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NFC Survey ResultsThe Payment Industry’s Perception of

NFC in the U.S. Card Accepting Market

STRICTLY CONFIDENTIAL.

For discussion purposes only.

This Report, and all information, analysis andconclusions hereunder, is in all respectssubject to and governed by the terms andprovisions of the Engagement Agreementbetween The Strawhecker Group and theClient.© Copyright 2014. The Strawhecker Group.All Rights Reserved.

The information is based upon information we consider reliable, but its accuracy and completeness cannot be guaranteed.

PREVIEW

2Confidential. For discussion purposes only.

© Copyright 2014. The Strawhecker Group. All Rights Reserved.

Table of Contents

Introduction [03] – [03]

NFC Snapshot [04] – [04]

Survey Participant Snapshot [05] – [05]

Survey Results [06] – [24]

This is a preview, identifying colors and labels will be included

within the full report



• The content in this report provides readers with survey results that convey the perceptions that payments

industry professionals have on NFC technology. Users of this report may form their own interpretation of

these results as the report does not attempt to make claims or list implications

• 105 online surveys were completed in 2013 by participants from companies that included third-party

processors, merchant acquirers, payment technology providers, financial institutions, payment gateways,

and other payments-industry organizations

• The survey consisted of five sections including: demographics, market size, benefits, adoption barriers, and a

technology acceptance model to gauge how respondents felt overall about NFC becoming a mainstream

payment system

Introduction

This report examines the status and perceptions of near field communication (NFC) technology in the United States based on a survey of professionals in the electronic payments industry

NFC (near field communication) is a short-wave radio communications technology that provides a way for two devices to communicate small amounts of data when they are placed about four inches apart. NFC requires an initiator and a target. The initiator generates a radio frequency field with a 4 centimeter range – the target then picks up the frequency and receives the data it contains. Its’ appeal is that it is compatible and interoperable with other current systems, e.g. transit and security. In essence, it is not a new technology and works with existing hardware, secure elements and communication protocols

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NFC Snapshot – Other Findings to Provide Context to this Report

$





37% Merchant Acquirer

Survey Participant Snapshot

39% C-Level or Executive

26% Senior Manager

22% Middle Manager

10% First Level Manager

3% Other

21% Processor

16% Technology Provider

7% Financial Institution

4% Gateway

15% Other

18% High

33% Medium-High

33% Medium

12% Low-Medium

4% Low

Who took the survey? Shown below are the 105 respondents’ role within their company, their company type, and how much they know about NFC

Company Role

Company Types

Knowledge of NFC

Note: completion of survey questions by respondents vary, each percent is calculated using the total answers provided in each category





Key Findings: Technology Acceptance Model

Overall Findings – What Does the Payments Industry Think About NFC

Comments

PNVT = Perceived Net Value of Transition - does the effort needed to enable NFC outweigh the drawback of the effort?

PFV = Perceived Frequency of Value - will NFC be frequently useful or needed?

PMNV = Perceived Magnitude of Value - the overall perception of value

Technology Acceptance Model: an information systems theory that models how users come to accept and use a technology.

Methodology: The Technology Acceptance Model was completed using 20 questions across three sections that included a series of confidence checks to ensure that perceptions were accurately captured

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Participant Facts

Question Number of active ‘brick and mortar’ merchant outlets that your company currently has in its merchant portfolio?

105 online surveys were completed in 2013 by participants from companies that included third-party processors, merchant

acquirers, payment technology providers, financial institutions, payment gateways, and other payments-industry organizations





Participant Facts

QuestionWhat is the average number of payment terminals deployed to each individual active merchant?

1Terminal

2 – 5 Terminals

6 -10 Terminals

11 -15 Terminals

16 -25 Terminals

26 -50 Terminals

51+ Terminals

% % % % % % %

QuestionWhat percentage of your deployed payment terminals are NFC contactless active?

(includes both NFC and conventional terminals)





NFC Benefits

QuestionTo what extent do you agree that each of the next options will motivate the use of NFC contactless mobile payments?

Ease ofUse

Security

Shopping Deals

Loyalty

% Agree Group

% Neutral

% Disagree Group

% Agree Group

% Neutral

% Disagree Group

% Agree Group

% Neutral

% Disagree Group

% Agree Group

% Neutral

% Disagree Group





NFC Benefits

QuestionTo what extent do you agree NFC contactless mobile payments will bring each of the benefits listed below to the payments industry?





NFC Benefits

QuestionTo what extent do you agree that each of the verticals listed below will benefit from NFC Contactless Payments?

TSG’s Merchant Database of 2.1 million merchants

has hundreds of performance metrics on each of these merchant

verticals & more

click here to learn more



https://origin.library.constantcontact.com/doc201/1111273965379/doc/JMsbArwMf5vJmRAN.pdf



NFC Benefits

Statement PresentedBased on your professional experience and knowledge of NFC Contactless Payments, to what extent do you agree this technology will be effective in terms of:





Paymentterminal

Transaction Deployment Consumerconvenience

Faster POStransaction

times

Loyaltyprograms

Consumercontrolled

process

Speed oftransaction

NFC Benefits

Statement PresentedTo what extent do you agree that the following are significant promoters to the adoption of NFC contactless mobile payments?





Costs Consumeracceptance

Merchantacceptance

Security & Fraud Common mobilepayment platform

Infrastructure

Entry Barriers

QuestionTo what extent do you agree that each of the next options represent a significant barrier to the adoption of NFC contactless mobile payments?





Entry Barriers

QuestionTo what extent do you consider that the next options are perceived as significant security risks associated to the adoption of NFC contactless mobile payments?





NFC Acceptance Views

Statement PresentedOverall, the payments industry is better off using contactless NFC technology

Comments






Statement PresentedOn the whole, contactless NFC technology is a valuable technology tool for payments industry participants

Comments






Statement PresentedThe effort required for deploying contactless NFC technology is/will be acceptable

Comments






Statement PresentedOverall, the benefits of contactless NFC technology outweigh its deployment efforts

Comments






Statement PresentedAs a payments industry participant we are willing to invest the amount of effort required towards the use contactless NFC technology

Comments






Statement PresentedContactless NFC technology will be my first choice for contactless payments

Comments






Statement PresentedI do not foresee abandoning contactless NFC technology in the near future

Comments






Statement PresentedAs a payments industry participant we are willing to invest the amount of effort required towards the use contactless NFC technology

Comments






Statement PresentedBased on my exposure to NFC contactless mobile payments tool, I am confident about my above answers

Comments





Research Analyst,` Nancy Jimenez

Nancy Jimenez has completed two masters programs during her time at the University of Nebraska,

including a Master of Science in Economics and a Master of Science in Management Information

Systems. Nancy partnered with TSG on NFC research while completing her thesis as a Graduate

Research Assistant. Content inside this report is derived from her project, Jimenez, Nancy M. “U.S.

Merchant Adoption of Contactless Mobile Payment Technology: Near Field Communication.” The

abstract of this thesis and the names of the individuals involved is available via ProQuest at this link:

ProQuest Citation/Abstract

Research Analyst Bio

http://proquest.umi.com/pqdweb?did=3037453881&sid=1&Fmt=2&cl ientId=70548&RQT=309&VName=PQD&cfc=1



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TSG can assist you with all aspects of your technology strategy such as component and partner selection to pricing strategy and go-to-market campaigns

Chuck Fillinger

Chuck Fillinger, a Senior Associate of The Strawhecker Group, has substantial experience in the Electronic Payments Industry with over 25 years of experience, most recently with First Data Corporation. He has proven results working with merchants within all vertical retail and internet markets, vendor’s, gateway providers and acquirers, providing enhanced payment processing solutions on a national and global scale. More about Chuck Fillinger

Cliff Gray

Cliff Gray, a Senior Associate of The Strawhecker Group, is an expert in electronic payment systems, transaction processing, and the acquiring space. He is a leading authority on large-scale, high-performance payment system design, including network infrastructure, platform and software architecture, system security, and industry compliance. Throughout his 20-year career, Gray has spearheaded the evolution of third-party integration methods, particularly the introduction of internet transport into the electronic payment space. He has long been a proponent of modernizing integration, and most recently is focused on payment data security. More about Cliff Gray

John Kirkpatrick

John Kirkpatrick, Senior Associate of The Strawhecker Group, brings more than 29 years of leadership experience developing and implementing complex global business strategies for companies of all sizes using his extensive knowledge of technology valuations, gateways, and back-ends. Before joining TSG, Kirkpatrick was the Chief Information officer for six years at TransFirst where he oversaw the company's information and technology, including payment gateways and all aspects of transaction processing such as security, financials, data center operations, software engineering, quality assurance and complex data analytics. More about John Kirkpatrick

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Comparable Company AnalysisAbout TSGThe Strawhecker Group (TSG) is a management consulting company focused on the electronic payments industry.

TSG’s Service GroupsPayments Strategy - Payments Strategy encompasses the full spectrum of advisory services within the Payments Industry. The depth of these services is built on deep industry knowledge - the Partners and Associates of the firm have an average of over 20 years of industry experience. With clients from card issuers to merchant acquirers, TSG has the experience and expertise to provide real-time strategies.Transaction Advisory - Whether buying or selling, seeking investment funding, or planning your company’s exit strategy, TSG’s experience can be critical to achieving success. TSG has performed more than 100 Payments Company Valuation and/or Business Assessments in the past three years - ranging in value from $1 million to $1 billion.TSG Metrics - TSG Metrics, the strategic research and analysis division of TSG, provides the Payments Industry with highly focused research and industry-wide studies. TSG Metrics takes data, boils it down to information, transforms it to knowledge and presents it to provide wisdom to its client partners.

TSG’s Unparalleled ExperienceTSG consists of Industry leaders with extensive experience leading teams through explosive growth periods, mergers and acquisitions, and international and domestic expansion within the Payments Industry. Both Partners and Associates of the firm have held key senior management positions at leading industry companies including First Data / First Data International, Visa Inc., MasterCard, TSYS, Humboldt Merchant Services, WorldPay, Heartland Payment Systems, Cardservice International, iPayment, Alliance Data, RapidAdvance, Accenture Consulting, Redwood Merchant Services, Chase Paymentech, as well as other leading financial institutions and Payments companies.

TSG’s Influence Shapes the Payments IndustryOver the last three years, TSG has completed over 400 projects for more than 200 different clients including financial institutions, merchant acquirers, card issuers, card associations, technology providers, ISOs, processing companies and the investment community. Additionally, the firm and its Associates sit on several industry committees whose focuses range from emerging product development to governmental regulation advisement.

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