Alternative Payments

A Special Report From The PELORUS Group

ALTERNATIVE PAYMENTS: CHANGING THE RULES

Assessing Market Dynamics, Opportunities and Challenges To 2011
*An Exclusive Report Dedicated To Probing Issues, Trends, And Competitive Forces Shaping Contactless Cards,*
*Mobile Payments And Biometric Payments And Their Impact On Traditional Payments*

Analyzing Why Technology And User Needs Are Now Aligned For Explosive Growth In Alternative Payments Defining The Market Drivers And Trends In Contactless Cards, Mobile Payments And Biometrics Det ailed Opportunity Analysis And Outlook For User Needs And Markets Served Detailed Strategy Discussions On A Per Company Basis For Existing And Emerging Players In: Contactless Cards, Mobile Payments and Biometrics Payments Impact Of Alternative Payments On The Traditional Payments Industry, Retailers, The Financial Industry, And Companies That Currently Serve The Unbanked And Credit Challenged Consumer Intangibles Hurdles In Authentication The Rise Of RFID And NFC Government Support And Regulation How Wary Do Credit Card Companies Need To Be Of Alternative Payments, And What Are Their Opportunities? What Are The Opportunities And Pitfalls Associated With The Increasing Utilization Of E-Payments Instead Of Cash For Parking, Vending, And Other Micropayments?	What Are The Partnership Opportunities Between Players Utilizing Different Technologies To Leverage Their Strengths And Drive Consumer Adoption Growth In Online Payments And Its Impact On The Payments Value Chain? Payment/Card Holder Steering And What It Means For Alternative Payments The Convenience Factor: Active vs. Passive Payments Analyzing The Features And Benefits Of Each Alternative Payments Technology Dealing With Security Issues By Alternative Payments Mode Merchant Benefits: Contactless Cards Mobile Payments Biometric Authenticated Payments Applications And Trials: Contactless Cards Mobile Payments Biometric Authenticated Payments The Future Of Alternative Payments Market Forecasts To 2011!

The First Report To Bring Together The Different Components Of The Alternative Payments Phenomenon Into A Single Overarching Study

The PELORUS Group Navigating Change In The Payments Industry ALTERNATIVE PAYMENTS: CHANGING THE RULES Alternative payment offerings are gaining in both creditability and popularity. From mobile payments to contactless cards to biometrics, consumers are taking notice of emerging alternatives to traditional payment modes. Each passing day sees more media announcing new deployments, new trails. The end result is a consumer reservoir that is more conversant with these solutions - and their inherent issues - than most realize. And one that is more wiling to embrace them. Although issues such as security remain, alternative payments no longer are relegated to "Sometime-In-The Future" status. The implications to traditional payment modes assume a more imperative nature. Alternative payments promise over time to re-write the payments ground rules. By 2011, *PELORUS* research suggests aggregate alternative payments revenue will exceed $400 billion. For the first time, a single report pulls together the potential - opportunistic as well as disruptive - associated with each distinct major category of alternative payment. *The PELORUS Group* offers a compelling perspective as to which segments will ultimately prove most profitable. Nobody studies the emerging payments industry as consistently, thoroughly and as passionately as *The PELORUS Group. "Alternative Payments: Changing the Rules" is The PELORUS Group's* vision of an industry in transition. It is dedicated to harnessing the incredible opportunity - in unprecedented detail - emerging from each major alternative payment category.
*The PELORUS Group’s* "Alternative Payments: Changing The Rules" isolates and analyzes: · What is the potential for alternative payments to erode traditional payment and credit card systems? · Which applications of alternative payments have already emerged, and which have yet to, but eventually will enjoy rapid growth? · Why might financial institutions eventually find themselves at a competitive disadvantage to alternative payment services providers despite their current market dominance? · How can new technologies such as RFID and NFC greatly enhance the users’ experience? · Why can direct debit payments using a biometrics solution, contactless card, or wireless device significantly increase security and reduce fraud? · From mobile payments, to biometrics, to contactless cards, what are the benefits realized by different alternative payments systems? · When, why and how quickly will each alternative payment category catch on in the U.S.? · What payments will grow the most as they reach an aggregate total of some $400 billion in the U.S. by 2011? · Which factors will help and which factors will hinder the payments evolution? · What progress has been made by the major players to establish standards and a common ground between telecom and the financial communities? · Will disintermediation, the buzzword of the Internet, also affect the payments process and the revenue potential of issuers and processors? · What are the services and product offers of the key players? · What is the impact of alternative payments on carriers, retailers, the financial industry, and companies that currently employ traditional payment systems? · What are the technologies that empower devices to displace traditional payment modes? · What are the fastest growing applications by alternative payment service? · What are the key regulatory, standards, fraud prevention, and security issues? · What is the five year market potential associated with contactless cards, mobile payments, and biometric payments?


Table of Contents
EXECUTIVE SUMMARY Challenges of Alternative Payments Innovations Electronic Payments Focus of Report Technologies Competition, Cooperation, Partnerships Conclusion OVERVIEW OF ALTERNATIVE PAYMENTS Overview of Alternative Payments Scope of this Report The Way People Pay Three Ways of Paying Paying on Account and Extending Credit The Payments Value Chain Potential to Shorten the Value Chain The Four Party Payment System Authorization Clearing and Settlement Interchange Fees Types of Alternative Payments Contactless Payments (Debit And Credit) Mobile Payments Biometric Payments Specialized Payment Markets Micropayments Social Money Key Market Segments Mainstream Market Unbanked, Immigrants, and Credit Challenged Unbanked – International Youth Market Merchants Conclusion ALTERNATIVE PAYMENTS TECHNOLOGY Introduction Magnetic Stripe Radio Frequency Identification (RFID) RFID Acceptance Smart Cards Short Message Service (SMS) Direct Debit Using SMS Near Field Communications (NFC) NFC Trials Philips Arena Trial in Atlanta, Georgia NFC Trial in Dallas, Texas NFC Potential NFC Developments in Japan NFC in Europe Biometrics Fingerprint Template and Payment Procedure Industry Coordination and Standards RFID m-Payments and Contactless Payments NFC Forum Payments: Mag-Stripe, Contactless, Smart Card, Wireless, Biometrics Conclusion MARKET DRIVERS AND TRENDS Introduction Speed and Convenience Country Specific/Cultural Factors Differing Payments Infrastructures By Country Ease of Use, Fumble Factor Micropayments Microcomputer in the Hand Cool Factor Retaining Customer Loyalty -- Rebates and Coupons Payment/Cardholder Steering Unbanked Population (Immigrants, Credit Challenged)	High Credit Card Fees - Background on PIN-Based Debit Cards Disintermediaton Security Concerns Active versus Relatively Passive Payment Action Government Support and Regulation Need for Online Payments, New Payment Alternatives PayPal Google Checkout Un-Drivers Point of Sale Equipment Other Payment Providers MoneyGram International Peppercoin CONTACTLESS PAYMENTS Introduction Background and History -- United States Japan and Korea, Europe Strategic Factors Affecting Contactless Usage and Deployment Interchange Costs Additional Benefits of Contactless Cards Security of Contactless Cards Cross-Elasticity with PIN-Based Debit Cards Background on PIN-Based Debit Cards Applications Big City Mass Transit Case Studies -- 7-Eleven and Sheetz Employee Cafeterias Vending Machines Market Promotions Incentive for Customer and Merchant Use Contactless Market Opportunity Lessons from Target’s Bad Experience with Smart Cards Terminal Upgrades to Contactless Key Players Credit Card Companies and Payment Services American Express Citibank Discover Financial Services MasterCard Worldwide (PayPass) Visa First Data Reader Systems and Equipment Companies On Track Innovations Ltd. (OTI) Symbol Technologies ViVOtech General Technology Providers Giesecke & Devrient GmbH INSIDE Contactless Other Contactless Payment Players Chockstone (Customer Loyalty Solutions) FreedomPay (Corporate Cafeteria Market) Precision Dynamics (Alternative Contactless Payment Provider) RFID Chips -Texas Instruments Oberthur Card Systems (Contactless Cards) WIRELESS PAYMENT SOLUTIONS Introduction Wireless Payment Types Wireless Payment Platform Current and Future Payments Evolution The Players, Current and Future Competitive Advantage and Payment System Margins Requirements for Market Growth The Smaller Companies - Establishing Customer Trust The Wild Card - NFC Technology, Wireless Carriers, and Banks World Development	Asia Europe United States South America Conclusion Key Players Service Providers/Enablers C-SAM Cyphermint Dexit MobileLime Mobipay MoreMagic Solutions Obopay PayPal Mobile Sapphire Mobile Systems SMART (Smart Communications) Valista WIZZIT Niche Players TextPayMe Verrus Mobile Technologies Wireless Carriers Cingular T-Mobile Verizon Wireless Cell Phone Companies Nokia Motorola Samsung Sony Ericcson BIOMETRIC AUTHENTICATED PAYMENTS Introduction Biometric Authentication How Payments Work Merchant Benefit Security Discussion Need for Registration Applications and Trials Market Evolution Potential Users Key Players Biometric Service Providers Pay By Touch Privaris Digital Defense Group IdentiSys Authentication Companies Gemalto (Axalto, Gemplus) US Biometrics Technology Providers NCR Facekey Fingerprint Cards Card Companies Discover Financial MARKET PROJECTIONS Introduction Contactless Payments Current Market Key Assumptions Five-Year Market Forecasts m-Payments Current Market Key Assumptions Five-Year Market Forecasts Biometrically Authenticated Payments Current Market Key Assumptions Five-Year Market Forecasts

About The Authors With over 30 years of experience in finance, information technologies, and telecommunications, Vance Hodnett is responsible for the company’s consulting practice and research offerings in the Stored Value, Alternative Payments, and Financial Services areas. His skill set includes business planning, financial analysis, network design and project management. Prior to joining *The PELORUS Group, Mr. Hodnett provided financial consulting and cost analysis to clients of Ernst and Young. In this capacity, Mr. Hodnett utilized financial models to forecast expected payouts and returns for various offers. Before then, Mr. Hodnett was with AT&T where he held positions in finance, regulatory and government affairs, investor relations and network management, performance and engineering. Mr. Hodnett received his MBA, with a concentration in Finance, from the Wharton School of the University of Pennsylvania and his Bachelor of Science degree in Industrial Engineering from Stanford University. Editor Al Fross has researched and written about the prepaid arenas for three decades. He has edited and published many groundbreaking studies, including The PELORUS Group’s* “The Stored Value Consumer Survey”, “Wireless Payments: The New Payments Paradigm”, and “Future Of Prepaid Telephony” reports. He holds an MBA in Finance from Rutgers University.

*The PELORUS Group* Helping Navigate Changes in The Payments Industry *The PELORUS Group* is a market research, consulting, and business planning firm. Its charter is to provide market research, business management, strategic planning, and competitive intelligence services to its worldwide base of clientele. Its challenge is to veer away from consensus research, and expose the myths within key financial services, telecommunications, and information services industries.

Additional reports available from The PELORUS Group:


"The Stored Value Consumer Survey"	“Enterprise Unified Communications”
"The Mobile Payments Survey”	“Global Speech Recognition”
“Stored Value: Transforming The Payments Industry”	“Wireless Location-Based Markets”
“Stored Value: 21^st Century Currency”	“Contact Centers: Re-Igniting The Market”
“Wireless Payments: The New Payments Paradigm”	“Speech Recognition Technologies”
“The DIS Survey”	“European DA/DQ Market”
“Opportunity in North American Prepaid Wireless and Beyond”	“Prepaid Telephony”
“North American Prepaid Wireline”	“Operator Services”
“Corporate Directory Assistance Markets”	“Prepaid Wireless”
“Enhanced Directory Assistance”	“The Future of SMS"
“North American Directory Assistance Markets”	“Unified Messaging CPE”
“The Future Of Operator Services”	“Unified Communications For The Service Provider”
“The Future Of Prepaid Telephony”

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