1.Mobile Payments in Latin America Landscape and Opportunity August 1, 2013 Mobile Payments in Latin America - 2013, All Rights Reserved, Paytroniks

2. OpportunityMobile Payments in Latin America - 2013, All Rights Reserved, Paytroniks2 3. Key Business Drivers in the Region Mobile Deployment: Close to 100% mobile penetration rates. Brazil is fifth largest mobile phone market in the world, with penetration rates of 130%. Brazil also ranked highest in mobile readiness in LAC Region. (MasterCard) In general, solutions struggling to gain foothold. Payments: All major payments schemes are well established and experiencing positive growth. MasterCard reported in January increase in volume of 18.5% for 2012.Socio Economic: D & E socio-economic segments increasingly rely on community banking. Users of mobile banking services will skyrocket from current number of 18 million to 140 million by 2015. (Felaban) Technology: 4G networks appearing but adoption is slow. NFC enabled phones have limited penetration so far in the region. Perceived lack of security for financial data on phone remains a significant consumer barrier for mobile payments.Mobile Payments in Latin America - 2013, All Rights Reserved, Paytroniks3 4. Sampling of LAC Mobile Initiatives As in other regions, commercial ventures in mobile payments continue to emerge/develop Santander: Samsung and Banco Santander announce NFC pilot in Chile in April. Press release states that objective is for 5000 terminals to be enabled with NFC and a commercial roll out by end of 2013. Wanda: JV between MasterCard and Telefonica announced in 2011 for development of mobile solutions in 12 countries with the exception of Brazil. So far have launched only in Argentina. Oi Paggo: Oi recently announced the roll out of a prepaid card as a companion to its closed loop Oi Paggo mobile payment service. Solution is accepted at all Cielo enabled merchants. Clip: Mexican start up recently received $1.5 million in funding. Claims that solution accepts Visa and MasterCard payments. Long term plans to eventually expand into the United States. Other Initiatives in the Region: I2C partners with Utiba; TIM Brasil CEO steps down in February; NFC trials in Brazil; PayPal launches new service in Chile. Source: Internal AnalysisMobile Payments in Latin America - 2013, All Rights Reserved, Paytroniks4 5. Changing Payments Landscape World-wide trend Traditional Payments: Consumer: Bank (Issuer) provided plastic cardTraditional Payment Schemes: Visa MasterCard AmexMerchant: Bank (acquirer) provided traditional POS terminal New Payments: Consumer: still mainly plastic but emerging contactless initiatives and mobile wallets.New Players and traditional Schemes: PayPal Wanda ClipMerchant: seeing emergence of mobile (phone and pad) as POS devices. Mobile Payments in Latin America - 2013, All Rights Reserved, PaytroniksVisa MasterCard AmexTelefonica Mobile Operators5 6. Paradigm Shift - Acquirer Landscape Latin American Trend Figure 1Figure 3Figure 2Expand value propositionAcq # 2Acq # 3Past Acquiring Structure Acq # 1Acq # 2Acq # 3Current TrendFigure 1: Past acquiring structure consisted of payment franchise offering exclusivity to one acquirer. Figure 2: Currently, payment franchises eliminating exclusivity and opening up franchise to several acquirers in one country leading to commoditization of services. Figure 3: In order for acquirers to differentiate themselves from the competition, they are beginning to incorporate other payment brands and value added services to their value proposition.DifferentiatorsAcq # 1 Acq # 1, 2 & 3Future TrendNew acceptance payment brands. Expansion into non-traditional merchant segments, i.e. bottom of the merchant pyramid activities. Promotion of emerging technologies: Bill payment, micropayment, mobile, and e-commerce solutions. Enhanced reporting capabilities and data mining at the POI. Robust offering of loyalty and incentive programs. Enhanced solutions involving recurring and installment payments at the POI.Mobile Payments in Latin America - 2013, All Rights Reserved, Paytroniks6 7. Paradigm Shift Strategic Implication Viable Mass-Adoption Strategy Adoption Steps / Progress 21 Credit and Debit Cards43 Mobile POSNon payment mobile applicationsMobile wallet + prepaid cardGreen = areas of greatest perceived value by end-usersConclusion: Mobile is a vehicle for expansion of POS network (near term) and mass adoption of prepaid (long term). Mobile Payments in Latin America - 2013, All Rights Reserved, Paytroniks7 8. Prepaid Regulatory Overview Regulatory AssessmentLAXSTRINGENT Mexico: One of the stringiest regulatory environments in the Latin American Region. 1-1 Bank to retailer relationships. Green Dot business model not possible in country. Authorities have substantial leeway in interpreting regulations. Brazil: Not as stringent as Mexico. Regulators open to interpreting grey areas with input from business community. Panama: Well established banking laws and a 25 year history of financial stability permit viable prepaid card solutions. As a general rule of thumb, the larger the market, the more stringent the regulation towards prepaid card products. Mobile Payments in Latin America - 2013, All Rights Reserved, Paytroniks8 9. Mobile POS Strong Value Addition POS systems continue to be expensive in most Latin American countries. Mexico only 400,000 merchants out of 5.5 million accept cards. Obtaining merchant account and equipment is long, costly, and tedious process. Square has a strong value proposition in this market. However, challenges remain: Phone has to be fairly sophisticated to use Square service. Challenge in countries were large segments of the population remain unbanked. Local clones starting to appear: www.clip.mx PayPal making inroads in Latin America, but key is use service without internet connection. Mobile Payments in Latin America - 2013, All Rights Reserved, Paytroniks9 10. Barriers to Entry of NFC in LAC NFC will require upgrades to POS infrastructure, which retailers will have little appetite to do so due to costs and lack of NFC enabled smartphones. A QR solution or NFC enabled sticker may be more viable. Pro: can be adapted to more phones. Con: Investments in POS and acquirer infrastructure still needed. Prognostication is that technology will take at least 5 years to become relevant. NFC may become more popular in niche, closed loop environments. Monedero synopsis. Mobile Payments in Latin America - 2013, All Rights Reserved, Paytroniks10 11. Quantifying the Opportunity Payment Franchises Perspective Current LAC Market - over 650 million Visa and MasterCard plastics: 325 Million Visa / 285 Million MC. Over $500 billion in transaction volume. Estimate $1.5 billion in revenue for Visa / MC or 30 basis points (.3%). Mobile Payment Solution opportunity extrapolation Assumptions Mobile payment solution launched today has gained foothold in market in 2014 with a .1% market share in the LAC market. $50 Average Revenue Per User (ARPU) per year. Revenue scenarios .1% plastic market share = 65K users x $50 ARPU = $3.25 million in revenues. Or another way to look at opportunity, for every $1 billion processed, this results in $3.25 million in revenues. Sources: MasterCard, Visa, Internal AnalysisMobile Payments in Latin America - 2013, All Rights Reserved, Paytroniks11 12. Quantifying the Opportunity Sanity Check - SquareMobile Payments in Latin America - 2013, All Rights Reserved, Paytroniks12 13. Mobile Payments in Latin America Landscape and Opportunity August 1, 2013 Mobile Payments in Latin America - 2013, All Rights Reserved, Paytroniks