. Like cash, the aim of a wallet is to be universally accepted, and this cant be realised as long as ubiquitous interoperability is left unaddressed. Consumers and merchants will wait for a clear , winning solution to emerge.
Digital coins are sold

That is, BitCoins or Digital (eVoucher) Coins. T ransport For London (TFL) recently announced that cash will not be accepted on buses beginning in 2014a transition that will be interesting to watch. Initiatives such as this will accelerate the adoption of cashless transactions by consumers. Those who dont adapt will be left at the bus stop or will have to buy an eVoucher at the nearest merchant.
Whats the backup?

Were closing in on the day that you will leave your wallet and cash behind, but were not there yet. So for the next three years, well need at least some sort of backup payment method. Thats where the ATM networks come in, playing an integral role in complementing the mobile-payment ecosystem.
Savings from digital transactions are passed on

Loyalty , rewards and the cost of current cash and card-based transactions carry hefty costs for all stakeholders. Digital money costs a fraction of that and the savings can easily be passed on to consumers. This in itself promotes quicker adoption and more frequent usage of mobile payments. Coupled with data analytics, the phone will become your avatar your practical clone.
NFC vs. NSDT vs SMS vs who knows what?

The mobile phone and any device interacting with it to complete a payment transaction have to be agnostic and omni-device oriented. Customers dont care about the behindthe-scene mechanics; they just want it to work. After all, whod want to wait in line to pay only to be told that their mobile or mobile app is not compatible with the merchants device?
Interoperability is promoted
Registration, know-your-customer and compliance processes continue to be cumbersome. The rewards of interoperability for all players far outweigh the narrow competitive advantages of individual players. The sooner they start improving the processes, the better it will be for consumers and merchants.
Security is safeguarded
Safeguards and regulation will continue to evolve to protect consumers and merchants. Value-added services tied to purchases will encourage consumers to try the merchant, and then keep coming back. The combined features and benefits of mobile payments will eventually outweigh the use of other payment methods, ultimately leading to mass acceptance and usage.
When to abandon ship?

If all else fails, make sure you have a good quality phone because you can always break it down and sell it off piece by piece. Depending on the bill you are trying to pay, you may have to give up the entire phone.
www.anthemis.com
the anthemis newsletter 02//7. Show me the money
19
Show me the money

The Payments Innovation Jury Report, published jointly by Anthemis and Ixaris in July 2013, identified that: adoption of smartphones and tablets is the biggest technology trend driving innovation in payments. So the key questions are: How does this translate into profitability? Which parties in the payment-value chain will reap the maximum benefits? In recent articles and interviews, gold rush has been used to describe the excitement around mPayments: the quick riches, the huge risks and rewards, and the many players complete with a romantic vision of people crossing continents eager to make their fortunes, followed by confusion and disillusion from too much pain for little reward. Of the many players involved in mPayments, only a few have made any sizable return on their investments and only over a relatively short period of time. And the processes have not changed significantly. Surely this isnt what mPayments should be all about. But unlike a gold rush, mPayments is an evolving process. A more apt analogy would be the introduction of steam engines in the industrial revolution introducing new ways of working and changing consumers behaviour. However, the great efficiencies the steam engine unlocked were realised over a much greater time period. For sustainable profits, mPayments need to be applied on a larger scale, they need to involve several players in the value chain and cruciallythey need consumers to adopt them. Both suppliers and processors expect to be profitable, whereas traditional banks see mPayments as a must do, simply to keep up with the times even if it means an increase in costs. Obviously, amongst the glut of new players and investors looking to change the payments landscape and grab a portion of the market, only a few
The industry, it seems, is yet to be convinced that consumers will pay for mobile-payment services. Is convenience enough of a driver to change not just consumers behaviour but also their willingness to pay?
will be profitable. Some successes will come from the scale of the solution and the collaboration of large players for whom costs and barriers to entry are not significant. But some niche markets will allow small players to blossom. The situation remains fluid because we dont know yet who will actually pay for the use of mPayments and why they will be willing to pay. Many mPayments startups, although successful at acquiring merchants at unprecedented rates at lower costs than the incumbents, have still to build profitable businesses. This is because payments are and will remain a business where volumes drive profitability. For startups to survive, then, they need to build a significant mass of users and merchants before they become sustainable businesses. In the meantime, many players are now looking to monetise on ancillary payment services such as loyalty or data analytics to survive. Is this an overly negative view of the future? Perhaps. We have no doubt that mobile devices and mobile payments will continue to grow and disrupt the current status quo. How the players in the industry make money and when they realise a return on their investment, however, remains a challenge.
The key take away for mPayments is that to be successful, consumer behaviour must change significantly, and experience tells us that such change takes time.
www.anthemis.com
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the anthemis newsletter 02//8. Revolutionising Shopping Habits
Revolutionising Shopping Habits

Today, mobile searching a product while shopping in retail stores has become ubiquitous, making product and merchant comparison much easier and leading to price transparency and retail competition. Previously, shoppers would look for a product, compare it to a similar product often in another store to verify their choice, and potentially return to their original choice. This was a good enough solution when life moved at a more leisurely pace. But technology has quickly changed consumers expectations, fast-tracking life and enabling instant gratification. The next frontier is to make the experience of payment disappear completely. From digital shopping to fading paymentsread on! the best showroom of all retailers.
The models
mPayments has two competing models: Snap&Deliver vs Pick&Go. With Snap&Deliver, you see a product in a shop, click on the barcode, find it at a digital retailer, buy it from the digital retailer to be delivered to your door, and abandon the product you first saw in the store. The other model, Pick&Go, is a new model that makes human interaction and queuing redundant by simply scanning the product barcode on your phone and completing the transaction using the retailers payment app; the store has access to your bank details or wallet and will automatically deduct the relevant amount.
The theory
Shoppers can now check a product online, compare its features and get it delivered. With money in the account and a robust internet connection, their shopping can be done seamlessly with just a few clicks: no stops at the counter, no cashier, no paper receipt. In a Comscore survey on smartphone users (2011) highlighted by KBCP ,a US-based venture fund, the top two reasons for in-store purchase abandonment were found it online for a better price and found it at another store for a better price. More and more people are realizing that shopping has been revolutionised and its now Amazon that has
The practice
Square Wallet, Uber/Braintree and Apple are trying to make the payment experience transparent and easy . From the retailer to the customer, Square Wallet offers the only fully integrated experience because it controls the wallet experience, the POS experience and the entire data chain in the middle: payment information, product information and all relevant metadata around it. Its no wonder that Square Wallet is pushing hard to make the act of making a payment disappear. As Megan Quinn, director of products at the time of the first launch put it, This is truly the most seamless way to pay. It becomes more about the interaction
between customer and merchant and that relationship rather than the actual act of the payments. People dont appreciate [making payments]; they enjoy making a purchase and feeling like a regular at places they shop. Uber has also integrated the non-payment experience successfully. When riding in one of its cars, customers just have to enter and leave the car. The software records the duration of the ride independently of the drivers and bills instantaneously when customers arrive at their destinations. And Apples changes in its retail experience are in this same vein. It took them less than a year to remove the checkout desk in most of their stores, equipping their store attendants, or geniuses as they are called, with credit card-accepting iPods in the US or hidden terminals in some European countries. Receipt printers are also purposefully out of view under the presentation
desks. And you can now self-checkout on smaller items, order online and pick up in the store. Apple is slowly moving its in-store experience toward less square footage for retail and more for support, classes and high profile events.
The revolution is here

With more competition from online players, major retail chains need to adapt or risk disappearing. This has already happened in the US, as witnessed by the demise of Mervyns and Woolworths. The impact of mPayments will change the commercial real-estate market, affecting the architectural structure of the city and thereby our rituals that traditionally have been in the physical marketplace. Integrating mobile payment solutions for in-store retail is a possible solution, but will it be enough or just an expensive and temporary stopgap against the unrelenting, revolutionary tide of digital?
It becomes more about the interaction between customer and merchant and that relationship rather than the actual act of the payments. We want to make payments fade away.
www.anthemis.com
the anthemis newsletter 02//9. Software Solutions: Experimenting, Tinkering, Developing and Adapting
21
Software Solutions: Experimenting, Tinkering, Developing and Adapting

Marc Andreessens famous essay , entitled Why Software is Eating the World, is a already part of the canon of the digital revolution. He advocates that software is disruptive to all industries, from automobiles to financial services, as it finally comes of age with the growing availability of low-cost, always-on connectivity and compute power . For financial services, he notes: The financial services industry has been visibly transformed by software over the last 30 years. Practically every financial transaction, from someone buying a cup of coffee to someone trading a trillion dollars of credit default derivatives, is done in software. And many of the leading innovators in financial services are software companies, such as Square, which allows anyone to accept credit card payments with a mobile phone, and PayPal, which generated more than $1 billion in revenue in the second quarter of this year , up 31% over the previous year . Andreessens choice of Square Wallet and PayPal as examples is not surprising because they are essentially software-based disruptors in payments. via mobile using existing connectivity and geofencing. To ensure fraud control, Square Wallet uses a mix of data (including social data) and localization. mobile, giving you the ability to instantly buy , participate and interact in real-time. This will be very different than most NFC integration. Bluetooth is treated as an open SDK (software development kit) feature, the same way the iPhone gyroscope can be accessed and used by various apps. There is no gatekeeper with Bluetooth in contrast to the SE/NFC implementation. To elaborate, people using Amazons in-real world store to make their purchase online (comparing prices, finding sizes) is an example of a pure software play .
But software is powering new entrants

However , It is interesting to compare some of the disruptors (from other industries) cited by AndreessenSkype, LinkedIn, Netflix to the disruptive companies that are taking on the mobile/online payment market as a software-based business. For them the question is: Why do I need dedicated hardware when I can use 3G/WiFi and cloudbased solutions to run local payments, with the same level of convenience and security? PayPal might be seen as an inspiration for these companies, having succeeded in Internet-based payment using a softwareonly solution, including fraud management, when other players were thinking of tokens, dedicated credit cards and security hardware.
Venmo by Braintree
Another example is Venmo, the P2P payment solution acquired by Braintree, which has been extended in a cloud-based wallet. Braintree can now store all payment information in one single digital location, so that whether you pay for a room on AirBnB or use a car with Uber , your payment experience will be the same because the back-end schematic has been standardised by Braintree. Its like a bespoke solution homogenised for all of Braintrees merchants. By doing this, Braintree is making a strong case to become synonymous with mobile payments just like PayPal is with online payments.
Software is eating the world.

Primary among the many advantages of the software solutions is that they are easier to launch and faster to adapt to changing market dynamics because the existing connectivity and tools can be leveraged. A limited number of NFC phones still exist, and Paypass POSs are not that common. But they are easier to adapt because no dedicated hardware is used. App stores have also made app updates more convenient. With software solutions less restrictive, they foster a stronger developer/ startup environment, leading to more innovation and frequent, useful updates for the end user .
Open Bluetooth by Apple

With iBeacon, Apple could truly unlock the the potential of hyperlocal information by developing an open Bluetooth standard. The best example would be, as you walk down a high street, offers, discounts and events happening in shops youre approaching flash up on your
Hardware is at the core of the banking industry

While its a software-based industry , financial-services still rely heavily on dedicated hardware. Cash, checks, credit cards are all physical tokens that manifest value and ownership. NFC is one of the latest in this chain of hardware-based solutions, using secure elements and dedicated POS hardware to ensure transactions.
Square Wallet
Several software-based businesses are pushing for software-based solutions in payments. At first glance, Square Wallet, for one, may seem to be a hardwarebased business model as it is known for its dongle enabling credit card acceptance on mobile. But looking more closely , its core vision is clearly software focused, and is a perfect example of this approach: allowing local payments with merchants
Ultimately, the advantage of a software-based solution is this flexibility to experiment, tinker, develop and adapt.
www.anthemis.com
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the anthemis newsletter 02//10. Interview: Lets hear it from the movers & shakers
mPayments: How will they evolve? we asked three industry experts

The future of payments lies with mobile, that much seems clear. But how best to arrive at that future is something that everyone is still trying to figure out. In phase with the times - the age of inclusion, the age of customer engagement and feedback, the age of free information flows, the age of technological innovations - mPayments are evolving at a blinding speed. Depending on their perspective and historical positioning, different players have vastly different views on the prospects for mPayments. So we decided it would make sense to talk to some experts at the forefront of mPayments, namely: - Jeremy Sewell (JS), CFO of GSMA, who stands firmly behind NFC being the key to a bright future for mPayments. - Christian Deger (CD), co-founder and Managing Director of a promising mobile payments startup, payworks, who believes that any meaningful advancement of mPayments depends on a neutral platform provider, independent from acquirers, banks and hardware providers. - Suresh Sethi (SS), the CEO of M-Pesa at Vodafone India, who approaches the discussion from an emerging-markets angle with a particular focus on how mobile payments are developing in India.
Jeremy Sewell
Christian Deger
Suresh Sethi
The GSMA represents the interests of mobile operators worldwide. Spanning more than 220 countries, the GSMA unites nearly 800 of the worlds mobile operators with 250 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and Internet companies, as well as organisations in industry sectors such as financial services, healthcare, media, transport and utilities. The GSMA also produces industry-leading events such as the Mobile World Congress and the Mobile Asia Expo. payworks provides a new kind of SaaS Mobile Payment Processing platform that enables providers of mobile POS solutions to integrate payment functionality into their products quickly , choose from a large range of global processing partners and acquiring banks and manage their merchants and payment streams efficiently after the product has been launched. The Munich based company was awarded with the Payment Startup Innovator Award at MPE 2013. British multinational telecommunications company Vodafone Group plc owns and operates networks in over 30 countries and has partner networks in over 40 additional countries. In March 2007, Safaricom, which is partly owned by Vodafone and the leading mobile communication provider in Kenya, launched M- Pesa, a mobile payment solution developed by Vodafone. Following M-Pesas success in Kenya, Vodafone announced that it was to extend the service to Afghanistan, Tanzania, South Africa and India.
Briefly , where are mobile payments headed? Which player is most important?
JS: The outlook for mobile payments is very healthy. A piece of research we conducted amongst consumers and credit card companies suggested that if the service was intuitive and
easy to use on the mobile phone, then people would largely spend 30% more through the phone than they would otherwise. The MNOs are key to mPayments success as they already have a strong relationship with the consumers who are increasingly using mobile phones in so many
aspects of their lives. Provided they tick all the boxes, such as providing secure services via the SIM and introducing SIMenabled mobile NFC, they could potentially come out as winners in the mPayments race. CD: Theres no doubt that mPayments are set to
www.anthemis.com
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grow immensely. In many cases though, growth is being driven not by the payment functionality itself but by the increased flexibility that enables this technology to be integrated into a variety of solutions targeted to a specific merchant segment. So the most important players will be the companies who build solutions that really enhance the merchants proposition and bring in the customers. Big players who are still thinking about technology and how to effectively roll-out payment products will have to move fast if they want to compete with new players targeting specific merchant verticals. SS: In India, at the moment, the money transfer proposition is still the biggest untapped business. Although the government has relaxed regulation to some extent and encouraged interoperability, given that only 5% of the villages in India have a bank outlet and nearly 70% of the population have a mobile phone, the opportunity for MNOs is immense. They have the technology, the distribution, all the data around their customer base so they are best placed to be the critical enablersto reach out,
get people to use it and grow volume. Also equally worth noting is that from the 9-million-strong unorganized retail sector in India, only 600,000 outlets accept cards. So there is a huge opportunity for adding eCommerce and mCommerce capability in India.
think about the best way to help the merchant grow his specific business. In the case of partnerships, it is always difficult to balance the different and oftentimes opposing interests without having to make compromises that may be disadvantageous for the merchant and his customers. SS: In my opinion, the best fit is when each entity sticks to what they do best. MNOs should have a free hand to create a wallet within prescribed guidelines and take it to the masses and the merchants given that they already have the reach and infrastructure. Banks should provide the banking servicesthe loans, the credit cards, the savings accounts, etc. Its best to play to ones strengths and complement each others abilities.
What is an ideal fit: When an MNO partners with a bank or when it uses a bank as a supplier?
JS: In Korea and Japan, mPayment and NFC service adoption is increasing, and has been successful with airlines, banks and MNOs partnering together. Canada has one of the largest contactless point of sale terminal penetration rates in the world making it prime for mobile NFC adoption. In the US, ISIS, a joint venture between the MNOs, has trialled successfully in Austin and Salt Lake City having completed deals with major banks and is ready to launch across the US. But bear in mind that geography and existing infrastructures dictate models to a large extent. CD: I believe it is always better if there is only one party in charge of designing the solution and providing it to the merchant. The provider is then in the position to
on operating system for mobile payments at the Point of Sale. Companies using our platform are indeed creating a variety of different solutions based on one single technical standard. In our view, there needs to be a neutral provider, independent from acquirers, banks and other providers. Otherwise, it will never be possible to facilitate the advancement of mPayments at a deeper level, especially in the developed world as investment costs are high and flexibility is low due to the high dependency on partners in each direction. SS: In India we want to reach each and every person who has a mobile phone, so for us, technology has to be the lowest common denominator. For the non-smartphone-using consumer, were using USSD channel or SMS, these being simple, easy. This will hopefully help in moving towards a selfservice model in India as opposed to the current agent-assisted model. Smartphones are now within easy reach of the urban consumer, so not only is the smartphone penetration increasing very quickly, but these consumers are also accessing app-based wallets.
Are you seeing any standardisation within the mobilepayments space across the world where the same or similar technology is used to address different needs?
From the 9-million-strong unorganized retail sector in India, only 600,000 outlets accept cards. So there is a huge opportunity for adding eCommerce and mCommerce capability in India.
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JS: The common thread to success, if I step above this question, is consumer ubiquity. In the case of M- Pesa, it was the service provider Safaricom with its nearly 70%-strong market share. So a consumers friend or family having the service as well was highly likely. This is being replicated in other countries through joint ventures like Weve and ISIS where its important to have a simple common interface, whether its at the business end or the consumer end. CD: At payworks we are building exactly this:
How crucial is interoperability amongst the mobile payments players?

JS: MNOs are well aware that scale of services will only be achieved through interoperability and a standards-based approach. To enable interoperability between SIM-based NFC
24
devices, regardless of manufacturer, operating system, mobile operator and network, the GSMA has published handset and SIM requirements which define common handset application programming interfaces (APIs) to support SIM-based mobile NFC services. The GSMA is also working with mobile network operators in markets globally to build the inter-industry ecosystems needed to roll-out compelling mobile NFC-based services. CD: Interoperability is certainly important on the technical level, but among the solutions themselves I dont necessarily think that it is very crucial. However, it will be important that the solution providers are enabled to build the respective payment schemes into their products in order to avoid the chicken-and-egg problem. These payment schemes are certainly the traditional credit cards, but may also include new mobile-payment schemes. SS: The Reserve Bank of India has named a wide range of bodies that are now eligible to become a BC (Business Correspondent), and they have been chosen because of their relevance and reach, amongst other factors. In India, the legislation allows retailers to become BCs to explore cash dispersal as a way to remain profitable. On top of that, interoperability has been encouraged, meaning that a payment can be made with any BC regardless of which bank it represents and where the recipient bank account is. Or say an Airtel BC can service an M-Pesa Vodafone customer in India. This brings a lot of ease and comfort to the end consumer .
What is your view on NFC? Many say times have already left NFC behind, while many still think it is the future. Who is the key player to decide on its future - mobile manufacturers, banks, MNOs?
JS: The momentum weve seen in NFC services continues to grow at a rapid pace. If their SIM-based NFC handset is lost, consumers can contact their operator and have their personal data immediately wiped from the SIM card. When they get a new NFC handset, that data can be securely loaded onto a new SIM card over the air . Consumers are likely to trust mobile operators to handle these processes because they are well-established companies with retail stores and call centres. So as consumers are in control, they will be the ones to drive this and decide the services. CD: It will be important to find cases where NFC technology really makes sense. All checkout techniques currently employed by the NFC cards could be mapped 1:1 to chip-based EMV payments; this is especially true for the CVM (cardholder verification method) waiver. Also, owning multiple NFC-enabled cards still requires you to pull out one specific card from your wallet and place it on the readerno real benefit compared to inserting it into the terminal. NFC in the current setup only adds wireless functionality to an already established payment workflow, but can potentially introduce revolutionized payment workflows and completely new payment systems.
SS: The future of NFC depends on the deployment of the NFC acceptance infrastructure. NFC is deeply penetrated, smart and intuitive, but in the end it all comes down to the merchants, whether they are willing to invest in the infrastructure or not. And that in turn leads to the question of what other value- added services NFC can bring with it for the merchants to give them a nudge towards adoption.
with phones. People, who are not that familiar with the technology , might adapt more slowly and may need some more education on technology and security . It will always depend on the specific situation though: If I get a creepy looking app from an even creepierlooking merchant, I would certainly not pay with my phone but then again not even with my credit card. SS: Fear of money on a digital wallet is always there, but thats where customer literacy and marketing programs kick in. Were working towards a selfservice model where the customers load the money on the wallet themselves, rather than an agent-assisted model where they have to rely on someonehence our focus on really simple and intuitive technology that empowers the customer . Another very simple, yet effective security check would be provided by the Aadhar scheme1 in India which ensures that BCs will be able to function without some of the cash-related KYC issues seen in other markets.
Is security a concern during customer acquisition in mobile payments? Although phones seem more secure than cards, are the customers convinced?
JS: Security will be vital in determining the success of NFC. Because the SIM is the device with all the information, the MNOs have control over it and its security. This allows them certain leverage when comparing them to other service providers, as they can enforce security and privacy rules for their applications, stored on the SIM card. MNOs already have to adhere to strict regulations; however, it is imperative for the service providers (banks and card companies) to ensure they also meet these standards. The SIM is key to developing secure services, which will allow consumers trust to build. CD: I think it depends to a large extent on the customers background. My generation and everybody born after (post-1980) uses their smartphone or mobile device for a number of things and do not really have a problem paying
What are the main hurdles right now being faced by mobile payments? How is regulation contributing to this?
JS: For the GSMA, it has been about building the relatively complex relationships and systems between the main players, i.e., MNOs, banks, card schemes, retailers, transport providers, governments, and also about raising service provider and customer awareness of NFC and how convenient and secure it is. The technology is in place, it is bank-grade secure and it works, although,
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as is always the case, further developments of specifications and standards are required and the GSMA is heavily engaged in activity to support this. Regulation is not really an issue in mobile commerce as it is a tool to deliver existing services and products in a new and innovative way . However , in these tough economic times, securing the relevant funds to invest in service building to further support and enhance services is bound to be tough at times, but industries are increasingly aware of the advantages that mobile can bring in terms of customer engagement and revenue generation. CD: Regulation has become clearer, especially in face-to-face payments, which adds certainty , inspires trust in the market and triggers investments into certain types of technology . Main hurdles right now are finding the right use cases where mobile payment technology can add value. If it adds value, people will use it. If it is a pain, people wont. SS: In India, weve seen a convergence of regulation and very clear guidelines about what a mobile can and cant do. The RBI is issuing licences to payment companies to create semiclosed wallet services, which come with a limit of the amount of money transferable and no cash-out facility . And since India is a cash-denominated economy , it makes sense to have
more BCs. Take the case of Vodafone: While there are only 100,000 bank branches in India, there are 1.6 million Vodafone outlets, out of which 7,000 to 8,000 are exclusively owned by Vodafone. So it makes perfect sense for us to become a BC. We have the distribution, understand the customer and the customer trusts us. But there is still some way to go for the regulation, like we would like to have a cash-out capability without bank sponsorship. And the fact that a BC can only operate within a 30km range of a bank also limits penetration and reach of mPayments.
Sprinters show that where MNOs invest in building a robust service, a good agent network, marketing support and relevant infrastructure, then mPayments can really fly.
Money Adoption Survey . Five of these 14 sprinters have publicly announced themselves as such: Econet Wireless Zimbabwe, Telesom Somalilands ZAAD, Easypaisa, the mobile money service launched in Pakistan by Telenor , UBL Omni and Orange Money in Madagascar . CD: M-Pesas success came from Safaricoms large market share but also a number of other sociocultural and economic conditions in Kenya. Such a set of conditions cannot be found exactly replicated in another country but Telcos elsewhere can still enhance their own service with mpayments or mobile banking and reduce their churn rates and increase customer retention. It will be critical for them to understand the market needs and see where their mPayments services can add real value. This can still be trimming the cost of money transfer in some countries, but could also be used to help fight corruption in others. In mature markets, Telcos will need to offer more than just transferring money from A to B to be successful. Otherwise, they have little benefit over banks that offer money transfer to anyone in Europe for a very low cost. SS: I think M-Pesa in Kenya worked really well, but we should go beyond looking for a clone of that success story. The geographies, the customers, the contexts are so different everywhere in the world that success cannot be measured in the same way. mPayments are at an inflection point in India right now; regulations are finally being relaxed, and the government is on board with creating the necessary ecosystem. Cash is the driver of the digital payment instrument and the government is aligned towards the cash-out proposition. Governments direct benefits transfers2 to the customers phone will make a huge difference to quality of life and get more customers on board and make way for greater financial inclusion. More than half of Indias 1.2bn population has no bank account, but it is the worlds second-largest mobile phone market, with more than 900m subscribers. If only a fraction of these customers come on board with mPayments, India could easily become the worlds mobile money leader . We have our work cut out for us. References
1. Aadhar is a 12-digit individual identification number issued by the Unique Identification Authority of India on behalf of the government, linked to three biometric characteristicsfingerprints and iris scans as well as photographs. 2. Under direct transfer, the difference between the market price and subsidised price is directly transferred to the beneficiary in the form of cash in proportion to the quantity uplifted from the market. In the Union Budget 2011, the government announced a direct transfer of subsidies to BPL households, which is a drastic departure from the existing indirect or price subsidy system wherein subsidies are routed through manufacturers who are required to sell goods below the market rate.
People keep talking about M-Pesa, but that has proved to be a one-off success story . It was successful in Kenya because of the large market share of Safaricom. Nowhere else in the world does one player have the lions share of the market. Therefore, how can a Telco repeat this success story and which other factors need to be in place for a similar success story?
JS: M-Pesa has been an incredible success story in Africa, which is really the poster child for mobile money services for the unbanked. Other services, however , have been growing rapidly since their launch and GSMA MMU identified 14 services which have gained significant traction in the 2012 Global Mobile
Technology is best when it disappears, and mobile payment gives us the power to make that happen.
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the anthemis newsletter 02//11. Anthemis Network News
Anthemis News
What have we been up to?

Udayan Goyal and AJ Hanna, discussing the digital , bespoke strategies and innovation within We hosted the Anthemis Innovation Playground for Financial Services customer traditional companies.* on the 18th of June. Attending were more than 200 senior financial services executives, entrepreneurs and academics from 150 companies Videos of these presentations and others can be found on our YouTube channel at http://www.youtube.com/user/AnthemisGroup Please subscribe to stay up to date and institutions across the world that came together to discuss the with all the latest presentations and events. trends in financial services. In particular , how the digital age is driving transformation of entire business models and philosophies. Deanna Oppenheimer, our newest venture partner , kicked off the What we have heard back conference with a keynote address on the emerging paradigm of banking and the five essentials businesses need to succeed in this All the sessions have been wonderful. new paradigm. JP Rangaswami spoke about scaling trust through technology and the power of openly and intelligently exchanging The panels were very strong panels and the networking great. information. Carlota Perezwhose work has been an inspiration for our business philosophy and modelwrapped up the day with a talk on The calibre of participants was really how best to usher in the golden era of the Information Age. impressive. We also had deeply interactive panels, hosted by Sean Park,
*
//Events
Anthemis Innovation Playground
FinTech Private Equity Dinner

On the same day as the 200-strong Innovation Playground, Anthemis hosted a much smaller and exclusive group: 30 of the top private equity executives in London. We feltand they agreedthat although so many of them worked on similar deals, communication amongst them was lacking. The dinner , the first of many , aimed to remedy that. Heres a glimpse of the evening, and some photos Our next senior executive Roundtable will be held on the 11th of February next year , to co-incide with Finovate Europe. If youd like to attend, please email us at [email protected]
Simply blown away truly outstanding!
this initiative is spectacular ...kudos to [Anthemis] its a great group, a lot of really quality names everyone has great stories to tell...I really enjoyed it
Anthemis Hacking Finance Retreat

Our second annual Anthemis Hacking Retreat in the mountains of Meribel was held in July and built on last years success. Our second annual Anthemis Hacking Finance Retreat in the mountains of Meribel built on last years success. We doubled the number of attendees this year to include not only our portfolio companies, but investors, entrepreneurs from our wider network, people actively involved in changing the financial landscape and our entire Anthemis team - a lively scene of 80 attendees, some with their families, coming from 15 countries. An entire day was devoted to content-driven workshops, complemented by lots of time to network and socialise. Rather than read about it, you can see for yourself what the retreat was like.
very impressive people and location definitely the FinTech highlight of the year high-quality attendees, informative sessions and great organisation awesome people
Financial Services Senior Executive Roundtable

Our latest senior executive Roundtable was held in Dubai on the 17th of September to complement the Sibos conference and leverage the presence of financiers from across the globe for high powered networking at the top of the iconic Burj Khalifa. We partnered with Network International, the #1 merchant acquirer for the UAE and 3rd part issuer-processor in the MENA region. The Roundtable included keynote speeches by JP Rangaswami. Dave Gray , author of the book The Connected Company , followed by discussion around the future of the global payments and broader financial services industry .
thoroughly enjoyable event...the crowd and the venue were top-notch the event was a great success...enjoyed the keynotes had a great evening, well done to the team
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Money2020
From 6th to the 9th of October, we participated in the biggest emerging payments event of the year, Money 2020 with its 4200+ attendees. Udayan Goyal hosted two panels there: Enabling Global Solutions International Processing Landscape and Innovation in India, both of which featured C-level executives, investors and founders. The feedback we had on the panels was incredibly positive and we look forward to participating next year.
//Pipeline
Senior Executive Roundtable, 11th Feb 2014

After the hugely successful Roundtable around Finovate Europe earlier this year, well be hosting it again on 11th February, 2014. Our aim as always is to enable the startups and incumbents to communicate and collaborate. To that end, well have in attendance C-level executives from traditional financial institutions and some of the most cutting edge startups in financial services.
//Announcements
Our congratulations to David Friedberg and The Climate Corporation for their announced acquisition by Monsanto. David, the CEO and co-founder of The Climate Corporation, or Weatherbill, as it was initially called, was in many ways an inspiration for the creation of Anthemis Group with his vision of harnessing 21st century technology to build a quintessential information age financial services business. The Climate Corporation is a perfect example of the opportunity that exists when great entrepreneurs invent disruptive new business models in finance.For the full press release, click here. We recently launched Anthemis Talent, a boutique talent and leadership advisory platform focused on helping clients recruit and develop world-class executives to grow and transform their businesses. We are excited that Gavin Holland will be leading this business for us. He brings with him the experience of running the financial-services business at Heidrick Struggles across Europe, the Middle East and Africa after returning from a three-year stint in the New York office in 2007 as one of the youngest partners in the 60-year history of the company. The potential of the Anthemis Talent business is huge. We are a core team from one of the worlds most prestigious executive search firms, bolstered by sector knowledge and network from Anthemis, and the client focus of a nimble entrepreneurial firm. All this combined will drive immense benefit for our clients, said Gavin. For the full press release, click here. Another auspicious announcement is the formation of a wide-ranging partnership with the Russian venture fund, Life.SREDA. Anthemis and Life.SREDA share a unique perspective into new disruptive business models and the challenges facing traditional financial institutions. This partnership enables both to co-invest in some of the most promising and disruptive financial-services startups, while sharing expertise and resources to provide the necessary mentoring and guidance for their existing portfolios to grow and scale successfully. At the same time, the two companies will also be collaborating on technological innovation projects to help incumbents adapt their businesses to the digital age. For the full press release: click here.
Anthemis News
What have our portfolio companies been up to?

Raising funds, winning industry recognition and moving forward strongly, here are just a few highlights from the past few months: MoPowered, our mobile commerce specialist that is part of the MoBank Group, secured 1.8m in the second close of its latest
1
funding round in August 2013. MoPowered intends to use the investment to increase its sales and marketing activities to ramp up growth before its planned listing on AIM within the next 12 months.
2 Moven our digital bank, established a strategic partnership with the
Russian venture fund, Life. SREDA, in August including a direct investment extending Life.SREDAs portfolio to North America.
3 Metamarkets CEO Michael Driscoll won the bronze award for Emerging Company Executive of the Year in the 2013 Tech Awards
Circle competition, based on his accomplishments in the emerging field of real-time analytics for the online advertising industry. Winners were selected by independent publication reviewers and journalists from nominations based on a broad range of achievementsfrom product and technology
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28
innovations to talented executive leadership and engineering innovators.

4 Blufin/Zyfin, the market-defining financial information and content company in India, changed its name to ZyFin in August. The name change is aimed at establishing its unique identity in the global market. ZyFin introduced hugely popular monthly economic lead indicators, such as the Consumer Confidence Index (CCI) of India and the Business Cycle Indicator (BCI), and plans to launch many more macroeconomic forecasters in the coming quarter.
5 Fidor Bank, closed a significant new equity financing led by JZ International, a mid-market private equity firm with a strong track-record in financial services. This new regulatory capital allows Fidor to continue to grow its balance sheet driven by strong customer demand and deposit growth.
6 Blueleaf, our US-focused wealth management platform, continued to grow its customer base to over $6bn of assets from 7,000+ end users while completing integrations with leading custodians ScottTrade and Charles Schwab.
//What is Anthemis Group?

Anthemis Group is a young, dynamic growth company focused on reinventing financial services for the 21st century. Our aim is to: build one of the worlds leading diversified financial services firms over the next 10 to 20 years, reinventing finance for the information age by bringing togetheron one innovative platform many of the most talented entrepreneurs, executives and engineers in the world of finance. create a remarkable ecosystem of companies with disruptive, technology-enabled business models, providing innovative products and services across the spectrum of retail banking, corporate banking, payments, markets, wealth management and insurance focus on leveraging design, user experience and data, fulfilling the demands of 21st century consumers and businesses. Our activities are organised into two complementary business lines: Principal Investments Anthemis has a portfolio of 22 high-growth private companies located across the globe. Investment areas include wealth and asset management, retail banking and consumer finance, capital markets and trading and data technology and infrastructure. For more information, please visit our website. Advisory Anthemis Edge is a business advisory group combining elements of a strategic consultancy, expert network, design firm and talent collective to provide deep industry knowledge and expertise in financial services. Anthemis Talent is a boutique talent and leadership advisory, focused on helping clients recruit and develop world-class executives to grow and transform their businesses. FT Advisors is a specialist M&A advisory boutique with a focus on financial technology including payments, exchanges and financial software.
Editor: Editor:
The Anthemis Group contributors to the newsletter are:
AJ Hanna
Andrew Veitch
Evelyn Kolintza
Iason Nikolakis
Ravi Bhatt
Yann Ranchere
Alexia Yannopoulos
Simrat Ghuman
Wed love your feedback and suggestions. Please contact us at [email protected]
www.anthemis.com

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the anthemis newsletter: trends in mobile payments

issue 02 | October 2013

Mobile First: Changing the Face of Banking by Brett King

2.Sizing the opportunity and barriers 55.9% to widespread adoption

3.mPayments in Smartphones the developing world: a tough act to follow

4.Emerging Players: Paying with a Click

5.Recent M&A: Featuring Visa & Zapp

6.Infographic: Promise of mPayments

Part II: Anthemis Talks

9.Revolutionising Shopping Habits

10. Software Solutions: Experimenting, Tinkering, Developing and Adapting

Rushing into the Future

Sizing the opportunity and barriers to widespread mobile adoption

Sizing up the players: Overview

//Global share of traditional handset and smartphone shipments

Source: Oppenheimer estimates, Anthemis research

//Mobile payment volume market opportunity

Merchandise Purchases 42%

Ticketing 1% Money Transfer 59%

Money Transfer 50%

Barriers to widespread adoptionResistance to change

//Mobile payment ecosystem

T en he tra cryp data ns fer ted a is red nd OT A

Agreement for payment

Su bs Ha cri nd pti se on inf ts ra + n str e uc tw tur ork e

QR Code Geo-fencing NFC Card Reader

Clearing settlement and payment transaction

Authorisation Request Authorisation request

Merchants and customers

//Banked population penetration (2011)

mPayments in the developing world a tough act to follow

Source: World Bank

//Mobile money: 2017E top five emerging markets

CHINA INDIA BRAZIL

151.3m users $5.82bn revenues

26.6m users $880m revenues

the anthemis newsletter 01//4. Emerging players: Paying with a Click

Emerging Players: Paying with a Click

Point of Sale Device

Mobile Wallet Software

Wallet Instrument Issuer

Carrier Direct Biller

the anthemis newsletter 01//4. Emerging players: Paying with a Click

the anthemis newsletter 01//4. Emerging players: Paying with a Click

the anthemis newsletter 01//4. Emerging players: Paying with a Click

4. Payment terminal vendors

//Click and Buy

the anthemis newsletter 01//4. Emerging players: Paying with a Click

the anthemis newsletter 01//4. Emerging players: Paying with a Click

//Merchants are implementing an omni-channel strategy

.com and physical

and beyond digital Brand holistic customer experience

Single touchpoint through the web

Multiple touchpoint acting independently

Multiple touchpoint with an ambition of a contiguous brand experience

the anthemis newsletter 01//4. Emerging players: Paying with a Click

Customer registration and services

Manage application lifecycle

Distribute/ Develop application

Account managment services