The FuTure Is In Your hands:TodaY’s MobIle opporTunITIes and how You Can eMbraCe TheM now

With cell phone ownership crossing the 85% penetration rate in the US, companies all over are questioning their mobile strategy. Discover the latest mobile landscape, the benefits, and best practices for texting/mobile channels that you can put to use right away.

Terms you need to know:Apps: An abbreviated term for third-party software applications that are developed specifically for mobile devices and their associated operating systems (e.g., Apple iOS for iPhone, Google’s Android OS, etc.). These programs range in size, complexity and price, and serve to allow individual users to customize their smartphone to meet their wants and needs, while enjoying a standardized experience.

Mobile Optimized Sites: Are simplified versions of websites designed for a smaller screen with stripped down navigation and interfaces, limited or no complex objects and resized links to promote usability across a broad range of mobile devices.

Text Messages: The exchange of short, unencrypted messages between devices over a network. Although text messages (or texts) are sometimes referred to as SMS (Short Message Service), the service

can also include messages that contain other media, like images and sound (MMS, or Multi Media Service). This two-way communication protocol can be used for time-critical alerts, updates and reminders, mobile campaigns, content and entertainment applications, as well as to trigger an action or update on the receiver’s side.

Smartphone: A device that combines cellular telephone functionality with computing power, usually in the form of a proprietary operating system, software or apps, web access and messaging capabilities. Touchscreens and full alphabet keyboards are also typical features.

Feature Phone: Usually defined as any phone that is not a smartphone, a feature phone provides voice calling and texting capabilities, and may allow web access, depending on the device.

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The growth and increasing sophistication of the mobile market has been one of the most important technological

developments of the last decade. It has changed the way we interact with our friends, our families and our communities

at large, the way we structure our work and our personal lives, and even the way we approach tasks as simple as listening

to music, driving across town, and taking pictures of our children.

But even though mobile tools have enabled significant changes to date, the future implications for mobile technologies are

larger still. Mobile devices have the potential to provide a complete set of electronic tools for the consumer and are poised

to take on every function that the contents of our wallets, pockets and purses perform today. A mobile device can carry

payment information, transmit identifying personal data and allow the owner to access one’s residence, office or public

transportation system. Furthermore, it can function as a communication device for sending messages and alerts, and

act as an Internet access point. In short, mobile devices are poised to facilitate and act as the hub for any transaction or

interaction that a consumer may wish to initiate.

In the coming years, as devices, businesses and users become more sophisticated, billers will have an unprecedented

opportunity to engage with their customers through automated touch points like billing, payment alerting and acceptance

tools, as well as two-way communication channels available through mobile and social tools, all while personalizing these

interactions to an extraordinary degree.

There is no question among billers both large and small that developing a mobile strategy to address the current and future

needs of customers is critical. However, resource constraints, combined with a rapidly shifting technological landscape

can act as barriers to fully investing in a mobile offering complete with apps, mobile optimized web sites and event-based

text messaging. Despite those barriers, it is important for each billers to build its own mobile case, based on what makes

sense for your business, and then define short and long-term goals, prioritize initiatives, and engage with your vendors and

business partners to ensure that you can meet the market as quickly and strategically as possible.

whY MobIle?

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The Mobile landscapeIn 2004, 65% of American adults reported owning a cell phone. This number grew rapidly until 2010, when the US achieved an 85% mobile device ownership rate among adults.1

Cell Phone Ownership% of all adults in each group who have a cell phone

Total 85%

Gender

Men 88

Women 82

Age

18-29 96

30-49 90

50-64 85

65+ 58

Race/Ethnicity

White, non-Hispanic 85

Black, non-Hispanic 79

Hispanic 84

Household Income

Less than $30,000 75

$30,000-$49,999 90

$50,000-$74,999 93

$75,000+ 95

Education level

Less than High School 69

High School Diploma 82

Some College 91

College+ 90

Geography

Urban 84

Suburban 86

Rural 77

Source: Pew Research Center’s Internet & American Life Project, August 9-September 13, 2001 Tracking Survey. N=3,001 adults 18 and older, including 1,000 reached via cell phone. Interviews were

conducted in English (n=2,804) and Spanish (n=197).

Although cell phone ownership rates among adults began to plateau in 2009, what has increased significantly is the sheer number of things that Americans are using their phones to do. Use of mobile technology to perform tasks other than talking on the phone may be especially visible and most striking among younger consumers, but all American adults are increasing their use of non-voice activities, with 72% of all American adults now using text messages.2

With this rise in ownership and increased use, mobile phones have permeated many aspects of our lives. A full 65% of all adults claim to sleep with their cell phone on or next to their bed3 and 25% of households (and 23% of all adults) in the second half of 2009 had no landline service.4 In addition to replacing our alarm clocks and home phones, the rising prevalence of mobile has broader technological implications. According to the market research firm, International Data Corp, the global smartphone market has now outpaced that of PCs. Makers of mobile devices distributed a total of 101m smartphones in Q4 2010, representing a massive 87.2 per cent year-on-year increase in numbers, compared to just 5.5 per cent for PCs.5 In other words, smart phones appear poised to take over many of the functions we currently associate with our laptop and desktop computers.

66

76

65

72

27

34

25

34

25

38

21

33

20

30

19

34

The Use Of Non-voice Data Applications Has Grown Significantly Over The Last Year

The % of cell phone owners who use their phones to do the following

Take a picture

Send or receivetext messages

Play a game

Send or receive email

Access the internet

Play music

Send or receiveinstant messages

Record a video

Source: Pew Research Center’s Internet & American Life Project, April 29-May 30, 2010 Tracking Survey. N=2,252 adults 18 and older; n=1,917 based on cell phone users.

April 2009

May 2009

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Although this shift represents real opportunity, rapid change, industry fragmentation and scarce development resources make it challenging to act quickly on mobile. As a rule, frequent service users with smartphones generally demand that apps be available to facilitate an optimal “curated” account management experience on a regular basis, while mobile optimized Internet is the channel of choice for more occasional service needs and inquiries. That being said, there is often a lag between intent and execution. According to independent research firm, Forrestor Research, Inc’s Q3 2010 Global Mobile Maturity Online Survey, 47% of executives interviewed reported they have an optimized mobile website and 41% plan to have one.6 However, in reviewing the Fortune 50, Burson-Marsteller and Proof Integrated Communications found that only 38% of these companies have mobile enabled websites and only 43% of those companies with sites optimized for mobile use have transactions enabled on those sites.7 Consumer brands will invest in mobile optimized websites, but that investment has proven to be a slower process than many initially might have thought.

What’s more, mobile product professionals have been frustrated by the high cost of native app development and maintenance across multiple platforms. Especially since that expense does not always translate into maximum reach. It is also difficult to determine which operating system to invest in when developing an app strategy. Despite being limited to AT&T subscribers (which accounts for about 27% of mobile subscribers8) Apple’s iPhone has held steady among smartphone users in the last quarter of 2010, with about 30% market share. Meanwhile, Android has gained considerable traction. Among consumers who have purchased a smartphone in the last six months, 40% have opted for a phone with an Android OS.9 Adding RIM’s Blackberry position into the mix, as well as Verizon’s recent addition of Apple’s iPhone to their equipment roster, makes the landscape even more challenging. As a result, many billers have indicated that they may slow down app development in the short term to better determine the direction of the market.

U.S. Smartphone Operating System Share - 6 mo. Recent Acquirers

Adult Smartphone Consumers, Jun - Nov 2010

35.0%

27.5%

20.5% 24.9%

32.0%

25.6%

20.7%

36.5%

27.1%

19.8%

37.6%

27.2%

19.2%

40.8%

26.9%

25.3%

28.0%

26.2%

Jun 2010

(n=1425)

Jul 2010

(n=1414)

Aug 2010

(n=1744)

Sep 2010

(n=1802)

Oct 2010

(n=1846)

Nov 2010 (n=1632)

Source: The Nielsen Company

Android RIM BlackBerry OS Apple iOS

U.S. Smartphone Operating System Share

Adult Smartphone Consumers, Jun - Nov 2010

33.9%

15.0%

27.9%

31.2%

19.0%

28.4%

28.6%

21.9%

28.3% 27.4%

22.7%

27.9%

26.1%25.8%

28.6%

31.6%

15.8%

27.3%

Jun 2010

(n=4185)

Jul 2010

(n=3942)

Aug 2010

(n=4547)

Sep 2010

(n=4754)

Oct 2010

(n=4889)

Nov 2010 (n=4371)

Source: The Nielsen Company

Android RIM BlackBerry OS Apple iOS

U.S. Network Operator ShareScorce: comScore MobiLens, 3 mo. ave. ending Dec-2010

Verizon

AT&T

T-Mobile

Sprint

Tracfone

Sprint Prepaid

MetroPCS

US Cellular

Cricket

Other

31.3%

26.6%

12.2%

11.9%

6.0%

4.2%2.8%

2.2% 1.8%

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To many – especially companies with severely constrained development resources – this plan makes sense when considering smartphone vs. feature phone distribution. Smartphones account for about 30% of the total US mobile phone population. It is true that smartphone adoption is growing, but it is also important to consider that among the population of recent acquirers, 45% may have chosen a smart phone, but the majority (55%) opted for a feature phone.10

The Case for Text MessagesAlthough it is true that most mobile industry’s attention is focused on apps for smart phones (and to a lesser degree, mobile optimized Internet sites), it’s important to consider what mobile strategies will deliver value to the broadest possible customer base and will best impact your bottom line. The smartphone penetration statistics cited above, combined with the fact that 72% of all adults with a mobile device use it to send text messages11 both serve to position a two-way text message channel as an excellent initial foray into the mobile space, or as a complement to other mobile initiatives. Virtually all of the mobile phones on the market today have texting capabilities, and texting adoption is strong across all demographics

The ubiquity, penetration and 2-way nature of text messages present an excellent opportunity for billers and their partners to build off their existing relationship with the consumer and capitalize on the familiarity and trust already in place. Real-time, actionable alerts with integrated payment capabilities are a strong tactic for engaging mobile consumers. What’s more – the market appears to be primed to accept payments by text message. Currently, 32% of online bill payers report doing so in locations other than home or work.12 Despite a dearth of available solutions today, nearly 1 in 5 consumers indicated that they are interested in using a mobile device for bill payment and 13% are interested in receiving text message alerts for transactions.13

U.S. Smartphone PenetrationAdult Smartphone Consumers, Jun - Nov 2010

24%

Jun 2010

(n=17386)

Jul 2010

(n=17665)

Aug 2010

(n=18978)

Sep 2010

(n=17538)

Oct 2010

(n=19868)

Nov 2010 (n=16800)

Source: The Nielsen Company

34%

27%

39%

28%

41%

30%

44%

30%

43%

31%

45%

6 Mo. Recent AcquirersAll Customers

Which Of The Following Mobile Phone Features Do You Use?

30%

16%

66%

46%

29%

75%

20%

14%

80%

27%

17%

81%

63%

35%

87%

92%

80%

91%

iPhone

Smartphone

Hispanic/Latino

Gen Y

Mobile bankers in the last 90 days

More than $100K

July 2009, n=89, 375, 478, 1,498, 3,000Base: All consumers with mobile. ©2010 Javelin Strategy & Research

Browse web pages

Downloading applications

Text messaging (SMS)

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To capitalize on this trend, some billers are looking to their payment partners to provide pay by text functionality while others are exploring the possibility of building in-house. Regardless of the approach you may wish to take in a pay by text program, it is important not to dismiss this channel as a way of engaging with your consumer base and offering them enhanced self-serve capabilities on a real-time basis. Consumers are beginning to rely on and expect alerts. In 2010, 34% of US adults with cell phones received SMS alerts, and Forrester expects consumers will begin to rely on and expect alerts in the future.14 Based on some initial results that we have seen across several billers, many customers use these text message alerts as a notification tool, choosing to transact in the traditional electronic channel. However, this incidence may vary from market to market, as one biller’s preliminary results show that 22% of text messages have resulted in a payment.

Benefits of Including Text Messaging in a Mobile Strategy:

• Provides a new, convenient solution to your customers

• All phone types are supported

• All major carriers are supported

• Easy to implement with no capital expenditures if using an outsourced solution

• Self service enrollment and management – the customer enrolls online or on the phone and provides payment and cell phone information

• Flexible – the customer opts in, can choose whether or not to make a payment and can stop at any time

• Scalable – can support messages, alerts, reminders, payments and confirmations

Best Practices for Text Messaging Programs:

• Partner with all major carriers

• Perform due diligence with each carrier to ensure the service meets individual carrier compliance requirements

• Standardize messages

• Eliminate exchange of personal data over non-encrypted SMS channels by promoting enrollment through electronic channels

• Actively market the service at multiple customer touch points

• If multiple partners are providing separate payment and service notification functions, ensure that they are committed to working together to deliver a comprehensive solution for your business

Payments Functions Consumers Are Intrested In Performing With A Mobile Device

19%

15%

14%

13%

11%

10%

8%

Paybills

Transfer funds between accounts

Use my mobile phone to make in-store purchases (physical)

Receive text messages alerts for tranactions

Make purchases online through my phone

Transfers to other individuals at other Fls

Load prepaid card

July 2009, n=515Base: All consumers who have used mobile banking in the last 12 months.

©2010 Javelin Strategy & Research

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No matter what the approach to mobile you elect to use, we believe that mobile channels can bring considerable value to billers, especially as mobile users become more prevalent and more sophisticated, bringing new expectations and a different perspective on what constitutes a set of truly convenient customer service options. Payments are one of the most frequent touch points between billers and consumers. As such, these mobile transactions have the potential to deliver value by anticipating market trends, enhancing customer satisfaction through convenience, immediacy, simplicity and control, allowing you to service consumers with something as simple as bill payments done the way they want while further automating your entire service environment.

Finally, we feel that it is important to note that to ensure alignment with your company’s mobile plans, make sure your payment partners have a well-articulated strategy in place for apps across multiple operating systems, as well as mobile web capabilities, to ensure that they are appropriately positioned to continue to grow with you and anticipate and meet future needs.

about western union payments:Western Union® Payments is committed to helping billers create the most value from their payments strategy by partnering to give your customers convenient, cutting-edge ways to pay. From presentment to payment, our services offer billing cycle solutions that can help you to meet efficiency, cost reduction and customer satisfaction goals. In 2010 we processed more than 405 million transactions through a full complement of electronic and walk-in channels and payment types, and we continue to develop innovative, industry-leading solutions that meet the needs of our partners. For more information, visit choosewesternunion.com/future

1 Pew Internet & American Life Project, Aaron Smith, “Americans and their Gadgets”, October 14, 2010, http://pewinternet.org/Reports/2010/Gadgets.aspx

2 Pew Internet & American Life Project, Aaron Smith, “Mobile Access 2010”, July 7, 2010, http://pewinternet.org/Reports/2010/Mobile-Access-2010.aspx

3 Pew Internet & American Life Project, Amanda Lenhart, “Cell Phones and American Adults”, September 9, 2010, http://pewinternet.org/Reports/2010/Cell-Phones-and-American-Adults.aspx

4 Pew Internet & American Life Project, Amanda Lenhart, “Cell Phones and American Adults”, September 9, 2010, http://pewinternet.org/Reports/2010/Cell-Phones-and-American-Adults.aspx

5 FT.com, Joseph Menn, “Smartphone Shipments Surpass PCs”, February 8, 2011, http://www.ft.com/cms/s/2/d96e3bd8-33ca-11e0-b1ed-00144feabdc0.html#ixzz1DVAmAjEZ

6 “2011 Mobile Trends”, January 2011, Forrester Research, Inc.

7 http://www.flowtown.com/blog/fortune-50-use-of-mobile-if-youve-got-it-flaunt-it, Accessed 2/16/2011

8 “The comScore 2010 U.S. Digital Year in Review”, February 7, 2011, http://www.comscore.com/Press_Events/Presentations_Whitepapers/2011/2010_US_Digital_Year_in_Review

9 The Nielsen Company, “Apple Leads Smartphone Race, while Android Attracts Most Recent Customers”, January 3, 2011, http://blog.nielsen.com/nielsenwire/online_mobile/apple-leads-smartphone-race-while-android-attracts-most-recent-customers/, Accessed February 9, 2011

10 The Nielsen Company, “Apple Leads Smartphone Race, while Android Attracts Most Recent Customers”, January 3, 2011, http://blog.nielsen.com/nielsenwire/online_mobile/apple-leads-smartphone-race-while-android-attracts-most-recent-customers/, Accessed February 9, 2011

11 Pew Internet & American Life Project, Aaron Smith, “Mobile Access 2010”, July 7, 2010, http://pewinternet.org/Reports/2010/Mobile-Access-2010.aspx

12 Synergistics Research Corporation “Mobile Payments: The Consumer Perspective”, October 2008

13 “2010 Mobile Payments — Crossing the Chasm: Industry Models Battle to Bridge the Gap”, May 2010, Javelin Strategy & Research

14 “2011 Mobile Trends”, January 2011, Forrester Research, Inc.