1

By Patrick Gildea

Payment Trends Online to Offline

February 2012

Table of Contents

• Background and Relationships

• Mobile and Innovation at the POS

• Financing, M&A and Valuations

• Payment Startup Ecosystem

3

Background and Relationships

Series C

Series B, C and D

Between Between

Initial Public Offering on TSE

PIPE on NASDAQ

Create

Create

Enters into strategic supply agreement with

Enters into Exclusive supplier agreement with

Enters into a marketing

partnership with

Enters into a marketing

agreement with

Pilot test of first NFC mobile wallet in US at Safeway

Pilot test of cardless debit / loyalty payment

system at Safeway

Enters into Exclusive BIN

sponsor agreement with

Acquires Acquires Sold to Sold to Acquires Acquires

Selected Transaction Experience

Leveraged Buyout Cross-border M&A

Acquires Acquired by

Assets Assets

Buy-side M&A Sell-side M&A

OSS Business Japan Operations

nvSRAM Business

Joint Ventures Public Capital Raise Private Capital Raise Software License

Pilots Supply Chain Sales & Marketing

Closed more than $11 billion in M&A, Joint Ventures, and Financing transactions and more than 20+ corporate and business development transactions including pilots, supplier, and technology partnerships.

Payments Buy-side Relationships

Extensive network of senior level relationships across many of the key buyers in Payments

MA/Gateway - Legacy MA/Gateway - SMB

Networks Card Processing Prepaid

Mobile Payment Platforms

Selected Venture Capital with Notable Payments Focus Investment Banks

Private Equity

6

Mobile and Innovation at the POS

Mobile is Changing the Payments Landscape

Healthy topline growth at 3.5% CAGR 2010-15

Share shift from cash and check to mobile wallet and ecommerce

Debit big benefactor of share shift- helped by bad economy, credit tightening, mobile and merchants push for lower cost payments

128.3 136.5

Source: The Nilson Report and RJ&A research 10/2011

Billions

47.8 45.9 40.1

24.5

17.5

12.9

25.3

26.1

28.1

25.8

41.5

68.4

4.9 5.5 7.0

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2006 2010 2015

US Consumer Payment Transactions

Prepaid Debit Credit Check Cash

156.5

The Many Flavors of Mobile Payments

• Smart phone adoption finally reaching scale to sustain true mobile payments traction

• Upgrade cost and merchants’ wait and see attitude still biggest hurdle to mobile enabled POS device adoption

• Offers and loyalty will be carrot for shifting consumers to mobile mediums

• Big data and location based intelligence infrastructure will soon follow

• Winners will own both sides of payment transactions- consumer and merchant

Mobile Wallet

Using mobile phone to pay at POS

Mobile POS

Using mobile phones as the POS device

• Enabled micropayments to convert from cash to cards

• P2P players could invade at micro level

Payment Platforms

Using mobile apps to transfer money

• Software on the phone enabled to manage money and payments

Direct Carrier Billing

Paying for items using your phone bill

• In app billing, one of the only current apps

Closed Loop Mobile

Paying for items gift card or store credit in mobile

app

• Good for micro payments or frequent use locations

• Starbucks trial did 3 million transactions in first 2 months

Mobile payments expected to reach $1 trillion worth of global transactions by 2014*

*Source: Yankee Group, 2011

Mobile Wallets – Invasion of the Software Giants

Sneak Peak

Source: Mercator

Comparison of Major Wallet Platforms

Yes, NFC Should Maybe Happen

Evolution of Payments

Barter Coins Paper Plastic Digital

RFID/NFC QRC Cardless

• POS / Phone Upgrade

• Fastest & Most secure

• Card present rate • Long-term winner

• Clumsy experience

• POS add-on • Available

today

• POS software upgrade

• Unsecure • Interchange rate? • Ease of use • Doesn’t need a

device

RFID Successful Overseas – Can that migrate to the US

Thoughts on NFC

• Longer range RFID might also come across the ocean, enabling proximity based offers and marketing, something like->

• First likely acceptance will be for micro-payments at: • Convenience • Fast food, coffee • Gas pump • Transportation • Grocery

• In-lane checkout speed and security will be key drivers tipping NFC as the winner vs. existing alternatives

• Sony bitWallet first mobile RFID (NFC) wallet in Japan, operating on the Sony Felica platform • More than 40,000 retail locations in first 5 years of operations • Accepted at all major convenience stores, railroads and at McDonalds • First wallet platform to incorporate targeted ads based on spend and geo-

location

• Octopus card first RFID rechargeable smart card in world- launched in Hong Kong 1997: • More than 20 million cards in circulation, nearly three times the population

of Hong Kong. • The cards are used by 95% of the population of Hong Kong aged 16 to 65 • Over 11 million daily transactions worth a total over HK$100 million

(US$12.8 million) everyday.

SIM

• Carriers still working out the details

• Safe and secure • Phone agnostic

Many challenges remain but NFC will soon be here, though don’t expect it to replace cards at the POS for many years to come.

?

Source: Wikipedia, company websites.

Shared view with Mercator

Handset shipments with NFC enabled chips will be the single biggest critical factor in timing broad use of NFC in the U.S.

So Where is All the Money Made?

Source: The Nilson Report, World Report and RJ&A research 10/2011

2006 2010 2015

Card Issuing $3.5 $3.9 $4.1

Prepaid $1.0 $1.1 $1.4

Merchant Acquiring $9.1 $11.8 $14.7

$9.1

$11.8

$14.7

$1.0

$1.1

$1.4

$3.5

$3.9

$4.1

$-

$5.0

$10.0

$15.0

$20.0

$25.0

US Transaction Processing Revenue

$USD Billions

$13.6

$16.8

$20.2

CAGR

5.0%

1.8%

4.0%

9.0%

Healthy topline growth at 4.7% CAGR 2010-15

Merchant acquiring fastest growing and biggest benefactor….

Mobile innovation

at POS

Oh yeah, and more

online shopping

Loyalty

Cloud POS

Cards & Data Social

Mobile POS QR Codes Quick Checkout

Wallet

Carrier to Retail

Cardless Debit

Cool Stuff Happening at the POS

Innovation at the POS will support the shift from cash to electronic transactions and thus driving revenue growth for Acquirors.

Ultrasonic

Themes to Watch For in Retail Payments

Own the customer and merchant

+

Square market approach combines POS for merchants and wallet for consumers. This convergence optimizes CRM, enables more enhanced loyalty and offer features and frankly creates a nice and sticky switching cost for merchants.

Loyalty, incentives, ads and big data

Big data will become more instrumental in tracking usage and behavior to drive timely and relevant offers to consumers. First evolution will be at card side, as PMs start tying user # to merchant ID and track data on network backend. Next evolution will be at the wallet or POS, tapping into Level III data and tracking consumers across the network backend.

Customer experience Technologies that are convenient, easy to deploy, easy to understand and make the overall purchasing experience better for consumers will be great interim plays until NFC goes mainstream.

Don’t wait in line Payment

Enter my phone + pin and go –

no wallet!

14

Financing, M&A and Valuations

Q1 Payments Financing Activity

Date Target Investors Amount

2/25/2012 Billmyparents n/a $0.22M

2/22/2012 GoPago JPMorgan Chase & Co.

2/16/2012 Flattr Passion Capital $2.1M

2/16/2012 Quickpay Fontinalis Partners

2/15/2012 Chirpify Upstart labs

2/10/2012 Stripe Sequoia Capital $18M

2/7/2012 Dwolla Thrive Capital, Union Square Ventures, Village Ventures $5M

2/6/2012 MoBeam DFJ Athena $1.5M

1/31/2012 Cardspring Accel Partners, Felicis Ventures, Greylock Partners, Morado Ventures, SV Angels

$10M

1/31/2012 Mogl Austin Ventures, Avalon Ventures, Sigma Partners $10M

1/26/2012 HelloWallet Morningstar; TD Fund $12M

1/17/2012 ShopKeep Total Technology Ventures; Tribeca Venture Partners $2.2M

1/12/2012 Jumio Edquardo Saverin $25.5M

1/11/2012 Payoff.com Anthemis Group; FirstMark Capital; Great Oaks Venture Capital $2MM

Q1 Payments M&A Activity

Date Target Buyer Amount

2/21/2012 OrcaOne Ingk Labs

2/20/2012 Kima Labs Groupon ~$10-$20M

2/17/2012 Princeton Payment Solutsions Financial Transaction Services, LLC

2/14/2012 WikiPay WikiLoan

2/7/2012 Integral Computers Sage Pay $27M

1/24/2012 eCommlink’s Prepaid Processing Assets Greendot $2.5M

1/20/2012 Mertado Groupon

1/19/2012 CardStar Constant Contact

Payments Public Valuations

18

Payments Startup Ecosystem

Payments Startup Ecosystem – There are Plenty!

Web Payments/ Loyalty

Gaming / Virtual Currency / Carrier Consumer Financing

Prepaid / Cards Cash & SMB Financing / Bill Pay Mobile Payments

Niche Transaction Processing

Social Payments / Big Data

Mobile Deals / Loyalty Technology /QRC / POS

Personal Finance / Gamification

Acquiring/Gateways