About ViVOtech

ViVOtech is the market leader in contactless payment software, readers, cards, fobs and transaction management systems. These solutions allow consumers to make contactless payments with radio frequency-enabled credit cards, debit cards, key fobs, and NFC enabled mobile phones. With more than 155,000 units shipped, ViVOtech's products are being used by movie theaters, fast food restaurants (QSR), casual dining establishments, convenience stores, gas stations, drug stores, grocery and vending machine locations enabling them to accept contactless payments. ViVOtech is headquartered in Santa Clara, California, with offices in Europe and Asia. In 2005, ViVOtech received the prestigious Frost & Sullivan technology award for its role in transforming the contactless payment industry as well as the Electronic Transactions Association first annual Technology Innovation Award. For more information, please visit the ViVOtech website at www.vivotech.com.

2

Copyright© 2006, ViVOtech,® Inc. All rights reserved. ViVOtech®, Inc. 451 El Camino Real Santa Clara, CA 95050 Phone: (408) 248-7001 Written and designed at ViVOtech, Inc. This paper, as well as the software and hardware described in it, is furnished under license and may be used or copied online in accordance with the terms of such license. The content of this paper is furnished for information use only, is subject to change without notice, and should not be construed as a commitment by ViVOtech, Inc. ViVOtech, Inc assumes no responsibility or liability for any errors or inaccuracies that may appear in this document. Except as permitted by such license, no part of this publication may be reproduced or transmitted by electronic, mechanical, recording, or otherwise, or translated into any language form without the express written consent of ViVOtech, Inc. ViVOtech, ViVOwallet, ViVOcard, ViVOfob, ViVOpay, ViVOplatform, Dynamic Strip, ViVOnfc, ViVOfob, ViVOdine and ViVOsmartcable are trademarks or registered trademarks of ViVOtech®, Inc. All other products or name brands are trademarks of their respective holders.

3

ABOUT VIVOTECH ................................................................................................................................... 2 INTRODUCTION ........................................................................................................................................ 5 RF-BASED CONTACTLESS PAYMENTS: HOW DO THEY WORK?............................................... 6 CREDIT CARD CONTACTLESS PAYMENT PROGRAMS ............................................................................... 6 Contactless payment process and existing infrastructure .................................................................... 7 CONTACTLESS CREDIT AND DEBIT CARDS ARE NOW ACCEPTED AT LEADING NATIONAL RETAILERS ... 8 CARD ASSOCIATIONS AND ISSUERS PROMOTE CONTACTLESS ON THEIR WEBSITES AND IN ADVERTISING .............................................................................................................................................. 9 CONTACTLESS CREDIT CARD PROGRAMS .............................................................................................. 10 MASTERCARD PAYPASS .......................................................................................................................... 10 EXPRESSPAY FROM AMERICAN EXPRESSSM ........................................................................................... 10 VISA CONTACTLESS ................................................................................................................................. 11 EXXONMOBIL SPEEDPASS ....................................................................................................................... 12 RETAIL APPLICATIONS AND RF-BASED CONTACTLESS TRANSACTION ............................ 13 RETAIL APPLICATIONS AND RF-BASED CONTACTLESS TRANSACTION ............................ 13 TRADITIONAL CREDIT AND DEBIT CARD PAYMENT ................................................................................. 13 LOYALTY PROGRAMS AND PREPAID/GIFT CARDS .................................................................................. 15 RETAILER PRIVATE LABEL PAYMENT CARDS .......................................................................................... 16 CO-BRANDED MULTI-APPLICATION CREDIT CARDS ................................................................................ 17 RETAILER IMPLEMENTATION AND BENEFITS OF CONTACTLESS PAYMENT.................. 17 OPPORTUNITIES FOR ACQUIRERS AND ISOS ............................................................................... 18 RF-BASED PAYMENT TECHNOLOGIES ........................................................................................... 19 ISO 14443-COMPLIANT RF CONTACTLESS SMART CARD TECHNOLOGY ............................................. 19 RFID TOKEN-BASED SOLUTIONS ............................................................................................................ 19 SONY FELICA ........................................................................................................................................... 20 NFC.......................................................................................................................................................... 20 POS SOLUTION OPTIONS: ....................................................................................................................... 22 TABLE 3: CONTACTLESS READER INTERFACE TECHNOLOGIES .............................................................. 22 THE VIVOTECH RF CONTACTLESS PAYMENT SOLUTION ....................................................... 23 VIVOPAY .................................................................................................................................................. 23 ViVOpay 4000 Easy Mount Solution: .......................................................................................... 24 ViVOpay 3000 RF Countertop: ..................................................................................................... 25 ViVOpay 5000 EMV Contactless: ................................................................................................. 25 ViVOpay DT Drive-Thru .................................................................................................................. 25 ViVOpay OEM: .................................................................................................................................. 25 ViVOpay iClass: ............................................................................................................................... 25 VIVOPLATFORM ....................................................................................................................................... 26 VIVOFOB / VIVOCARD ............................................................................................................................. 27 VIVONFC SOFTWARE SUITE .................................................................................................................... 28 SUMMARY ................................................................................................................................................. 30 CONCLUSION........................................................................................................................................... 31 REFERENCES ........................................................................................................................................... 32

4

Introduction
Contactless Payments are a reality already in the hands of millions of consumers, in the checkout lane of thousands of merchants and in innumerous prime time advertising spots by leading financial institutions. Backed by some of the most important players in the Banking, Payments and Retail sectors contactless has been growing at an astounding pace replacing cash as the most convenient method of payment. These cards, key fobs and mobile phones allow consumers to quickly and easily pay for transactions with a “tap” or a “wave.” The RF-based contactless payment devices are easy to use; consumers like the increased speed and control of transactions and are increasingly using the devices instead of cash. Retailers are seeing better revenues as consumers spend more per transaction and purchase more frequently.

American Express®, MasterCard® and Visa® have launched initiatives to offer contactless payment devices to card Issuers, Acquirers and National Retailers. Financial and retail industries recognize that RF-based contactless payments are a means to increase credit and debit card transactions in traditional cash-only retail segments, provide improved views of customer buying behavior, and enable new customer-facing programs and services. In environments where speed and convenience is important, or where handing over cash or a traditional payment instrument is difficult, contactless payments can add demonstrable value. In fact, The TowerGroup in a January report predicted that, by 2009, the total market for contactless micro payments--those worth less than $5--in the United States will reach $11.5 billion, with almost $5 billion of that transacted via mobile phones. This white paper provides a comprehensive description of RFbased contactless payment including: RF-Based Contactless Payment: How Does It Work? Retail Applications and RF-Based Contactless Transaction Retailer Implementation and Benefits of Contactless Payment Opportunities for Acquirers and Independent Sales Organizations ( ISOs) RF-Based Payment Technologies The ViVOtech RF Contactless Payment Solution

5

Contactless Payment Cards, Key Fobs and Phones

RF-Based Contactless Payments: How Do They Work?
RF-based contactless payments are straightforward for both consumers and retailers. Consumers use a payment card or a key fob that is equipped with a chip and antenna that securely communicates consumer account information via radio frequency to the retailer’s payment terminal. The payment terminal then connects to the appropriate financial networks or other back-end processing systems to authorize the transaction. Once authorized, the consumer completes the transaction – in a fraction of the time required by cash, traditional credit, or debit transactions that require a card to be swiped through a reader.

Credit Card Contactless Payment Programs

To date, all major card associations have started their own contactless payment programs. In 2003, American Express began a pilot for ExpressPay in Phoenix, AZ, New York and Singapore, issuing over 25,000 key fobs and enabling hundreds of merchant locations. The success of these pilots led to the national launch of Blue from American Express® with the ExpressPay feature in June 2005. Also in 2003, MasterCard started its PayPass trial in Dallas, Orlando and New York, issuing an initial 16,000 RF-enabled cards and enabling several merchant locations. In the 4th quarter of 2005 Visa announced their Visa Contactless strategy. Discover is expected to announce its entry into contactless payments in second half of 2006. . Significantly, JPMorgan Chase issued approximately 1 million contactless credit cards per market in Atlanta, Denver, Orlando, Boston, Philadelphia and New York in 2005 and 1st quarter of 2006. They are expecting to continue issuing contactless cards throughout 2006 in top DMA’s. Other Issuers have also adopted a contactless strategy with MBNA, Citibank, HSBC, KeyBank and Citizens Bank issuing contactless credit and debit cards to their cardholders in 2006 and more major Issuers are expecting to do the same.

6

To accelerate deployment of this new payment method, all card associations have designed their programs to work within the existing financial infrastructure, requiring minimal retailer investment and allowing retailers to quickly start accepting contactless transactions. American Express, MasterCard, and Visa have created a “universal contactless indicator” hoping that the industry will adopt this as a general contactless payment identifier:

They also use the same technology standards for contactless payments to guarantee future interoperability. Usage of the cards/devices is similar between the different programs: Consumers are issued a contactless credit card that includes a contactless interface to an on-card chip and a magnetic stripe. Track 1 (T1) and/or Track 2 (T2) magnetic stripe data (cardholder name, card number, and expiration date) and other security information is stored in the chip. Retailers connect the radio frequency-based reader devices to existing POS terminals, ECRs and PC-based systems. The consumer holds the contactless card/device in close proximity to a specially equipped terminal. The card communicates payment account information wirelessly to the terminal via radio frequency, providing the information needed to complete the transaction and eliminating the need for the cardholder to hand a card to the merchant to swipe. The terminal processes the payment as it would a traditional magnetic stripe credit card transaction, sending the account information and transaction amount to the appropriate acquiring processor for authorization. No changes are required of the retailer or acquirer systems for authorization and settlement. Upon transaction authorization, the consumer receives payment confirmation and completes the transaction. For many low cost retail purchases (e.g., fast food, theater tickets or parking), a signature may not be required, making the checkout process even faster.

Contactless payment process and existing infrastructure

7

Contactless Credit and Debit Cards Are Now Accepted at Leading National Retailers
As of April 2006 there are over 25,000 merchant locations representing over 150,000 POS locations that accept contactless credit cards in the United States – with thousands more in Canada and South East Asia

Retail acceptance points for contactless credit cards

POS Branding At retail locations consumers recognize contactless-enabled POS systems by the presence of the “universal contactless indicator” followed by the logos of ExpressPay from American Express, MasterCard PayPass and Visa contactless:

8

Card Associations and Issuers Promote Contactless on Their Websites and in Advertising
The launch of RF-enabled credit cards has seen unprecedented support from card associations and issuers. MasterCard started running national television advertising in late 2005 and continues to run contactless acceptance commercials using their famous “Priceless” format. JPMorgan Chase is supporting its issuing efforts by running multimedia advertising in a market by market strategy. In addition to television commercials for their “blink” contactless card product they are deploying billboards, transit boards, bus shelter and newspaper advertising. Below is a shot of their on-line support at www,chase.com In addition, Visa, American Express and MasterCard are featuring contactless technology on their websites.

9

Contactless Credit Card Programs
MasterCard PayPass
MasterCard PayPass contactless payment program was launched in the US in 2003 and rolled out in 2005. Traditional credit card issuers have distributed contactless payment cards. For example, MasterCard issuers Chase, Citibank, and MBNA have issued RF-based contactless credit cards to existing cardholders as part of the MasterCard PayPass™ pilot program. McDonald's announced its acceptance of PayPass devices at most of their 13,500 fast food locations. Sheetz, a petroleum retailer and convenience store operator, rolled out PayPass on its entire chain not only by accepting the cards on its stores nationwide but also by launching Sheetz-branded MasterCard cards with rebates on purchases for customers. RF-based contactless payments are ideal for retailers where speed of payment is essential, such as QSR (quick serve restaurants), gas stations, convenience stores, grocery stores, theatres, and parking facilities. MasterCard PayPass has also been designed to support additional customer-facing POS applications.

ExpressPay from American ExpressSM
ExpressPay from American Express comes either embedded in a Card or in other separate forms such as a key fob, which can be attached to one’s key chain. ExpressPay is the perfect alternative to cash where speed and convenience are crucial to high traffic POS locations such as quick-service restaurants, drugstores, convenience stores, gas stations, movie theatres, video stores, and supermarkets. American Express became the first issuer to nationally launch a contactless-enabled credit card, Blue from American Express® with the ExpressPay feature, in June 2005. Pilot tests in Phoenix and New York demonstrated significant merchant benefits of ExpressPay in the form of time savings and spend increases. Customers move through checkout more quickly. Based on a 3-day sample, customers get through the line 53% faster with ExpressPay than with magstripe transactions, and 63% faster than cash. Customers spend more using ExpressPay. According to pilot merchant reports, customers spent 25-33% more with ExpressPay than with cash. Besides added speed and convenience, ExpressPay offers other benefits that can enhance the customer’s experience: • ExpressPay offers built-in security, through a unique cryptogram that generates a digital signature for each transaction. This helps to ensure the integrity of ExpressPay transactions and minimizes the risk of fraud.

10

ExpressPay allows consumers to track their spending. 24/7 Online account management lets customers monitor account activity and check their balances anytime.

ExpressPay is compliant with the industry standard (ISO 14443), ensuring contactless interoperability. And because ExpressPay leverages a merchant’s existing credit card acceptance network, it can be easily integrated into the existing point of sale environment.

Visa Contactless
Visa is adopting contactless payments in two fashions: In the US, Visa plans to roll out a contactless payment initiative this year. Via does not plan to have a “branded” program but will add contactless as a standard feature of its cards. VisaNet payment processing network was upgraded to accept this new type of transaction, promising to minimize the impact of contactless implementation on merchants and credit card issuers. The preferred Visa contactless transaction model for the United States uses the ISO/IEC 14443 standard to transmit Track 1 and Track 2 information. It leverages existing merchant and acquirer infrastructure and follows traditional credit, debit, and prepaid payment models. Contactless payment transactions are is processed by the existing bankcard infrastructure, and the authorization and settlement processes are the same as for a magnetic stripe card. In Asia Visa launched the “Visa Wave” contactless payment program. All cards will be the dual contact/contactless smart card in order to be compatible with the existing standards there. Over the next 12 months starting in Malaysia five Visa banks expect to have issued 500,000 Visa credit and debit cards for use at 4,000 merchants.

Discover is expected to announce its entry into contactless payments in second half of 2006.

Debit Card Card Issuers
In late 2005 we have seen the expansion of contactless payment technology beyond credit to debit. Current debit card issuers are Citibank, Citizen’s Bank, Keybank and HSBC. Also, the first “pre-paid” card with MasterCard Paypass, the eFinity Card, has been issued by Peoples Bank. It is expected that many more debit card issuers will begin to distribute contactless debit cards starting in 2006.

Sample contactless debit cards

11

ExxonMobil Speedpass
Mobil Speedpass™ branded service stations allow customers To Whom It May Concern: make purchases fast, simply, and conveniently. By linking to a customer's credit or check card, Speedpass eliminates the need to search through purses or wallets to find cash or credit cards. More than six million people in the U.S. have a Speedpass device. Speedpass has been installed in over 8,500 Exxon- and Mobilbranded service stations and convenience stores in the U.S. More than 90 percent of Speedpass users report they are highly satisfied. Speedpass uses a radio frequency system located at the pump or register to communicate with the miniature transponder located in a key fob, watch, or transponder affixed to the Speedpass vehicle’s rear window. Each device has a unique identification and security code that is transmitted to the reader when a purchase is made. The purchase is automatically charged via the payment method setup in the Speedpass device. The customer’s credit or check card number and personal information are never stored in the Speedpass device and remain outside the Speedpass signal system, maintaining the confidentiality of that information. Mobil Speedpass does not support the ISO 14443 payment standard and as such MasterCard, Visa, American Express nor Discover contactless cards are not accepted at Exxon Mobil retailers. Similarly, the Speedpass key fob will not work with the installed base of contactless readers in the ISO 14443 format for contactless credit card payment.

Speedpass is currently in use at several retailer locations such as grocery stores, convenience stores, and quick-service restaurants. Selected Stop & Shop supermarkets have been using Speedpass for payment, coupons, and loyalty programs. ExxonMobil Speedpass and Timex® have introduced products incorporating the Speedpass transponder into various versions of Timex watches. The watches look and function like regular watches, with the added feature of allowing customers to pay at locations accepting Speedpass.

12

Retail Applications and RF-Based Contactless Transaction
RF-based contactless transactions can add value for a number of retail applications including: Traditional credit and debit card payment Loyalty programs and prepaid gift cards Retailer private label credit cards Multi-application, co-branded credit cards

Traditional Credit and Debit Card Payment
Most of the focus in initial contactless payment pilots has been on using RF-based payment cards or key fobs to replace traditional magnetic stripe credit and debit cards. This application has tremendous potential for retail segments where transaction speed is essential and where cash replacement is desirable – e.g., QSR, convenience stores, gas stations, theatres, grocery stores and parking facilities. In worldwide contactless payment implementations, consumers have responded favorably to the new payment cards and processes. They value the increased convenience and speed of transactions with RF-based contactless payment, eliminating the need to fumble for cash or to hand over a card for payment. Even more interesting, consumers like paying with contactless cards. MasterCard’s consumer feedback indicated that PayPass was perceived to be “fun to use” and to make “shopping less of a hassle.” American Express has also reported that focus group research shows that consumers like the new payment device and are excited about how easy it is to use. With such strong, positive consumer reaction, retailers who adopt RF-based contactless payment can expect a high degree of 2003 US Payment Systems customer satisfaction with the new payment Electronic process. Contactless payment provides the following tangible retailer benefits: Faster transaction processing Increased size and frequency of transactions Improved access to customer data Improved transaction security Replacement of cash. Cash and checks make up 58% of the $6 trillion dollars worth of consumer payments in the US. The Nilson Report estimates that within five years, cash and checks will represent less than 37% of transactions, with cards representing over 49%. Contactless payment implementations are becoming one of the main drivers of this trend, enabling consumers to pay with an RF-based credit card more easily than with cash.
2008 US Payment Systems
Electronic 14%
Paper (cash & checks) 37%

7% Paper (cash & checks) 58%

Cards 35%

Cards 49%

13

For example, the top 50 U.S. QSR chains are expected to generate more than $87 billion in sales throughout 100,000 locations. However, though many of U.S. fast food restaurants accept credit cards ,they have been mostly the corporate-owned stores and many franchisees are just now embracing credit. McDonald’s has taken the lead in accepting credit and debit cards and has rolled out ViVOtech-based contactless payment systems at all locations throughout the U.S. Conversion of fast food customers to RF-based contactless payment offers tremendous value to the retailer by eliminating cash handling and saving time. Faster transaction processing RF-based contactless payments speed transaction times at checkout. Consumers are not required to extract cash or cards for purchases and retailers are not required to give change or swipe a card. Transaction time is even further reduced in certain retail segments where card associations no longer require signatures if transactions are below certain limits (e.g., QSR, movie theaters, parking lots). This results in increased profits as retailers can more efficiently handle a larger number of customers, vital consideration during peak periods. Increased size and frequency of transactions Studies and early implementations of contactless payment have shown that consumers spend more if they are not required to use cash and that they frequent retailers who offer convenience and quick checkout with less hassle. Numerous implementations have reported increases of up to 30 percent in sales for retailers accepting RF-based contactless payment. Improved access to customer data Cash sales are anonymous, providing retailers with no information about their cash customers. Using RF-based contactless payment, retailers can collect data about customer buying habits and preferences. By making the cash customer purchases visible, retailers can better understand customer behavior and implement targeted promotions to further increase sales and customer loyalty. Improved transaction security Contactless smart cards provide a highly secure payment solution. Consumer account information is stored securely on the chip and the cards themselves are tamper-resistant and extremely difficult to duplicate. A payment transaction initiated by the contactless smart card’s built-in chip is be considered much more secure than one initiated with a magnetic stripe card. The major international card associations -- MasterCard, Visa, and American Express -- have launched rollouts offering RF-based contactless payment devices. All of the implementations have been based on technology complying with the ISO 14443 standard. This strong financial industry support, coupled with the favorable consumer reaction and strong retailer benefits demonstrated in early implementations, is expected to motivate issuers to offer new RF-based payment cards.

14

Loyalty Programs and Prepaid/Gift Cards Retail transactions include more than just payments – loyalty programs and prepaid/gift cards deliver significant value to retailers. Virtually every retail segment has implemented loyalty programs, studies show that 50 to 83 percent of Americans participate in at least one. Retailers have found that loyalty programs work.

Results from Contactless Payment Implementations
• “Trials [of RF payment] in so-called quick-service restaurants have resulted in a 15 to 30 percent “bag lift” – the industry jargon for an increase in the average order cost,” according to Ed Kountz, senior analyst with Tower Group. Purchase transaction times were reduced up to 64 percent and the average transaction amount increased by 10 percent (as compared to using cash) in MasterCard’s PayPass employee pilot in Purchase, NY. Contactless payment can decrease drive-through transaction time by 90 seconds, according to Sue GordonLathrop, Visa International.

Consumers will shop preferentially • A recent Visa study showed a 20 to 30 percent increase in at stores offering attractive loyalty the average transaction value for credit cards at quick benefits. Loyalty programs also service restaurants. allow retailers to collect better information on customer behavior • According to David Bonalle at American Express, focus (e.g., when they visit, what they buy) groups show consumers like contactless payment and get so that they can identify their best excited about how easy it is to use. customers, implement targeted promotions to encourage repeat or incremental purchases, and improve the customer’s purchase experience. In recent years, sales of prepaid cards have totaled $36 to $38 billion according to Bain & Co. American Express, Visa, MasterCard and retailers issue prepaid cards sold as gift cards or as reusable stored-value cards that allow consumers to quickly and easily pay for purchases. Prepaid cards deliver a number of clear benefits to retailers, including: Increased sales of cards that drive traffic to retailers’ stores. Income from investment of prepaid card purchases while they are not being used. Revenue from unused prepaid card balances. (According to Synergistics Research, 3 in 10 consumers do not use the full value of the prepaid card.) Faster payment and shorter queues. The prepaid card serves as a cash substitute that can speed payment at high traffic retailers. Increased revenue and loyalty. For example, a ValueLink survey reported that 61 percent of gift card recipients spend more than the initial prepaid amount. More efficient and profitable gift certificate programs. Gift cards eliminate the need to process paper-based gift certificates and allow tracking of gift certificate activity. Since balances are maintained within the gift card system, gift cards also eliminate the need to provide the customer with cash if a purchase is less that the gift card/certificate amount. Increased “Sales Plastic vs. Paper”. Experience has shown that plastic gift card sales increase an average of 35 percent over current paper certificate programs.

While both prepaid and loyalty cards have been implemented most often with magnetic stripe cards, RF-based contactless smart cards offer significant benefits to retailers and increased convenience to consumers. Transaction time is further reduced. Consumers wave their card at the POS terminal without needing to hand it to the retailer to swipe. Since loyalty information or card value

15

can be stored on the card itself, online access to a central database is not required. This allows information to be available at all retail locations and enables instant reward redemption at the POS. Multiple loyalty programs or multiple retailer prepaid/gift programs can be implemented on a single card, improving consumer convenience. According to a Forrester consumer survey, over 30 percent of consumers wish they could use a single frequent shopper card at many locations. A multi-retailer loyalty card also offers opportunities to mall operators and/or other merchant coalitions that collaborate on crosspromotions. A combined prepaid/gift card and loyalty card can be issued. This provides increased information on customer purchasing behavior and the mechanism for retailers to offer other promotions to customers that they know. Transaction security is improved. With data securely stored in the contactless card which is securely transmitted from the card to the terminal, RF-based smart cards are extremely difficult to counterfeit and include features that make them resistant to tampering – reducing the potential for loyalty or prepaid card fraud. By taking advantage of RF-based contactless technology, retailers can implement more effective programs that increase revenue, improve customer loyalty, and gain better information on consumer behavior. Loyalty program and gift card service providers can also offer new valueadded services, capitalizing on the inherent advantages of having a more capable payment card system that is also more convenient to use. In March 2006 Smoothie King, a New Orleans-based QSR franchisor, launched the first RF-enabled gift card in the US. Smoothie King is the premier smoothie bar and nutritional center operator in the US with close to 400 locations. ViVOtech worked with First Data to provide RF technology in this ground-breaking initiative for the fist 5 Denver-area stores. It is expected to roll-out to all locations later in 2006.

Retailer Private Label Payment Cards
While private label card usage is declining, over 600 million private label cards remain in circulation. Approximately 35 percent of cards issued are private label cards. These cards are attractive to retailers since studies have shown that they help to build customer loyalty, as private label cardholders visit stores twice as often and spend 2.5 times more per year than noncardholders. Private label cards can be integrated with RF-based contactless smart card technology and offer benefits above and beyond traditional bankcards. Retailers and private label card issuers can easily couple payment and other value-added applications on a single card, increasing consumer convenience and allowing the retailer to implement multiple customer relationship-enhancing functions. For example, retailer’s loyalty program, prepaid gift card, and electronic coupons or discounts can be combined on a single card. By increasing the value of the private label card to the consumer, retailers can increase usage of their card, gain access to information about customer buying behavior, and use the card to implement programs that solidify relationships with their best customers.

16

Co-branded Multi-Application Credit Cards
While private label cards are still in use, the market trend is for retailers to offer a co-branded credit card with a card association. By partnering with issuers like MasterCard or Visa, retailers can continue to develop consumer brand loyalty and increase in-store spending, while also capturing a fraction of cardholder spending outside of their stores. The co-branded Sears MasterCard is a good example. Kevin T. Keleghan, Sears’ president of credit services said "The company was surprised when customers who received Sears' MasterCards in the mail began coming back – unbidden – to the stores. In-store spending by the 10 million or so “light” card users who received new MasterCards surged 35 percent.” Mr. Keleghan said that when Sears can entice inactive cardholders to transfer balances to Sears' MasterCards, in-store spending spikes, with 25 percent of those cardholders making purchases at Sears.” As with private label and traditional credit cards, RF-based contactless smart cards can increase cardholder convenience and usage of the co-branded card and can support the implementation of multiple applications. Using the secure on-card chip, retailers and issuers can offer payment, loyalty, and prepaid programs on a single card. RFbased contactless smart cards can also support multi-retailer loyalty and promotion programs (as with MasterCard PayPass) – for example, allowing cross-selling and standard loyalty programs among complimentary retailers. By integrating applications through a common infrastructure, retailers and issuers can leverage investment across applications and across retailer participants.

Retailer Implementation and Benefits of Contactless Payment
For a new payment technology to be successful in the market, retailers must implement the infrastructure required to accept and process payment. For payment technologies such as EMV contact smart cards, the investment required by retailers and payment processors is significant and market deployment is slow, while the infrastructure is upgraded over time. Retailers can quickly and easily implement contactless payment and start accepting contactless payment cards and key fobs that are being issued by card associations. This is facilitated by the payment approach being implemented and by the products being offered that allow retailers to adapt existing POS systems to accept contactless payment cards. U.S. pilot implementations of contactless payment store T1 and T2 magnetic stripe data in the contactless card. The card then communicates T1 and T2 payment account information to the terminal via radio frequency. In order to accept contactless payment, the POS must be able to “read” specific security information inherent to contactless credit cards and pass the information to the payment processing network. All of the major Acquirers and Processors have completed all software changes in their “back end” to process contactless transactions. Many POS hardware and software vendors have also completed the data element changes required by Visa and MasterCard which has resulted in over 25,000 merchant locations now accepting contactless credit cards. Category leaders such as McDonald’s, 7-Eleven, CVS Pharmacy and Regal Cinemas are examples. American Express doesn't require any additional data elements to be passed. Vendors are offering RF-based terminals that can be installed quickly and easily with existing POS systems. With solutions available that permits retailers to upgrade POS systems while also retaining existing functionality, contactless payment acceptance is straightforward and inexpensive for retailers to implement. By basing contactless payments on the magnetic stripe payment infrastructure, major card associations have launched programs that are driveng rapid acceptance of contactless payment cards by

17

retailers – similar to the rapid growth seen by gift card programs that used the existing infrastructure. This approach and the innovative products being offered by terminal vendors allow retailers to realize the significant benefits of accepting contactless payment cards, with minimal investment. Table 1: Retail Applications and Contactless Payment Benefits New Retail Applications • Traditional credit and debit card payment • Loyalty and prepaid/gift cards • Private label payment cards • Co-branded multi-application cards • Multi- Retailer Coalition Cards • Instant Consumer Incentives Contactless Payment Card Benefits • Replacement of cash • Faster transactions • Increased revenue • Improved access to customer data • Multiple applications on a single card (payment, loyalty, prepaid/gift card, promotion programs) • Multiple retailer programs on a single card • Improved transaction security

Opportunities for Acquirers and ISOs
According to James Crawford of Forrester Research, retailers spend almost 30 percent of IT capital budgets in stores and are “poised for an explosion of customer-facing technology.” The emergence of RF-based contactless payment technology provides acquirers and Independent Sales Organizations ( ISOs) with the opportunity to differentiate product and service offerings, gain additional revenue, and help their retailer customers take advantage of the benefits of RFbased contactless payment. Increased revenue. Early market results show that retailers can easily start accepting Visa Contactless, MasterCard PayPass and American Express ExpressPay contactless payment cards. By offering low-cost terminal solutions and helping retailers with the straightforward POS installation, acquirers and ISOs can quickly increase revenue from equipment sales and monthly leases/rentals and gain share in this emerging market. Increased transaction volume. Acquirers and ISOs will see an increase in card usage by consumers with contactless payment cards. The almost immediate increase in transaction volume that retailers have seen when implementing RF-based contactless payment translates directly into increased transaction revenue for acquiring processors. Improved penetration of traditional cash-only retail segments. By offering RF-based contactless payment solutions, acquirers and ISOs can better serve traditional cash-only retail segments that need fast transaction processing. By upgrading payment systems at QSR, parking facilities, movie theatres and other retailers to accept RF-based contactless payment, acquirers and ISOs can increase transaction volume (converting cash to credit transactions) and gain additional revenue from equipment purchases. New value-added service portfolio. RF-based contactless transactions are not limited to payments. The emergence of this new technology provides opportunities for acquirers and ISOs to add new services to their portfolio that can differentiate their offerings with retailers. Offering outsourced loyalty, prepaid card or electronic coupon services can help acquirers and ISOs develop new sources of revenues. Better return on existing POS investment. Acquirers and ISOs will be able to enjoy an extension in the lifetime of their existing POS terminal installed base – providing revenue over a longer period of time. Acquirers and ISOs can quickly and easily capitalize on this new market opportunity by offering retailers a straightforward upgrade to their POS equipment to accept RF-based contactless payment devices.

18

RF-Based Payment Technologies
A number of technologies can be used to implement contactless payment systems. Key RFbased technologies include: 1. ISO 14443-compliant RF contactless smart card technology 2. RFID token-based solutions 3. Sony FeliCa smart card technology 4. NFC - Near Field Communications

ISO 14443-Compliant RF Contactless Smart Card Technology
Standards are important for the adoption of technology as they provide the ability to have multiple sources of products base on the same standard. The ISO has standardized the technologies used in contactless smart cards. Contactless smart cards compliant with the ISO 14443 international standard for contactless cards are used in numerous payment applications, with over 200 million cards in use worldwide. Contactless payment cards based on ISO 14443 communicate with readers at 13.56 MHz and have an operational range of up to 10 centimeters (approximately 4 inches).1 Operational range is the maximum distance between the proximity card and reader for reading and writing data from/to the card. The ISO 14443 standard provides an option for two different types of signaling schemes: Both signaling schemes offer half duplex communication with a 106 Kbit per second data rate in each direction and use a sub-carrier modulation frequency of 847.5 KHz to transmit data. An ISO 14443 card is powered by the RF field and does not require its own battery. Applications based on ISO 14443 A/B are highly secure when compared to those using magnetic stripe cards and other RF-based technologies. Counterfeit cards are extremely difficult to manufacture and the cards themselves are tamper-resistant. Built in security features on the contactless card allow the encryption of data on the card during communication with the POS terminal and prevent the “replay” of transactions. Contactless smart cards now achieve the same degree of security as contact smart cards. All major card associations are endorsing the ISO 14443 standard, with RF-based contactless payment initiatives using the technology. ViVOtech readers have firmware that accepts MasterCard, Visa and American Express contactless cards at the same reader. MasterCard PayPass and Visa Contactless both use ISO 14443 Types A/B to communicate T1 and T2 magnetic stripe credit card data from the contactless card to the retailers POS terminal. Retailers can easily add a compatible RF reader to existing certified POS systems. American Express also uses ISO 14443 Types A/B to communicate T1 and/orT2 magnetic stripe credit card data from the ExpressPay device or card to the RF-enabled retailer POS terminal. Retailers can easily add a compatible RF-based terminal to existing POS systems. No software changes are required for ExpressPay acceptance, as American Express doesn't require any additional data elements to be passed.

RFID Token-Based Solutions
RFID token-based solutions are typically used in closed payment systems. Applications in North America include automated toll collection and payment services for gas stations and convenience stores (e.g., Exxon Mobil Speedpass). In an RFID token-based system, a unique ID is stored on the RF-based consumer key fob. This ID is transmitted via RF (either low- or high frequency) to the receiver where it is sent to a central processing system. The central processing system then links the consumer ID to a payment account and payment is completed (either through a prefunded account or through standard credit card processing).

19

RFID token-based systems can operate at longer ranges – 0.2 to 10 meters (approximately 0.75 to 33 feet) depending on the frequency – increasing their attractiveness for certain contactless payment applications (e.g., toll collection). To date, they have not received any support from the financial industry since they are perceived to have security risks and are based on proprietary technology with no global standard. Systems that use RFID tokens may require a separate processing infrastructure with retailers incurring additional costs for processing transactions.

Sony FeliCa
Over 35 million Sony FeliCa contactless smart cards have been issued worldwide, including large-scale implementations in Hong Kong, Singapore and Japan. Sony FeliCa technology is used throughout Asia Pacific for transit, electronic purse and loyalty applications. The proprietary Sony FeliCa cards use 13.56 MHz to communicate with readers. Sony FeliCa technology has similar technical specifications to ISO 14443 A/B, but is not compliant with the standard. JCB has recently announced a contactless smart card that incorporates both Sony FeliCa contactless and EMV contact technology and that will be used for JCB employees as an ID and payment card. Sony is also working with Visa and Infineon to develop a common chip supporting ISO 14443 A/B and FeliCa technology. Table 2 summarizes the implementation status of the three RF-based contactless technologies for payment systems. Given the significant advantages that RF-based smart cards have, it is expected that most large-scale contactless payment implementations will be based on ISO 14443 and Sony FeliCa smart card technology.

NFC
Near field communication (NFC) is a very short-range frequency identification (RFID) protocol that provides easy and secure communications among various devices without user configuration. NFC range is measured in centimeters, which provides just enough range for end users to leverage the technology’s intuitive, easy-to-use nature to transfer content among devices, make payment transactions, and access content from smart objects. NFC devices recognize each other in short-range scenarios and, regardless of manufacturer, transmit data to enhance user functionality. Some proponents see NFC as transforming consumer lifestyle and building the bridge across the consumer electronics, communications, and computing islands that exist today. To date, NFC-driven demonstrations have included digital music transfers, smart poster interaction, boarding ticket transfers, electronic key access, and interactive service e-payments. NFC technology is bolstered by strong ISO and ECMA standards, and the technology is generating interest and action across multiple industry leaders. Still, NFC chips have yet to reach the market and a number of question marks remain.

20

Table 2: RF-Based Contactless Payment Technologies Technology Implementation Status • Wide card deployment worldwide, with over 200 million in use through pilot implementations and production rollouts in the U.S. ISO 14443 A/B • Strong financial industry support from all major card associations – American Express, JCB, MasterCard, Visa • Standards-based, with strongest security • Contactless payment implementations have used the existing payments infrastructure, requiring less retailer and acquirer investment • Strong market presence in the U.S., with RFID tokens used for toll collection and payment at gas stations RFID tokenbased solutions • Proprietary technology, with single source availability of cards and reader technology and weaker security • No financial industry support and implementations have used new processing infrastructures, requiring higher retailer investment • Wide card deployment in Asia Pacific, with over 35 million cards in use Sony FeliCa • Used by JCB in payment applications in Asia Pacific • Strong security, but proprietary technology • ViVOtech, Chase Bank, Cingular Wireless, Nokia, Philips, Visa USA, and Atlanta Spirit LLC (owners of the NBA’s Atlanta Hawks, NHL's Atlanta Thrashers and Philips Arena) are running the first large-scale NFC trial at Philips Arena in Atlanta enabling season-mticket holders to make contactless payments as well as hockey and basketball content downloads from smart posters. • Motorola and MasterCard International have trials in Asia for payment and transport systems • Enables customers’ mobile phones and PDAs to initiate credit card transactions when placed near readers

NFC

21

POS Solution Options:
Vendors are offering contactless RF readers that can quickly and easily be installed with existing POS systems. In the future, POS terminal vendors are also expected to release new POS terminals with physically integrated contactless readers – especially for the consumer-operated payment terminal market. ViVOtech has developed custom brackets that “visually integrate” a ViVOpay 4000 reader to a POS device. As counter space in most retailers is limited, the ability to add a contactless reader without increasing the terminal footprint. An example shown here is for the VeriFone OMNI 3750 terminal, one of the most popular stand-alone terminals in the US.

There are two approaches that can be used to interface the contactless RF terminal with existing POS systems: Serial Cable Interface: This is the long-term recommended solution. It provides a bi-directional communication interface between a POS system and a contactless RF card reader. This approach requires a change in the POS system software to communicate with the reader through its serial port. The serial interface with the POS software change also allows the POS system to recognize that the financial T1 and T2 data is coming from a contactless payment device rather than from a magnetic stripe card. Smart Cable Interface: This is a wedge cable that connects either to a PS/2 port or to a serial communication port. It is unidirectional cable and works with many of existing POS ECR systems that have PS/2 port available. It does not require software changes as many of the POS systems expect to receive T1 and T2 data through their PS/2 port.

Table 3: Contactless Reader Interface Technologies Technology Pro’s • Long Term Recommended Solution • Reliable and easy to maintain Serial Interface • Provides Bi-Directional Communications interface • Make Data Element changes required by some card associations • Short and long term solution. Smart Cable Interface • Reliable • Easy to maintain Con’s • Requires Extra Serial Port on existing POS • Additional time to market in order to make software changes on the POS application • Requires field upgrade and possible recertification

• Cannot tell if the data is coming from a magnetic stripe reader or from a contactless RF card/fob reader.

22

The ViVOtech RF Contactless Payment Solution
ViVOpay
ViVOpay is a unique contactless payment solution enabling more than 30 million existing POS systems with rapid and cost-effective deployment of RF-based contactless card payment capabilities. Rather than requiring retailers to purchase new systems, ViVOpay enables an easy and cost-efficient upgrade of previously installed magnetic stripe POS terminals to accept payment from contactless payment cards. Consumers move quickly through checkout lines and wave their RF-based contactless payment card near the ViVOpay terminal. The ViVOpay terminal adapter accepts the contactless card information and transmits it to the retailer’s installed POS system. ViVOpay can be installed easily with any POS system that accepts magnetic stripe cards – without costly changes. ViVOpay is compatible with most POS systems used by retailers large and small (e.g., VeriFone, Hypercom and integrated ECR) and provides a powerful contactless payment solution without requiring hardware replacement. ViVOpay 4000 Retail personnel can easily install the ViVOpay reader to make a certified POS terminal capable of contactless-payments. The ViVOpay reader enables the acceptance of RF-based contactless credit, debit and pre-paid cards, while retaining the terminal’s existing functionality.

ViVOtech has implemented a Smart Cable technology, similar to the wedge design, which will connect between a PS2 port on the POS system and the ViVOpay reader. In this configuration, there is no need for additional ports on the POS system because the external keyboard or magnetic stripe reader plugs directly into the SmartCable. ViVOpay’s flexible design is crafted to fit any sales counter or store layout. Retailers can place ViVOpay’s customer-friendly reader at the existing checkout or integrated to the existing POS system without moving current POS systems. ViVOpay is designed to accept RF proximity payment technologies using the same system. In addition to RF-based contactless cards, consumers will be able to make payments by tapping their NFC-enabled cell phones and PDAs. ViVOtech applications make retail operations more efficient and greatly improve the reach and capabilities of retailer loyalty programs. ViVOpay benefits to retailers include: Versatility. ViVOpay’s flexible design and small footprint allows it fit most check-out layouts with minimum impact. It can be either be placed on the counter or be mounted onto POS systems, windows, cash registers, kiosks and even Drive Thrus (ViVOtech has the ONLY certified contactless reader for use at the Drive-Thru). Highly secure transactions. ViVOpay supports ISO 14443 Types A/B contactless smart cards that carry the appropriate financial card application. All financial data is encrypted during all steps of the transaction. Fast and easy installation. Merchants can install ViVOpay easily and within minutes, with certified POS terminals and even vending machines. Existing POS functionality is unaffected. Loyalty program capable. ViVOpay is able to communicate with the consumer’s RF contactless card. By connecting ViVOpay directly to ECR systems and POS terminals

23

through a serial port, retailers can support two-way communication with the consumer’s card, implementing loyalty program applications, electronic promotions and coupons, and digital receipts. Customer-friendly design. ViVOpay is equipped with LEDs and audible tones to capture the customer’s attention in a noisy retail environment and provide for an interactive and self-explanatory payment process. Low cost. The ViVOpay reader is just a fraction of the cost of a new POS terminal, enabling retailers to quickly and cost-effectively accept payment from new RF-based contactless payment cards. Immediate availability. The ViVOpay reader is available now and is currently being installed and used at thousands retailers. ViVOtech delivers acquiring banks and ISOs an affordable, scalable, and easy to use contactless payment solution that increases card acceptance at traditional cash-only retailers and provides benefits to any retailer who wants to improve their customer’s checkout process. Unlike previous attempts to “reinvent” the POS system for new payment devices, ViVOtech’s payment solution leverages the existing magnetic stripe infrastructure at retailer locations. ViVOpay is extremely cost-effective and provides almost instantaneous return to both retailers and acquirers. ViVOpay comes in several different packages to fulfill the specific needs of each merchant:

ViVOpay 4000 Easy Mount Solution: The flexible ViVOpay
4000 contactless payment device can easily be mounted onto a wide variety of existing Point of Sale (POS) terminals, Electronic Cash Register (ECR) systems, countertops, windows and a variety of other surfaces providing for physical and functional integration with the existing merchant system and check-out layout. ViVOpay 4000 enables most POS and ECR systems with contactless payments with full visual integration with existing POS and store layout.

The ViVOpay 4000 is designed to provide easy, convenient, and safe transaction in limited space counter environments such as quick service restaurants (QSR), convenience stores, car rental facilities, movie theatres, ticket booths, retail outlets and hospitality areas.

24

The small footprint (5" x 4.2" x 0. 7") and flexible design of the ViVOpay 4000 was crafted to give merchants a variety of mounting options and provide for complete visual integration with POS and ECR systems as well as other implementations such as window mount for ticket sale booths or drive thru windows.

ViVOpay 3000 RF Countertop: Enables contactless credit,
debit, gift and stored valued card payments with minimum change to existing infrastructure. Merchants themselves can easily install the plug-and-play ViVOpay 3000 and immediately start accepting contactless payments such as ExpressPay from American ExpressSM, MasterCard® PayPass™, Visa® contactless and Chase blink™ as well as their own contactless gift, loyalty, etc.

ViVOpay 5000 EMV Contactless: The powerful ViVOpay 5000 makes possible contactless EMV programs in Asia, EMEA and Latin America by enabling existing POS and ECR systems with contactless EMV capabilities compatible with programs such as Visa® Wave, OneSmart MasterCard PayPass™, OneSmart® MasterCard PreAuthorized and Expresspay from American ExpressSM.

ViVOpay DT Drive-Thru: Makes contactless credit, debit and gift
card payments possible at the Drive-Thru lane with the same easiness of that the ViVOpay countertop units do inside the store.

ViVOpay OEM: ViVOpay OEM boards are easily integrated into existing point-of-sale (POS) systems such as vending machines, kiosks, time & attendance terminals, transportation ticket machines, and others.

ViVOpay iClass: ViVOpay iCLASS is a point-of-sale (POS) terminal adapter
that enables the next-generation of HID 13.56 MHz read/write contactless smart cards to exchange payment and loyalty information with current cash register systems in and around campus.

25

ViVOplatform
ViVOplatform is a high performance, high availability, online, realtime gift and loyalty transaction processing system. ViVOplatform allows retailers and processors to offer value-added loyalty and gift card applications to their customers via the POS in real-time. Using a contactless card or fob enables the retailer to have both a gift card and a loyalty application on the same device. They can be linked in a dynamic way that will enhance the value of each application. The ViVOplatform solution has been developed using the latest software technologies and is designed to support multiple operating systems: Windows, Linux/Unix and Solaris. Leading retail and transaction processing companies utilize broadband and satellite technologies to efficiently move data between stores and data centers at speeds that were unheard of only a few years ago. An on-line loyalty processing system such as ViVOplatform must not only take advantage of telecommunications speed but must move loyalty messages in a format that allows a sub-second round trip from the POS to the loyalty host and back again. The ViVOplatform forwards gift and loyalty messages in a messaging format that complies to standard payment message protocol IOS8583-2003. Integration of the ViVOplatform messaging format at POS is a straightforward process that is no more difficult than integrating a standard gift card program. ViVOplatform has been designed to offer a rich set of features and functionality, and its architecture and message handling protocols make it readily adaptable to either an ASP or retailer data center environment.

Benefits:
• Increase loyalty and gift card usage: Custom, easy to carry form-factors ensures customers always carry merchant cards. Boost loyalty, boost sales: Attract new customers, retain and increase spending of existing customers. Increase Revenues: Increasing gift cards usage will increase total revenues of merchant.. Easy Promotions and Paperless Coupons: Choose the promotion to run, the target market and deliver value to the consumers at the time of transaction. Automate Point Collection and Redemption: • "Earn one point per $1 spent." "Earn a free lunch when reaching the point balance threshold."

• •

Choose the Best Loyalty Proposition: Points, miles, gift certificates, cash back, discounts, charity donations and more Easy to implement: Enable functionality with minimum changes to existing systems. Increase loyalty card usage: Custom, easy to carry form-factors ensure customers always carry merchant cards.

• •

26

• • •

Dynamic promotions: Personalized promotions can be delivered directly to the POS. Internet enabled: Customers verify transactions and balances, ultimately providing merchants another customer communication channel. Modular infrastructure: Flexible infrastructure can be customized for the client's different needs.

The loyalty system can be tailored for each retailer to meet existing programs or for creating new programs. The loyalty system can offer instantaneous rewards or accumulate rewards that are redeemable at the POS location, online, or by phone/mail. Cross selling and a coupon-based scheme can be designed to reward customers when a preset frequency or point total is reached.

ViVOfob / ViVOcard
ViVOfob works in conjunction with the ViVOplatform and ViVOpay for private merchant gift and loyalty card applications. Contactless gift and loyalty cards can increase consumer use of gift cards, by making payments quicker, easier, and more secure than cash. With the ViVOfob solution, gift and loyalty card devices can have custom and innovative form factors such as cards, key fobs, mobile phones, guitars, and other custom designs, better expressing a company's brand and helping merchants win the "wallet share" war by offering their customers real ease of use. ViVOfob contactless technology also provides added security, reduces wear and tear of customer cards, and can be easily reloaded with cash online or at any ViVOfob-enabled store. Customers carry their ViVOfobs on key chains in their pockets or attached to their mobile phones and simply wave their cards to make quick payments at merchants, saving precious seconds in every transaction. The highly differentiated ViVOfob is designed to boost the adoption rate and use of gift cards by a merchant's customers, expanding the benefits of gift card programs: increased prepaid revenue, higher transaction amount per visit, fraud protection, and easier processing. The ViVOfob solution includes the ViVOplatform server software application, the ViVOpay appliance, and the contactless gift card device.

27

ViVOnfc Software Suite – ViVOtech NFC Solution
ViVOnfc Software Suite is the industry's first end-to-end Near Field Communication (NFC) payment solution, enabling cellular service providers, card issuing financial institutions, and retailers to rapidly deploy services based on NFC-enabled mobile phones. With ViVOnfc Software Suite, users can carry their credit and debit cards stored securely in their NFC-enabled cellular phones and make contactless payments at merchant locations. NFC technology provides very short-range wireless connectivity-typically a range of less than four inches—and uses an international standard RF frequency that has been designed specifically to meet stringent security and encryption requirements of the payments industry.

ViVOnfc Software Suite Components ViVOplatform Provisioning Server: An over-the-air (OTA) provisioning infrastructure which allows issuers to securely download a variety of “soft cards” over the carrier’s radio spectrum into NFC phones. These include credit, debit, prepaid, loyalty, and gift cards as well as mCoupons, event tickets, parking and transit passes. ViVOplatform Issuer Server: A secure server installed at card issuing financial institutions that enables secure download of credit card information directly from the issuing bank directly into a encrypted smart chip embedded in the NFC-enabled phone. ViVOwallet Software: allows consumers secure access to their soft cards directly from their mobile phone display. This software also provides transaction reporting functions such as balances, payments history, and content discovery from smart posters. Midlet Payment Software Package: that provides secure communications between the NFC phone and the growing number of merchant locations that are being equipped to accept Contactless payments.

Atlanta’s Philips Arena Trial
As the leader in NFC software solutions, ViVOtech enabled an NFC trial with 250 participants that enabled contactless payments as well as hockey and basketball content downloads at Philips Arena in Atlanta. JP Morgan Chase, Cingular Wireless, Nokia, Philips, Visa USA, ViVOtech, and Atlanta Spirit LLC (owners of the NBA’s Atlanta Hawks, NHL's Atlanta Thrashers and Philips Arena) are the partners in this trial. During the trial, season ticket holders with Chase-issued Visa credit accounts and Cingular Wireless accounts make contactless payments at concession stands, and access mobile content throughout the arena with their NFC-enabled Mobile Phones.

28

MasterCard – ViVOtech NFC Phone Giveway
At the NFC Summit in Las Vegas on April 4th MasterCard and ViVOtech gave away 20 NFC Phones enabled with ViVOwallet application and a MasterCard prepaid accounts. The NFCenabled mobile phones were distributed to selected attendees, allowing them to see how simple and convenient NFC technology is for making payments. Each phone was preloaded with a $25.00 MasterCard Prepaid account, from People’s Bank of Paris, Texas and could be used at a variety of contactless-enabled retail stores in Las Vegas or anywhere else where MasterCard® PayPass™ contactless payment technology is accepted. Users simply select the MasterCard logo on the phone’s ViVOwallet display and tap the phone on a special PayPass-enabled reader to complete the transaction.

29

Summary
ViVOtech offers a variety of products to make the contactless payment process quick and easy. First, the ViVOpay reader communicates to the contactless card and key fobs. A serial cable, Smart Cable or Dynamic strip for interfacing with the POS system is also available. As a complementary product to the payment network, ViVOtech offers the ViVOgiftcard solution for private merchant loyalty and prepaid applications. The cards can piggyback on MasterCard and American Express equipment so that retailers can accept the ExpressPay and Paypass programs while implementing their own contactless gift card programs. Finally, ViVOtech offers the ViVOplatform, which manages the contactless accounts and allows for a secure consumer interface using the Internet. Consumers can buy contactless cards, add value to a prepaid account, and accumulate loyalty points. Table 4 summarizes the exciting benefits of RF-based contactless payment and ViVOtech’s solution for consumers, retailers, acquirers and issuers. Replace Old fob logo, contactless indicator on reader

Table 4: ViVOtech RF-Based Contactless Payment Solution Benefits Consumers • Convenience • Faster payment • Shorter checkout lines • Less need for cash Retailers • Replacement of cash • Faster transaction processing – ability to handle a higher volume of customers • Increased revenue – from increased transaction size and more frequent transactions • Fewer checkout lanes • Better access to customer data and improved knowledge of customer buying behaviors • Low investment to accept RF-based contactless payments, with straightforward upgrade of existing POS terminals • Improved transaction security • Ability to implement payment, loyalty, prepaid/gift and other applications on a single card • Ability to participate in multi-retailer loyalty and cross-promotion programs Acquirers • Increased credit card transaction volume and higher penetration of cash transactions • Ability to gain market share with traditional cash-only retailers • Increased revenue from equipment sales and monthly leases • Ability to offer new value-added services that capitalize on the increased functionality of RF-based contactless smart cards Issuers • Deeper penetration of cash transactions in traditional cash-only retail segments (e.g., QSRs) • Increased usage of credit cards at high traffic retailers, further increasing transaction volumes • Increased revenue through enhanced co-branded cards • Reduction in counterfeit fraud • Ability to implement multiapplication cards, incorporating payment, loyalty, prepaid/gift and other applications • Ability to offer multi-retailer programs

30

Conclusion
The market momentum is building for RF-based contactless payments. With all of the major card associations launching contactless payment initiatives and with the positive results achieved in early implementations, RF-based contactless payment solutions are starting to deploy quickly both nationally and in specific geographic markets where contactless cards are being issued. The value proposition for all participants in a contactless payment transaction is clear. Consumers enjoy increased convenience and faster checkout times. Retailers can quickly and easily take advantage of this emerging new payment technology to speed transaction processing, increase revenue, and better understand customer-buying behavior. With RF-based contactless smart cards, transactions are more secure and the technology’s multi-application capability allows retailers, acquirers and issuers to implement creative new programs (e.g., RF-based contactless implementations of loyalty programs, prepaid/gift cards and other single or multiple-retailer promotion programs). The replacement of cash with RF-based contactless credit card payment also allows acquirers and issuers to increase transaction volume and revenue. ViVOtech provides a unique contactless payment solution, lowering the risk to the retailer and acquirer by leveraging the existing installed payment infrastructure and allowing implementations to start with a small investment. The ViVOpay contactless payment terminal can be quickly and easily installed, enabling retailers to accept RF-based contactless credit cards in minutes and providing acquirers and ISOs with an enhanced payment solution for their customers. The case for contactless payment is clear; in the present and the future. And ViVOtech is the solution. By partnering with ViVOtech, retailers and acquirers can achieve increased differentiation, a strategic market advantage and increased sales by acting quickly to implement an RF-based contactless payment solution.

31

References
The Rush to Contactless Payments”, Card Technology, Cover Story, January, 2004 Issue “MasterCard Plans Big Contactless Push in 2004” Card Technology Magazine News Bulletin, December 2003 “American Express Leaves Home with ExpressPay” Card Technology Magazine News Bulletin, November 03 “MasterCard PayPass Trials and Survey Demonstrate Momentum of Contactless Payments” MasterCard International Press Release, November 03 “Amex Tests Wave-‘N-Go Payment,” Card Technology, March 6, 2003 “Consumer Payment Systems,” The Nilson Report, Number 777, December 2002 “Contactless Payment and the Retail Point of Sale: Applications, Technologies and Transaction Models,” Smart Card Alliance white paper, March 2003 James Crawford, “Building Smarter Stores,” Forrester Research, August 2002 James Crawford, “Identity: The Changing Relationship between Consumers and Retailers,” presentation at Smart Card Alliance Mid-Winter Conference, Forrester Research, February 13, 2003 Fred P. Gore, “Payment Cards Represent an Increasingly Popular Choice on the QSR Menu,” Transaction World, December 2002 Michelle Higgins, “Short on Gift Ideas?…Think Plastic,” Wall Street Journal, November 13, 2002 Kelly Hlavinka, “Fostering a Renaissance in Private-label Loyalty,” CREDITtalk, Frequency Marketing, Inc., August 2002 “JCB Readies New Smart Card,” TechWeb, March 7, 2003 Lavonne Kuykendall, “A Catalog of Reasons for Sears’ Card Profits,” The American Banker, March 14, 2002 Patrick LaPointe, “The Future of Loyalty Marketing,” TRENDtalk, Frequency Marketing, Inc., March 2002 “McDonald’s to accept plastic,” CNNMoney, November 26, 2002 Matthew Miller, “Received Wisdom,” CommVerge, November 1, 2002 “New Generation of Payments Calls for Proximity,” Visa International web site “New MasterCard PayPass Utilizes Contactless Card Payment Technology,” MasterCard press release, December 12, 2002 “Survey Shows Consumers Buying More, Spending More on Gift Cards for Friends, Relatives and Themselves,” ValueLink press release, October 29, 2002 “U.S. Smart Card Breakthrough,” The Nilson Report, Number 780, January 2003

32

“Visa Develops Global Payment Specification for Contactless Smart Cards,” Visa Release, September 19, 2002 “Visa, MasterCard diverge on proximity payments,” European Card Review, August 2002 “Visa Payment Card Acceptance Helps the Bottom Line of Quick Service Restaurant Partners,” Visa press release, November 11, 2002 “Visa Selects ISO 14443 as its standard for global contactless payments,” ContactlessNews, December 2002 “Visa, Sony and Infineon Form Strategic Alliance for Smart Cards,” press release, March 11, 2003 “Getting Smart with New Technology,” Convenience Store News, February 7, 2005 “All CVS Stores to Offer ExpressPay,” RFID Journal, December 2004 “Visa Wave Cards in Asia/Pacific,“ The Nilson Report, Number 828, February 2005 “Speed the Wireless Payment,“ Internetnews.com, February 2005
Lavonne Kuykendall, “A Catalog of Reasons for Sears’ Card Profits,” The American Banker, March 14, 2002 “Near Field Communications” ABIresearch

33

Master your semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master your semester with Scribd & The New York Times

Cancel anytime.