Disruptive innovation or technology enabler? Mobile payments Alex Lee Director, Payments Markets, Asia Pacific, SWIFT 8 April 2011

Mobile Payments - a banks’ perspective 2  Disruptive innovation that will disintermediate banks?  Technology enabler for banks to serve the unbanked? Inspired by thinkmobilemoney

Let’s develop our thinking in five thematic steps 1.Everybody’s talking about mobile payments 2.Incl. for person-to-person international money transfers 3.But now, MNOs are at centre of the eco-system and if m-wallets interconnected, where does that leave banks? 4.Before achieving global adoption, some things to sort out: regulation, cooperation, interoperability 5.What is the ideal model for global interoperability of mobile payments eco-systems, and who can take us there? PS: hurry up - the world is changing around us 3

Many types of ‘mobile payments’ 4 Mobile banking Use mobile phone to access your bank account Mobile commerce Use mobile phone to buy products (digital / physical, remote / proximity) Mobile money transfers Use mobile phone to send money to someone

Mobile payments are ‘hot’ Every week, a new mobile payments project 5 Some of the 360+ examples

The irresistible ubiquity of the mobile phone for payments bn people on this planet 75% mobile phone (5.2 bn) 30% bank account (2.1 bn)

Mobile payments grow significantly 7 Source: Gartner, May 2010 By 2014 USD 245 billion 340 million users = 5% of mobile subscribers

What if all mobile wallets interconnected? 8 Source: GCASH Global interconnectivity as seen by MNOs. There is no bank in this picture …

Clear business case for MNOs MNOs: Mobile Network Operators 9 Source: Greenwich Consulting

Value for a bank in an MNO-led model? 10

Within bank eco-system Connecting eco-systems Banks can lead mobile payments 11 Eco- system Bank Eco- system MNO Eco- system MTO Eco- system Bank Eco- system Bank MNO: Mobile Network Operator MTO: Money Transfer Operator

Two different worlds create Huge space for co-operation Reliability -> in banking: 99.9x% up, in telco: “nobody cares when you drop a call” Security -> banks and telcos do not think the same way AML/KYC -> in banks: heavy, big cost; at telco: in proportion to currently limited amounts Margins -> in banking: basis points; in telco: “90%” on an SMS Tacking -> in telco: you know where person is, when ‘payment‘ got there 12 RobustnessAgility

Build an open community, with standards What is the ideal model of interoperability? for international mobile money transfers 13 Payments clearing Settlement Financial messaging Eco- system MNO MTO Eco- system MNO Eco- system Bank MTOBank Put mobile on top 2 4 Enable existing channels for mobile instructed payments 3 Use existing processes 1 Mobile messaging

“Who can bring all parties together, Who will be the SWIFT for mobile payments?” The MNO world (eg GSMA) … but can they bring Banks to the table? The Bank world (eg SWIFT) … but do they have the ‘agility’ mind set and can they bring MNOs to the table? A platform vendor (some) … but since commercial venture, can they be inclusive enough? A mobile standardisation body (eg Mobey Forum) … but do they have world-wide execution capability? An international standardisation body (eg ISO) … but can they drive adoption? 14

Final thought and sense of urgency, as the world is changing around us Who will you compete with next 15 PayPal P2P networks Social networks and e-commerce sites AmazonAmerican Express Credit card companies

In conclusion Mobile payments are reality, will become bigger Require Banks and MNOs to work together The ideal model builds on existing processes Open in participation, with standards Banks can deploy innovative services Urgency to act 16

Thank you