The Future of Digital Commerce - TEXPO Conference Future of Digital Commerce ... and P2P – will be...

The Future of Digital Commerce Derrick Carpenter, SVP – Industry Solutions and Platforms

Bank of America Merchant Services

Confidential and Proprietary - NOT TO BE DISTRIBUTED WITHOUT THE EXPRESS WRITTEN PERMISSION OF BANK OF AMERICA MERCHANT SERVICES.

Disclosures

This presentation is provided as a courtesy and is to be used for general information purposes only. Bank of America Merchant Services shall not be responsible for any inaccurate or incomplete information. The matters contained herein are subject to change. Individual circumstances may vary and procedures may be amended or supplemented as appropriate. This is not intended to be a complete listing of all applicable procedures. No information contained herein alters any existing contractual obligations between Bank of America Merchant Services and its clients. This presentation may not be copied, reproduced or distributed in any manner whatsoever without the express written consent of Bank of America Merchant Services.


What we’re going to cover today

1. Digital commerce trends 2. The modern mandates 3. Select client experiences 4. Your questions 5. Key takeaways

Digital commerce trends


Payments – An evolution… or a revolution?

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Consumer behaviors are rapidly changing

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Pre Purchase Purchase Usage Sharing

Activated Customer

Digital Customer

Traditional Customer

Uses search engines and reads reviews

Uses internet-based search engines

In-store search; speaks to store employees

Uses apps to “check-in” if buying in-store

Purchases the product online or in-store

Purchases products in store only

Thinks about experience and “posts” reaction

Forms views and might “post” thoughts

Forms individual observations about the product

Consumers are becoming increasingly engaged across the value chain

Writes reviews across multiple platforms

Engages with the brand via “likes” or tags

Verbally shares experience with friends and family

Consumer Type


Payments today

The acquiring industry is changing – payment mix is shifting to eCommerce

Omni-channel and mobile payments are ramping up due to the penetration of smartphones and mobile wallets, but at a slower pace than originally expected

Data security remains a significant concern as fraud continues to increase

Fintech explosion – many new financial technology firms are disrupting how the industry operates, with new examples emerging rapidly, including:

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Aggregation models - Payment facilitator - Payment Service Provider (PSP) - Reseller - Flash title owner - Master merchant

• Other Complex Models - ISO - ISV/VAR - Gateways - Submitter/presenter/biller - Convenience fee - Third Party Processor (TPP) - Third Party Servicer (TPS) - eWallets - Money transmitter/MSB


3 catalysts for change

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Omni-channel search & purchasing

Rise of mCommerce and mobile wallets

More consumers are demanding a seamless, integrated experience across the full purchasing lifecycle – before, during and after a transaction – from any channel

Mobile commerce is growing faster than eCommerce with in-app payments a key growth driver

Faster payments New payment paradigms in the U.S. and abroad are driving changes to local and global payments


Payment trends by the numbers

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$503B in U.S. in-store

mobile payments are anticipated by

the year 2020¹

50% of consumers will expect anywhere,

anytime convenience on their mobile²

¹BI Intelligence, The Mobile Payments Report: Market Forecast, Consumer Trends, and the Key Barriers and Benefits that will Influence Adoption, May 2016 ²The Mobile Mind Shift; Engineer Your Business To Win In the Mobile Moment Ted Schadler, Josh Bernoff, Julie Ask Groundswell Press 2014

Integrated loyalty programs and other potential add-ons – such as in-app, in-

browser, and P2P – will be key to mobile

wallets taking off ¹


B2B eCommerce trends by the numbers

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$1.13 trillion

in U.S. B2B eCommerce sales anticipated by the year 2020.1

B2B customers

increasingly expect their suppliers to produce B2C-like B2B experiences on par with the “Amazon experience.”3

1,3 B2B eCommerce: A Trillion Dollars For The Taking, Forrester, 2015 2 The Global B2B E-commerce Market Will Reach 6.7 Trillion USD by 2020, Frost & Sullivan, April 9, 2015

$6.7trillion in

global B2B online sales are anticipated by the year 2020.2


Global eCommerce growth is significant

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$1.6 trillion 2015 global online spend

$3.5 trillion estimated 2019 global online spend

Source: Global e-commerce sales set to grow 25% in 2015, Internet Retailer, July 29, 2015

+118% estimated growth

https://www.internetretailer.com/2015/07/29/global-e-commerce-set-grow-25-2015





Changing payment transaction mix

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Card-not-present transactions expected to grow at double the rate of total card transactions Card-present transactions will grow much more slowly

U.S. eCommerce/card-not-present growth is outpacing card present growth

+15% CAGR estimated growth (2013-2018)

+6%CAGR estimated growth (2013-2018)

As the compound average growth rate (CAGR) of card-not-present transactions continues to be in double digits, this is creating new opportunities for an enhanced customer experience but brings with it heightened concerns around data security.

Source: Business Insider, Forecast, July 21, 2014


Expectations are changing… are you?

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• Your stakeholders’ perceptions, preferences and standards are being reshaped every day by advances in technology and an increasing number of daily experiences that are tailored to their needs.

• Next, we’ll look at how you can better meet those evolving expectations through three modern payments mandates.

The modern mandates


On your plate today

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If you’re a treasury officer, chief financial officer, chief risk officer or other key corporate leader, your attention is likely focused on:


The modern mandates

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Here’s how three of your most pressing concerns align with what we’re calling the modern payments mandates:

Payments Optimization Mandate #1: Broaden your view Payment data analytics Integrated payments and innovative

partnership models

Risk Management

Mandate #2: Shore up your defenses Cybersecurity and fraud protection

Business Growth Mandate #3: Embrace universal commerce

eCommerce/mCommerce

Customer loyalty

Tender shift


Mandate #1: Broaden your view

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• Payments are no longer a discrete component of your treasury model.

• They’re embedded in the seamless, omnichannel and increasingly digital experience you seek to deliver to your customers.


The power of data analytics

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• You’re likely sitting on a treasure chest of payments data that can help you understand and keep pace with changing customer behaviors, interests and preferences.

• Powerful data analytics can help drive business growth by informing investment strategies, improving the customer experience and suggesting new revenue streams.


The value of integrated payments and partnerships

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• Embedding payments into other business management operations can help drive integration, efficiency and opportunity

- Payments become part of, rather than separate from, the operational processes and flows across a number of functions within your organization.

• We live in an increasingly customized world.

• Which integrated payments solutions and partnerships could help you operate and grow your business more effectively?


Mandate #2: Shore up your defenses

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• What keeps you up at night?

• If you’re already EMV®-enabled and rely on tokenization to safeguard transactions and customer data, what else requires your vigilance?

EMV is a registered trademark in the U.S. and other countries, and an unregistered trademark elsewhere. EMV® is a registered trademark owned by EMVCo LLC.


Data breaches and incidents are costly and on the rise

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$221

Average cost of a compromised

record*

$7.01 MILLION

Average cost of a data breach*

$575 BILLION Estimated cost of cybercrime

on the global economy.**

Total identities exposed as a result of data breaches in 2015.*

429 MILLION

$3.97 MILLION Estimated lost business costs per

incident* Abnormal turnover of customers,

increased customer acquisition activities, reputation losses and diminished goodwill.

$1.72 MILLION Average cost of post

breach response activities*

Fines for PCI non-compliance examples: • Visa (pre breach) $5K-$25K per month

• MasterCard (related to breach) $100K for each PCI violation

*Source: IBM/Ponemon Institute’s “2016 Cost of a Data Breach Study United States” **Source: Symantec Internet Security Threat Report, 2016, Bank of America Merrill Lynch Global Research


Security tools we offer to help merchants reduce card fraud

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Card Security Codes

MasterCard® SecureCode™

Address Verification

Service (AVS)

Fraud FlexDetect®

Verified by Visa®

These solutions are designed to help protect card-not-present transactions.

TransArmor® Data Protection

TransArmor data protection provides encryption and tokenization services. TransArmor Data Protection is not a guarantee that your systems will not be breached or cause you to be compliant with the Payment Card Industry Data Security Standard or Card Organization Rules. Requires eligible equipment.


Mandate #3: Embrace universal commerce

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Universal commerce connects payments, loyalty and offer services to virtually any customer channel and serves as the centerpiece to unlimited number of product and channel platforms.

Payments Loyalty Offers

Mobile Online Point of Sale Any Connected Device


Benefits of effective eCommerce storefronts

• Consumer purchasing via web, mobile, and tablet

• Formats: plastic, email, mobile • Personalization: audio, image, text, video,

marketing • Real-time or scheduled delivery

Turnkey Business-to-Consumer eCommerce Storefronts

Program Management via Web Portal

• Complete storefront management • Full line-of-sight card/customer history • Marketing/promotion capabilities • Analytical reporting dashboard • Guest relations/traffic monitoring • Fraud monitoring


Select client experiences

Confidential and Proprietary - NOT TO BE DISTRIBUTED WITHOUT THE EXPRESS WRITTEN PERMISSION OF BANK OF AMERICA MERCHANT SERVICES. 29

Case study: A nationwide fast-food chain delves into custom analytics to deliver better marketing and sales results

Goal: Leverage existing merchant data to increase the effectiveness of customer promotions in targeted regions/locations and pinpoint impacts on customer loyalty and share of wallet

Execution: • Analyze data to develop market share analysis, establish market

share/promotion correlation, and density and promotion optimization analyses

• Analytics revealed useful trends that point to expected store performance

• Results informed a number of pending decisions, including dinner/late dinner promotion and new store site selection

Results:

Source: First Data, Gift Solutions Use Cases, 2016


Heat maps reveal sales trends and opportunities

Source: Bank of America Merchant Services Data Analytics


Custom analytics help establish correlations between many data sets


Case study: A nationwide fuel chain launches a mobile app to engage customers and drive loyalty

Goal: Deliver a branded mobile experience that allowed customers to select fuel, enable the pump and pay for the transaction, while also delivering loyalty and rewards to create recurring visits

Execution: Implement a platform that supports the roll out of a mobile app that helps enroll customers, stores data securely, manages petro and convenience store sites, manages fraud and processes payments

• Ability stand up a pilot within the timeline the organization planned

• The successful pilot is now being rolled out on a national basis

• Additional geographies are also now using the same infrastructure to implement a mobile experience for their customers

Results:

Source: First Data, Gift Solutions Use Cases, 2016


Enrollment Widgets, Website & APIs

Enrollment Vault

Fraud Management & Device

Authentication Tokenization Mobile

Authorizations Site Connection

Management

A La Carte Set of Mobile and Customer Engagement Services

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Virtual Gift Cards

Auto Reload Loyalty & Rewards

Offers & Coupon Management & Self

Publishing

Remote Ordering Pay or Redeem Rewards

Help improve your customer experience and accelerate your mobile development while also enabling the merchant to maintain & enhance their brand, and their relationship with their customers


Your questions


Key takeaways


Key takeaways

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• Your role is changing.

- As payments (r)evolution continues, so, too, must your awareness of customer trends, as well as security/fraud threats.

- Don’t miss opportunities to evolve and build customer/brand loyalty.

• Remember the three modern mandates.

1. Broaden your view.

2. Shore up your defenses.

3. Embrace universal commerce.

• Don’t go it alone.

- You need strategic partners both inside and outside your organization to keep pace with marketplace changes and emerging threats.

- Build relationships, challenge the status quo and invest wisely.

Confidential and Proprietary - NOT TO BE DISTRIBUTED WITHOUT THE EXPRESS WRITTEN PERMISSION OF BANK OF AMERICA MERCHANT SERVICES. 38 38

© 2017 Banc of America Merchant Services, LLC. All rights reserved. All trademarks, service marks and trade names referenced in this material are the property of and licensed by their respective owners. Merchant Services are provided by Bank of America, N.A. and its representative Banc of America Merchant Services, LLC. Banc of America Merchant Services, LLC is not a bank, does not offer bank deposits, and its services are not guaranteed or insured by the FDIC or any other governmental agency. AR4STN9G – 08/12/2016

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