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THE WINNING MOBILE

WALLET SOLUTION
Achieving Success through Financial Institution
and Retailer Interoperability
About “The Winning Mobile Wallet Solution”
This white paper is the result of the collaborative and transparent efforts of the
members of the Payments Innovation Alliance Mobile Wallet Team. The paper is
divided into two parts: the white paper itself and this highly technical companion piece
that provides the detailed explanations behind the conclusions in the main white paper.
The paper covers the function and value of financial institution and retailer-branded
domestic mobile wallets, explores the issues surrounding tender reciprocity between
financial institutions and retailers, and discusses how ACH can be leveraged to
empower mobile wallets.
About the Payments Innovation Alliance Mobile Wallet Team

The Mobile Wallet Team is an initiative of the Payments Innovation Alliance, designed
to enable stakeholder companies and the broader mobile payments community to
leverage an “open” acceptance platform that includes support for retailer- and bank-
branded mobile wallets for electronic payments. Mobile Wallet Team members seek to
provide historical perspective and thought leadership about the potential for mobile
wallets and lead the industry and the marketplace through collaboration to address
key topics and concerns related to advancing the security, value, adoption and
interoperability of mobile wallets.
About the Payments Innovation Alliance

The Payments Innovation Alliance, a membership program of NACHA — The Electronic
Payments Association®, brings together diverse, global stakeholders to support payments
innovation, collaboration, and results through discussion, debate, education, networking,
and special projects that support the ACH Network and the payments industry
worldwide. The Alliance brings together content and focus across all payment areas,
including emerging payment technologies, electronic billing and presentment, mobile,
payment security/risk, check conversion and global payments. Membership includes
organizations of all sizes and spans the payments industry spectrum.
This paper is intended for educational purposes only. It should not be relied upon for legal advice.
Readers should consult attorneys for legal advice.
2 © 2016 NACHA – The Electronic Payments Association.

All rights reserved.
Acknowledgements
This paper was developed with the collaboration of many stakeholders. The Payments Innovation Alliance
would like to acknowledge its members who provided recommendations and expertise during its creation.
Access Softek, Inc. Fiserv

Accuity HSBC Bank USA, NA
ACI Worldwide IBM
ADP, LLC Javelin
Alliance Data Systems, Inc. National Credit Union Administration
American Bankers Association Navy Federal Credit Union
American Family Insurance OmnyPay
BIM PayPal
Board of Governors of the Federal Reserve System Pillsbury Winthrop Shaw Pittman LLP
Boy Scouts of America Prairie Cloudware
City National Bank RSA, The Security Division of EMC
CGI Technologies and Solutions SHAZAM, Inc.
Commerce Bank SunTrust
CO-OP Financial Services Target
CU Wallet TD Bank, N.A.
Desjardins Group The Home Depot
Dollar Bank, FSB TSYS
Dovetail U.S. Department of Treasury, BFS
EastPay, Inc. Upper Midwest ACH Association
Elavon WACHA
Federal Reserve Bank of Atlanta Webster Bank
FIS Western Payments Alliance
Additionally, the Payments Innovation Alliance would like to extend a special thanks to the Crone
Consulting team, Richard Crone and Heidi Liebenguth, for their significant efforts to develop this
white paper.
Note: The views presented in this white paper do not necessarily reflect the individual views of each
member of the Mobile Wallet Team, the entities or organizations that employ the members of the
Mobile Wallet Team, the Payments Innovation Alliance Leadership Team, or the individual Alliance
member organizations.
© 2016 NACHA – The Electronic Payments Association. 3

Introduction to Mobile Wallets
What is a Mobile Wallet?
A mobile wallet is a secure application for initiating payments on a mobile device. It can
take many different forms depending on the issuer of the mobile wallet, the account
provisioning and access technology deployed, and the purchase venues or market
segments being addressed. For example, there are many purchase scenarios, the
largest of which include the physical point of sale (POS), traditional desktop electronic
and mobile commerce through a browser, mobile in-app purchases, bill payment, and
person-to-person (P2P) transfers. This paper will focus on how mobile wallets will
enhance the in-store experience.
The mobile wallet is a consumer-facing application for managing payment types,

typically with the ability to access many different payment types and funding accounts
such as open-loop, financial institution-issued debit, general purpose reloadable (GPR)
prepaid debit and credit accounts, as well as private label, merchant-issued credit,
pre-paid or stored value, and direct debit accounts.
Mobile wallet functionality can be rendered as a standalone payments app such as

PayPal, Apple Pay, Android Pay, and Samsung Pay. It can also be a plus-one feature
integrated into bank-branded mobile banking applications such as Capital One or into
retailer-branded mobile shopping apps such as Starbucks. Another rendition of a
mobile wallet might be characterized as a pre-authenticated “buy button” or
embedded payment option such as PayPal One Touch, Visa Checkout, MasterCard
MasterPass, or Android and Apple Pay, residing inside other apps, e- and m-commerce
websites, biller direct bill payment sites and the like. Another version merely subsumes
the payment into the customer experience, with no interruption or separate payment
authorization step such as the Uber ride-sharing app.
Because successful shopping results in a sale and accompanying payment, the mobile
wallet is a compelling vehicle for enhancing the shopping experience before, during
and after a purchase by providing a new online, real time, in-context connection with
the user. The mobile wallet possesses the potential to be much more than payment, as
it sets the stage for a whole new set of value-added services for the issuer of the app.
In this regard, the mobile wallet is really a new customer service, communications and
marketing platform for the issuer.
As we will explore later in the business case sections of this paper, Crone Consulting
LLC estimates the annual gross revenue that could be generated from a mobile
wallet can be as much as $300 per user per year. This could be as much as two times
the annual gross revenue generated from a typical demand deposit account (DDA) for
a financial institution or nearly equal to the gross revenue of the typical credit card
account. It could be more than 10 times what the typical search engine-based or
enrolled social platform generates in gross revenue per enrolled user per year.
The marketing platform potential is game-changing and disruptive to traditional forms

of payments, offers, promotions and advertising, and for this reason merchants, financial
institutions and new entrants are pursuing the issuance of their own mobile wallets. But
as we will see in the next section, there are many interdependencies required to launch
a mobile wallet and new payment types.
Issuers of Mobile Wallets and the Dependencies of a Multi-Party Market
Payments is a multi-dependent market, which means to initiate a new payment
product or service offering, one must also gain the support and integration of many
entities beyond the deploying mobile wallet platform. Making a mobile wallet available
to consumers is not enough; to drive adoption by consumers the wallet must be
convenient and provide some sort of incentive or value add. In addition, there must be
merchant acceptance of the mobile wallet and the access technology it is deploying
such as Near Field Communications (NFC), bar codes, Bluetooth Low Energy (BLE),
presence detection, or ultrasonic.
At its very simplest, the two dependent groups in payments are issuers and acquirers.
On one side, payment accounts are issued to consumers or businesses. But these
accounts are only useful if the locations where the consumers or businesses want to
shop (the acquisition side) accept those payment types and processing methods.
Issuers of payment accounts are generally characterized not just as financial institutions
for debit, prepaid debit and credit accounts, but also retailers, as the issuers of private
labeled, closed-loop prepaid debit, direct debit and private labeled credit accounts. In
the case of mobile wallets, issuers can be financial institutions, retailers and third party
intermediaries such as mobile phone handset manufacturers, wireless carriers, payment
networks, technology companies, new entrants and a whole host of others yet to be
named or revealed as of this writing.
In reality, the two party market between issuers and acquirers is quite complex with
many multi-dependent infrastructure providers and supporting processors. Examples
of the many possible dependent stakeholders in the mobile payment processing value
chain include:
Acquiring Stakeholders Issuing Stakeholders

Retailers Financial Institutions
Enterprise Resource Planning (ERP) Core processors to financial institutions
vendors to retailers such as Oracle, such as FIS, Fiserv, etc.
SAP, etc.
Private label issuer processors to retailers Open-loop payment brands and
such as Alliance Data, Synchrony Financial, networks such as Visa, MasterCard,
Capital One Private Label, etc. Discover, American Express, etc.
POS terminal manufacturers such as Issuer processors such as First Data,
Verifone, Ingenico, etc. TSYS, etc.
Payment gateway providers such as AJB, TSPs such as Visa Digital Enablement
ACI, S4, etc. and systems integrators Program (VDEP), MasterCard Digital
Enablement Service (MDES), etc.
Merchant Acquirer Processors (MAPs) Near Field Communications (NFC) and
Secure Element (SE) semiconductor
manufacturers and systems integrators
Cash management services provided by Mobile smartphone handset
banks to retailers manufacturers
TSPs for digitized private label payment Wireless carriers
credentials

The primary challenge for initiating a mobile wallet is whether to integrate with the
existing stakeholders and processing standards or harness the full and disruptive
potential of mobile by creating new payment methods, clearing procedures and
settlement networks. However, whether integrated with or replacing existing providers,
processes and procedures, the fundamentals of deploying new payments types rests on
the shoulders of retailer acceptance. In other words, although this is a multi-dependent
market, all new payment types start first with merchant acceptance. Knowing this sets
the stage for analyzing the business case and return on investment for mobile wallets
and embedded payments.
Mobile Wallet Business Case

The Business Case and Return on Investment (ROI) for Mobile Wallets
& Embedded Payments
The motivation, business case and ROI for mobile wallets and embedded payments
extends far beyond the original cost reduction benefits pursued by the early entrants to
Internet and mobile customer self-service platforms. The investment to embed mobile
payment into an existing mobile app, be it mobile banking for a financial institution or
the shopping app of a retailer, could be cost justified alone by protecting and extending
the mobile touchpoints and active use goals for the app. But the real upside and
business case for mobile payment comes from instant, relevant engagement that
deepens a loyal relationship with customers in-context, and uses mobile touchpoints to
deliver new, opt-in and tailored solutions that will improve their lives. This is the real
win-win-win-win between financial institutions, retailers, new entrants and consumers.
It is from this premise that the business case and ROI of mobile payments is built across the
following two points of view (POVs) and various dimensions. Each of the nine ROI drivers
below can be equally applied to a financial institution or retailer issued mobile wallet.
Processing, Acquiring and Cost Efficiencies Mobile Wallet Issuing Upside

Payment account aggregation Protecting and promoting mobile
moments and brand across the Five
Mobile Trigger Points™
Gross Merchandise Value (GMV) In-context data feeds with machine
regardless of tender type used learning and artificial intelligence
Tender steering, least cost routing and Data-driven customized, opt-in
payment selection optimization advertising, promotion and offers
Greater security, multifactor New payment types with alternative
authentication and reduced fraud clearing and settlement options
Customer Relationship Management (CRM)
and loyalty platform
The ROI applies to merchants and financial institutions regardless of size. Smaller
retailers and financial institutions can utilize providers of white labeled options. For
example, a simple white labeled mobile wallet for a retailer could be used to manage
gift cards or loyalty punch cards, and also provide a platform for distributing gift cards
through bank-branded wallets.

We will review each of the business drivers listed above in the following sections.
Payment Account Aggregation

Depending on the technology deployed and the issuer processors involved, one of the
potential benefits of a fully featured mobile wallet is access to multiple tender types
regardless of issuer. The business case for payment account aggregation centers on a
key gating factor: enrollment. The entity that secures the enrollment of multiple
disparate accounts, decoupled from the original entity that provisioned the account,
be it financial institution or retailer private label, controls the user interface (UI) and
subsequent benefits from monetizing the active use of a mobile wallet.
The issuer of the mobile wallet will be a party to all payments initiated from its platform
and thus can benefit from the interpretation of the big data (e.g., location, merchant
proximity, etc.) derived combined with the knowledge of those transactions, regardless
of tender type.
Payment account aggregation maximizes the potential of a mobile wallet, not just for
payments, but as a new servicing and marketing platform that connects with customers
in-context. The issuer of the mobile wallet that supports multiple tenders, regardless of
issuer, can maximize all the other business drivers outlined below, especially GMV,
tender steering and least cost routing, CRM and loyalty, in-context data feeds with
machine learning and artificial intelligence and data-driven customized, opt-in
advertising, promotion and offers.
The metric used for quantifying the financial value of payment account aggregation will
be the average total number of registered payment accounts per mobile wallet user. Of
particular interest to financial institutions and retailers will be the number of open-loop
versus closed-loop accounts enrolled and utilized, and the average sale per tender type
among other traditional measurements by the account issuer.
GMV Regardless Of Tender Type Used

The new primary metric to judge the success of mobile wallet platforms will build on
payment account aggregation. Gross Merchandise Value (GMV) is used currently by
online marketplaces such as eBay and Alibaba as the primary measure of active use and
total transaction revenues. GMV is used as a primary measurement because in general,
the marketplace is not the original service or product provider, and is merely
facilitating sales on the behalf of others, regardless of product manufacturer, service
provider or brand. A mobile wallet also serves as a marketplace for activating and
redeeming offers and making payments from a variety of tender types across a number
of payment account issuers. Whereas each payment account issuer is judged by the
total spend on its account, the mobile wallet’s active use and success will be judged by
the gross merchandising value, offer activity or total sales facilitated by its platform.
GMV itself is one of the overarching metrics for quantifying the financial value of a
mobile wallet. Mobile wallet issuers will use it in establishing provisioning tolls on
original account issuers and other activity-based measures that all have their genesis
in GMV as will be shown in later sections.

Tender steering, least cost routing and payment selection optimization
If the mobile wallet supports multiple payment options, the issuer of the wallet also
possesses the potential to influence and motivate the user to select and use their
preferred tender. The one who enrolls the customer for their mobile wallet controls the
opportunity to provide the scripting, incentives and other techniques for enticing the
consumer to use their preferred tender. For example, a financial institution-branded
mobile wallet might feature more prominently the credit account over the debit
account for mobile payments in order to maximize the revenues from interchange and
outstanding balance interest and fees. The opposite is true for a retailer-issued and
merchant-branded mobile wallet, where they would be more likely to promote the use
of lower cost tenders such as their own private label payment options or Personal
Identification Number (PIN)-based or direct debit options. In this way, the retailer is
using a form of least-cost routing, starting by influencing the user experience in favor
of the lower cost tenders, in addition to lower cost clearing and settlement options that
may be available to them behind the scenes at the processing or payment gateway
level. The ultimate choke point for tender steering is to simply not support a
particular account, payment brand or issuer within a mobile wallet platform. Examples
of this would include the Starbucks Mobile Payment app, which only supports its own
proprietary, private label prepaid debit account; Visa’s bank-branded mobile wallet,
that only allows Visa-branded accounts; or the Merchant Customer Exchange (MCX)
CurrentC mobile app, that in its initial pilot only supported an ACH- based debit option
and retailer-issued private label accounts.
The financial value of tender steering can be directly measured by the individual usage
volume and spend on the preferred tenders. Account spend and the existing metrics
such as interchange, processor and network “take rates” that support the use of that
tender, and the difference compared to other available payment options, drives the ROI
of tender steering and least-cost routing.
Greater Security, Multifactor Authentication and Reduced Fraud

The mobile wallet itself is a unique security token, which when combined with
multifactor and out-of-band authentication, yields a greater level of security and ability
to reduce fraud than cards with magnetic stripes, PINs and even chip cards. There are
at least three factors of authentication that can be applied to the authorization and
validation of mobile payments:
• Something you have: the unique hardware fingerprint of the device itself as
identified by the mobile number, firmware level of each component, version,
provisioning wireless carrier, device manufacturer and model, serial number,
International Manufacturer Equipment Identifier (IMEI), Universal Device
Identification (UDID), Integrated Circuit Card Identifier (ICCID), Subscriber Identity
Module (SIM), geo-location of activity, etc.
• Something you know: user name, passmark and password and/or PIN.
Out-of-band verification can also be supplemented at this level such as when
provisioning a standalone third party mobile wallet such as Apple Pay or Samsung
Pay where an account issuer requires additional input or dynamic input of a
verification sequence outside the existing device where the mobile wallet is
being provisioned.

• Something you are: biometric verification through finger or thumb prints, facial,
iris or voice recognition, etc.
It is the combination and utilization of these multiple factors of authentication in a

dynamic and ongoing way that allow mobile payments to have a higher degree of
security and less fraud than today’s plastic cards.
This increased security should translate to lower interchange costs for retailers, but
currently lower costs only apply to mobile payments utilizing the card brands
proprietary tokenization schemes. Retailers accepting mobile payments would be
justified in requesting “card present” rates (or better) for all mobile payments, as they
are shown to be more secure than a physical card swipe. These lower rates may
ultimately apply to in-app or other mobile payments for e-commerce, which currently
trigger “card not present” higher interchange rates.
Of course, even with tokenization of credentials and the multi-factor security of the
mobile device, account issuers must take care to fully authenticate the account holder
before the credentials are provisioned and paired with that mobile device. In the early
days of Apple Pay, several banks saw increased fraud rates due to sloppy initial
authentication procedures that allowed thieves who gained access to stolen credit card
credentials to provision them on their own mobile phones. With better confirmation of
the account holder’s identity and matching to the on-file mobile number, this increased
fraud has been greatly reduced.
The ROI can be quantified by the actual transaction fraud perpetrated in light of these
additional controls versus that of traditional card-based authentication and security
measures. Dynamic multifactor authentication tying a tokenized payment credential to a
specific device and person should provide greater security and reduced fraud.
CRM and Loyalty Platform

With a mobile wallet you have two primary means to improve any CRM, whether for a
financial institution or a retailer, and that is 1) an authenticated user, and 2) a dynamic,
two-way communications platform with that known user.
Financial institutions, by their very nature have a CRM, as they must comply with Know
Your Customer (KYC) laws, but that is not necessarily the case for retailers. The majority
of retail transactions are conducted anonymously without any knowledge of the
customer. For this reason, many retailers lack a CRM, and without a formal loyalty
program or private label payment offering, lack the input and communications points
necessary for a CRM.
That changes with a mobile wallet, as it establishes a basis for CRM and loyalty as a
byproduct of the payment registration process. Even if a merchant does not issue its
own retailer-branded mobile shopping app and wallet, it can still benefit from the CRM
of other mobile wallet issuers, if those mobile wallet issuers are willing to share the
data with the retailer. Whoever enrolls the wallet user is the one who has the known
customer credentials for triggering CRM activation and interaction.

As described above, multifactor authentication is applied to every transaction before it
is ever initiated with the merchant. But depending on the mobile wallet technology
deployed and the logical scheme utilized, the merchant may or may not have the
opportunity to identify a pre-enrolled customer. The entity that provisioned the original
funded account must apply KYC requirements to open a payment account. The
combination of the two connected to a CRM and loyalty platform provides a degree of
integrity not previously available to financial institutions and (especially) retailers.
The ROI of CRM and loyalty from a retailer’s perspective is driven by generating One
More Item (OMI) and One More Visit (OMV). The most profitable retailers know the
impact of OMI and OMV from their most loyal customers and highly value the
opportunity to influence these two factors in a relevant, opt-in, preference-driven
fashion with those customers. The mobile wallet provides such a platform. Financial
institutions and standalone mobile wallet providers can extend Application
Programming Interfaces (APIs) and integration with retailers’ POS, private label
payment, loyalty and ERP systems to provide the CRM input points used to manage the
programs for OMI and OMV.
The ROI benefit of mobile wallet-enhanced CRM and loyalty programs can be directly
measured by the OMI and OMV metrics of a retailer’s average item dollar value, basket
value, and payment account spend.
Protecting and Promoting Mobile Moments and Brand Across the Five Mobile
Trigger Points™
By its nature, payment is the connecting tissue that binds the consumer to the ultimate
goal of the shopping experience. Integrating payment with mobile apps that enhance
the shopping experience and extend financial services in-context, wherever the
customers find themselves, holds great potential for redefining when, how and why
consumers engage with service providers, be they financial institutions, retailers or other
information enhancement servicers. As we analyzed above, mobile payment provides
the ultimate identifier for CRM, and for the issuer of mobile and embedded payments,
it can serve as a new platform for delivering branded mobile moments. The mobile app
with mobile payment is positioned to be the new front door to the retailing and
shopping experience. Providers of mobile wallets and embedded payments are
equipped to benefit greatly from not just payment, but being positioned in very close
proximity to the big data feeds and user interface before, during and after payment.
A mobile wallet issuer’s commitment to mobile payment will ultimately enable the
enhancement of its services in-context, regardless of platform or proximity, creating true
omni-channel, CRM-driven marketing and value-added services throughout the entire
sales lifecycle. Crone Consulting LLC refers to this new mobile-enabled sales lifecycle as
the Five Mobile Trigger Points™:
1. Discovery, locating and navigating

2. Presence detection, check-in and data-driven personalized offers
3. In-store enhanced customer self-service
4. Mobile payment and check-out
5. eReceipts, post-sale promotions and social sharing

Each of these Five Mobile Trigger Points™ are described in greater detail below.
1. Discovery, locating and navigating – Discovery is one of the game-changing aspects

of mobile. It is more than just using the mobile device to find and navigate to the
store or access financial services in-context through a mobile banking app. It involves
the discovery and locating of products, services, and information, and the navigation
leading up to eventual purchase or financial service. If customers download and use
a retailer’s app, that retailer can present the promotional incentives directly to their
customers versus paying for placement and competing with others on a search
engine screen. Both are viable ways to help customers locate the retailer and its
products, but a merchant’s own app provides a direct, opted-in dialog with the
customer. Shopping lists, for example, magnify the discovery process. When
controlled by the retailer, they provide a forward view to actual purchase intent
before the customer ever enters the store. This advance knowledge can drive
efficiencies in supply chain, merchandise distribution and staffing.
2. Presence detection, check-in & data-driven personalized offers – If customers use

a retailer’s shopping app or mobile wallet to check in upon arriving at the store, the
merchant can present the offer personally to them based on their opt-in preferences.
If a third party intermediary performs this function, they may offer to broker back
the check-in data to the retailer, for a fee, without necessarily passing along all the
profile and preference data. In other words, if it is the retailer’s app, it is the retailer’s
CRM. If it is not, the merchant is relegated to acquiring the customer information
through shared and competitive services. The business model of the third party
intermediaries controlling check-in is to maximize their own revenue through
competitive advertising and offers to the retail POS via geographical, consumer-
riggered check-in.
3. In-store enhanced self-service – When a customer needs help or more information

inside the store, they may seek a service representative, or likely turn to their
mobile phone. If the retailer app provides the assistance they need, the retailer’s
brand is reinforced and positioned to create more value for the customer. If a third
party intermediary app is used, for example, RedLaser, the retailer’s store now plays
the role of a showroom for Amazon and other competitors. Consumer Packaged
Goods (CPGs) and other product manufacturers want to reach the consumer at the
point of decision. Will they pay the retailer a premium to reach a certain type of
customer in a specific location, or will they pay a third party to reach them?
4. Mobile payment and check-out – What do retailers give up if their customers close
the retailer’s app and open up a separate mobile wallet when they check-out? If the
retailer can offer payment, they maintain the customer connection, make a direct
connection to their loyalty program, can offer incentives for use of preferred tenders,
and keep the upside from pre- and post-sale advertising and offers.
5. eReceipts, post-sale promotions and social sharing – These can be very lucrative.
Examples such as Catalina Marketing or inStream Media command advertising rates
many times higher than other mediums just because they have a known geography
and time of day triggers. If a customer is using the retailer’s app, there is not only a
known geography and timing trigger but a registered user and their purchase and

loyalty preferences. Advertising rates for reaching that profiled customer have not
been established, but one could expect it would be no less than what Catalina
commands at the POS today.
Each of the Five Mobile Trigger Points™ above represents a new customer service
and merchandising touchpoint for the mobile wallet issuer. What happens to a retailer’s
merchandising advantage if all the value-added interactions listed above are done
within a third party intermediary’s app and mobile wallet while customers are inside
the retailer’s store? Where does that leave the retailer and their ability to compete?
Without consciously deciding to do so, retailers could be, touchpoint by touchpoint,
‘dis-integrated’ (versus vertically integrated) and marginalized to the point of simply
being a warehouse.
Therefore the ROI for issuing and managing a mobile wallet and embedded payment
service can be measured by the brandable, CRM-driven service interactions that can
be controlled and influenced by the mobile wallet issuer. The cost benefit analysis
of conducting the interaction through one’s own mobile wallet or app can easily be
compared to the cost to obtain that same level of mobile interactivity through a
competing platform.
In-Context Data Feeds with Machine Learning and Artificial Intelligence

The in-context service interactions within a mobile wallet, especially when integrated
across the Five Mobile Trigger Points™ in a retailer or financial institution or standalone
app, can provide a stream of data for continuous improvement and product
development beyond the payment value chain and throughout the financial services
and retailing lifecycle. The data sets from the mobile service interactions have the
potential to be massive, rich and continuous, and as such, well positioned for
interpretation by algorithms and artificial intelligence that grow smarter and more
valuable with each data element contributed to the machine learning platform.
Machine learning has had its biggest impact on payments in dynamic fraud detection
and prevention. This will undoubtedly improve exponentially when mobile wallets are
integrated with the big data in-context feeds and two-way communications with
account holders. Well-constructed and adaptable machine learning algorithms grow
more valuable on their own with the continuous input of new big data feeds.
The ROI from in-context data feeds with machine learning and artificial intelligence
will extend beyond the improvements in fraud detection and prevention. The greatest
return will come from extending the machine learning algorithms for improving the
customer experience with functionality that is integrated before, during and after
payment across the Five Mobile Trigger Points™.
So the business case for in-context data feeds with machine learning will first be
measured directly by the reduction in fraud. This can be specifically calculated as the
difference of fraud rates for accounts accessed through cards and other traditional
modalities versus those initiated by tokenized mobile wallets and embedded buy
buttons. However, the greater ongoing ROI will come from new customized
functionality that was developed dynamically by machine learning algorithms on a
highly individualized basis for each enrolled mobile wallet user. One measurable

example will be the increased engagement and value of data-driven, customized, opt-in
advertising, promotions and offers.
Data-Driven Customized, Opt-In Advertising, Promotion and Offers

The mobile wallet is a unique platform for delivering advertisements, offers, loyalty
and other targeted incentives. As pointed out above, when the mobile wallet user
registers a payment instrument, the mobile wallet platform provider must fulfill KYC
requirements, thus providing a known, validated and authenticated user, something
that very few advertising media possess today. Because the mobile wallet issuer is
connected online, real-time to each registered user, the interaction can now be CRM-
driven by specified, historical or predictive preferencing, meaning the exposure to ads
and offers is on an opt-in basis, tailored and specified by the users themselves, and
enhanced through machine learning, thus eliminating spam and irrelevant/annoying
promotional content.
Product recommendations from Amazon generate about one-third of its total sales. For
NetFlix, approximately three-fourths of their sales are derived from machine learning
algorithm-driven recommendations. Delivering relevant promotional content and offers
through a mobile wallet holds the potential for increasing sales, not just for electronic
commerce sales as with Amazon or digital goods such as NetFlix, but in every purchase
venue, the largest of which is in-store.
These and many other factors provide the foundation for mobile wallets commanding
the highest rates for advertising, promotion and offers, even higher than those in the
marketplace today that are geographically triggered at the POS on a receipt by Catalina
Marketing or Instream Media.
Because a mobile wallet is an interactive, location-aware platform, new value-added

services can be injected into it, making it relevant at each trigger point before, during
and after payment. Each of these mobile promotional moments and interactions can be
measured across the Five Mobile Trigger Points™ for determining the revenue potential
to the mobile wallet issuer, because each of the five trigger points represents a new
customer service and merchandising touchpoint for those that pay for advertising.
The majority of ads and offers revenue is generated from Consumer Packaged Goods
(CPGs) and product manufacturers, which typically lack a known, CRM view to their
customers, and thus opens up a whole new interaction point for promotions and loyalty.
The entity who enrolls the customer for the mobile wallet is the one to control the ads
and offer revenue generated across these Five Mobile Trigger Points™; financial
nstitution versus retailer versus third-party intermediary mobile wallet. Advertising and
promotional rates are driven by viewership, context and results generated from using
the profiled, opt-in, preference-driven data across the Five Mobile Trigger Points™, with
ads and offers inventory being sold to advertisers three ways, with each increased level
of engagement/results generating higher revenues.
• Cost per thousand impressions (CPM)
• Cost per click (CPC)
• Cost per acquisition/action (CPA)

The mobile wallet can confirm product or page views/impressions and sell the
advertising inventory on a traditional CPM basis. Because the mobile wallet is
interactive, the activated offers and interactions can be sold on a CPC basis the same
way that Google, Yahoo and other Internet advertisers do today. Additionally, offers
viewed and activated in a mobile wallet can be used to prove a net new sale for a
retailer or CPG and thus command CPA promotional premiums from the advertiser in
the way that Google, Groupon and others do.
This mobile advertising and offer business represents a net new revenue stream
generated outside the financial institution’s current revenue base from CPGs, product
manufacturers and retailers. It is estimated that the revenue potential of these ads and
offers is roughly double what a typical financial institution generates in gross revenue
per year from a DDA or approximately equal to the gross revenue per credit card
account.1 For retailers, the mobile wallet platform strengthens their relationships and
bargaining power with their supplying product manufacturers, increasing both sales and
access to additional promotional dollars.
So the ROI from advertising, promotions and offers can be determined by the
projected compensation extended to the mobile wallet issuer. It is estimated that the
gross revenue potential generated by each active mobile wallet user is more than $300
per year through compensation from advertisers and brands based on CPAs, CPCs and/
or CPMs.2
New Payment Types with Alternative Clearing and Settlement Options

The mobile wallet is its own unique token with multifactor authentication unsurpassed
by any other payment type in terms of security and functionality. The platform,
especially in the case of cloud-based approaches, holds the potential for establishing
whole new payment types as well as alternative clearing and settlement networks.
The announcement by JPMorgan Chase of Chase Pay is an example of an alternative

clearing and settlement network. According to the Chase Pay press release, on the
issuing side, Chase manages a portfolio of more than 94 million credit, debit and
pre-paid card accounts and is the top issuer in terms of credit and debit payment
volume, with $707 billion in total sales in 2014. On the acquiring side, Chase
Paymentech/Merchant Services represents one of the largest Merchant Acquirer
Processors (MAPs) in the world. With issuing, acceptance and acquiring assets on both
sides of this two-party market, combined with ChaseNet’s on-us processing terms and
conditions secured by Chase in its 2013 deal with Visa, Chase Pay is able to essentially
set up a closed-loop network for processing its own on-us mobile payment transactions.
They have a complete payments system, and can work directly with merchants to drive
down the cost of accepting payments through fixed pricing and no additional fees ($0
Network Fees, $0 Merchant Processing Fees and $0 Merchant Fraud Liability). Certainly
the value proposition for Chase Paymentech has been uniquely strengthened compared
to other MAPs by offering up its online and active base of account holders - an account
1 Crone Consulting LLC Best Practices Benchmark Database™
2 UBS Report titled “Mobile Payments: Apple Has First-Mover Advantage, but Will Apple Pay Go Cloud-
Based?” November 13, 2015.

base that completes 34 million transactions a day and logs in to their digital and mobile
Chase accounts more than 16 million times each day, on average, according to Chase.
Starbucks has created an essentially new payment type in its transformation of the
traditional gift card into a mobile spending account. In doing so, Starbucks has not only
redefined its payments cost structure but supercharged customer loyalty, with more
than 20 percent of its total sales initiated through the private label prepaid debit (PLPD)
spending account inside the Starbucks app. Starbucks, acting as its own PLPD program
manager, is able to further minimize costs and outside dependencies by acting as its
own clearing and settlement network for all PLPD on-us remittances. And because
PLPD balances can only be spent at Starbucks, they have essentially implemented an
additional loyalty component as a byproduct of the mobile payment offering. The
prepaid balances held by Starbucks contribute to funding their working capital needs
without additional outside bank borrowing.
Other examples would include the Target Debit RedCard and other direct debit
initiatives by merchants, including the CurrentC mobile wallet by the Merchant
Customer Exchange (MCX) with Buy It Mobility Networks Inc. (BIM) now in pilot in
Columbus, OH. Real-time payment initiatives currently underway could potentially be
used in mobile wallets at the POS as well.
As the examples above portray, the ROI from launching new payment types with
alternative clearing and settlement options can be measured directly in lower
processing costs, greater loyalty and the value that comes from securing the data
feeds for machine learning and offers engines within the mobile payment platform.
Merchant Acceptance
The business case for mobile payments is attractive to all pursuing the space, not just
financial institutions and retailers. But for all the stakeholders in this multi-dependent
ecosystem, the most important starting point for launching a ubiquitous mobile
payment platform is merchant acceptance. Without merchant acceptance, consumers
cannot use the wallet.
The most successful mobile payment schemes to date are those launched and
controlled entirely by merchants themselves, such as Starbucks, Dunkin Donuts, and
Subway, or embedded payments options such as Uber, Lyft, Amazon, or PayPal. To
move beyond just private label merchant proprietary schemes to open ubiquitous
mobile payment platforms at the physical POS requires a financial institution or third
party playing into the self-interest of and benefits to retailers. Acceptance of a new
mobile payment option by retailers hinges on the following major considerations:
• Access to customer data to improve OMI and OMV to increase sales;
• Reducing payment processing costs;
• Enabling tender reciprocity (allowing open-loop bank-originated debit and credit

accounts inside retailer shopping apps and wallets and vice versa – supporting
retailer-sponsored private label accounts inside financial institution-branded
mobile banking apps and wallets);

• Establishing deep links for opening retailer-branded shopping apps in-context.
(Deep linking among mobile apps is similar to accessing content across the web
dynamically through hypertext markup language (HTML). For example, a deep link
would open a specific feature or function in a retailer’s mobile app, such as an
offer, directly from a mobile banking app in the same way an HTML link would
open a specific page.); and
• Required effort and changes to the POS and acceptance technology.
The persuasive argument for merchants to support a new payment type must
demonstrate how it will decrease processing costs, increase sales, and strengthen
loyalty and customer engagement. If these things add up, then the one remaining
major factor is the effort, upgrades and changes required to support a particular mobile
payment type at the point of sale. Larger retailers have a limited window in which to test
and certify changes to the physical POS as most lock down their systems in advance
of and through the holiday shopping season. The effort is further complicated by the
fact that changes impact not only the physical terminals at the POS, but also the
controllers, services, gateways and other backend operations and systems linked to or
supporting the payment processes.
Mobile Payment Deployment Models

As it pertains to physical POS-based mobile payments, there are two basic models for
facilitating the payment credentials:
• Closed hardware-based models where the credential or token stored is in the

physical hardware that is controlled by the device manufacturer, wireless carrier,
TSP, payment brand or some other proprietary entity; and
• Cloud-based deployment, which stores credentials in the cloud with open access
to the various functional elements on the phone for making the connection at the
physical POS.
Closed Hardware-Based Deployment Models and Tokenization

In the hardware-based deployment model, account credentials, such as the Primary
Account Number (PAN), cardholder name, expiration date, and security code, are
tokenized and stored in the physical hardware of the mobile device. (What information
is tokenized can vary depending on the standard used. For example, in the EMVCo
standard, only the PAN is tokenized.) Typically the information is stored in a SE or
within the SIM card of a mobile phone. Tokenized account credentials can also be
specifically designated within a proprietary secure area within a device manufacturer’s
mobile device. The phone’s internal memory card or a wrap-around phone case have
also been used to store credentials, but these methods have been transitory.
In the hardware-based model, the tokenized account credentials stored physically in

one of these areas are typically accessible through an NFC antenna embedded in the
device. This deployment model is considered closed because access to the SE, secure
area and NFC antenna are controlled and limited by the device manufacturer, wireless
carrier/mobile network operator and/or the TSP designated with provisioning tokenized
account credentials in the device. These restrictions contribute to greater security than

previously available in traditional card-based approaches. Further, many feel that the
radically decentralized provisioning of tokens on individual SEs on mobile phones is
safer than centralized control and access via cloud-based tokenization schemes.
This closed model has been favored by the device manufacturers, mobile network
operators (MNOs) and existing payment brands to launch the first set of device
manufacturer controlled and branded mobile wallets such as Apple Pay with NFC and
Samsung Pay for both NFC and Magnetic Secure Transmission (MST), with the existing
payment brands such as Visa, MasterCard, American Express and Discover.
The entity controlling the device and its hardware elements (e.g., SE, NFC antenna, etc.)
controls the branded mobile payment option. The model forces payment account
issuers (financial institutions or retailers) to establish a relationship and agree upon
business terms dictated by the entity controlling the SE and tokenization scheme. In the
case of Apple Pay, Apple extracts monopoly rents from financial institutions in the form
of interchange concessions for provisioning a financial institution’s payment accounts
within Apple Pay. Additionally, the financial institution’s payment issuing brand such
as Visa and MasterCard also extracts a toll for tokenization services required to work
with Apple Pay, among other material economic and procedural support requirements
required to participate in Apple Pay.
As a physical SE can only store a finite amount of data, dependence on this hardware
could possibly restrict the number of accounts that can be stored there. Thus, there are
limitations to the number of issuers that can participate, and the prioritization of the
types of accounts that can be activated.
Certainly the early winners that stand to gain materially from the walled garden erected
by this closed hardware approach are the device manufacturers, wireless carriers, their
designated TSPs and their sponsoring payment brands.
The device manufacturer, wireless carriers and/or payment brands’ TSPs will certainly
charge tolls to provide access for provisioning of account credentials and Application
Programming Interfaces (APIs), or refuse access for those credentials through the NFC
antenna. As such, this approach essentially locks out financial institutions, retailers and
other third parties from launching their own branded mobile wallet and embedded
payment solutions using this approach.
The closed hardware-dependent approach also increases processing costs across the
following dimensions:
• Interchange or other fees paid by the issuer directly to device manufacturer or entity
controlling the closed hardware elements on the device such as the SE, SIM, NFC
antenna, etc.;
• Tokenization fees paid to the sponsoring payment brand such as Visa and MasterCard;
• Processor fees for accounting and paying the fees to the device manufacturer;
• Cost of providing tier one customer and/or member service since Apple, Visa and
the processors are insulated contractually from this responsibility, especially for
attended CSR support to thwart higher provisioning fraud rates;

• Foregone value of the upside revenue potential from advertising and offers,
estimated to be worth about $300 per active mobile wallet user per year;
• Hardware upgrades by retailers at the physical POS to support NFC;
• Loss of Track Two customer identification data used by retailers’ CRMs and loyalty
systems as a result of tokenization; and
• Cost of losing the User Interface, tender steering and marketing platform because
of dependence on a third party controlling availability; preventing the key role of
the mobile wallet as a servicing and marketing platform, not just a wallet.
Keep in mind that the benefit to device manufacturers from this approach, and risk to
financial institutions and others, is added cost of entry, if not potential marginalization,
commoditization and disintermediation for financial institutions and retailers. Device
manufacturers controlling SEs, antennas and NFC could choose to provide secure
APIs to financial institutions in the same way they do today for access to the camera,
microphone, geo-location, TouchID, or Bluetooth. Yet their enviable control
position makes it hard to imagine they would give up that position without first
attempting to achieve critical mass for the approach that yields the highest return for
their controlled enrolled user base.
Most of the forward momentum for the NFC-installed hardware base has been driven
by existing payment brands, POS and mobile device manufacturers. But initial
deployments have been limited to using the old ISO 14443 one-way NFC standard,
which does not accommodate the value-added functions considered vital to igniting
mass adoption of mobile payments, namely access to loyalty, offers activation,
automatic redemption and net settlement at the POS as a byproduct of initiating a
mobile payment.
Open Cloud-Based Deployment Models and Tokenization

Cloud-based mobile payment options minimize the device-specific dependencies of
other models and instead rely on open, readily available access connections through
the mobile device and the physical POS. Payment credentials are stored in the cloud
not on the phone’s SE, SIM or mobile wallet application. Connections to the physical
POS are made via open protocols and APIs using the camera function with bar codes,
BLE, ultrasonic, presence detection or Host Card Emulation (HCE) in the case of NFC.
(Note that HCE still requires access to the NFC antenna, which in certain proprietary
device schemes such as Apple iOS is not made available as an open API. For Android,
NFC-enabled Android 4.4 and Blackberry 10 smartphones provide open access to the
antenna and can perform HCE.)
The payment brands currently require issuers to provision and abide by their specified
requirements for tokenization for NFC transactions via HCE to qualify for card-present
rates. But HCE technology also makes it easier to deploy other lower cost token
provisioning schemes, including performing the function in-house by the account issuer
themselves. Regardless, cloud-based schemes are far easier to integrate with multiple
disparate TSPs for different payment accounts, be they issued by financial institutions
and/or retailers.

Some cloud-based models, such as Paydiant, actually tokenize not just payment
credentials but the entire session, storing payment credentials in the cloud and
matching them to retailer transactions in the cloud, rendering tokens with no
sensitive data back to the merchant POS and the customer’s mobile app. This flow
renders the entire process out of scope for Payment Card Industry Data Security
Standard (PCI DSS), reducing vulnerability to hacking at the merchant or the consumer’s
phone, and the dependency on outside TSPs.
The flexibility of Android-based NFC and the other access methods (e.g., camera/bar
codes, BLE, ultrasonic, and presence detection) allows the mobile account issuer, be it
financial institution or retailer or third party, to potentially deploy without any business
arrangements or economic concessions to device manufacturers, wireless carriers,
payment brands and TSPs (depending on the access technology used and the
tokenization scheme deployed). Additionally, cloud-based options such as bar code
presentment and bar code reading by the mobile wallet can be deployed with a
minimum of effort by retailers, typically only requiring a software upgrade rather than
a hardware and software upgrade necessary for NFC and EMV. Bar codes and other
non-NFC access methods also can be deployed more universally across multiple
mobile operating systems and multiple purchase venues such as fine dining, quick
service restaurants (QSRs) drive thru lines, picture bill payment, pay-at-the-TV, cardless
cash access (CCA) and the like.
Cloud-based schemes also enable the mobile wallet issuer to know the identity and
preferences of all transaction stakeholders and the attributes of the transaction before
a payment instrument is selected. Cloud-based payment by its nature presumes
pre-authenticating and identifying the customer before completing a payment.
Because of this, cloud-based payments are more easily paired with loyalty, offer
activation with automatic redemption at the POS, electronic receipts and other new
value-added services.
For these reasons, the open cloud-based approaches are considered the most
promising for launching ubiquitous access for all phones, all tender types, in all
purchase venues for financial institution- and retailer-branded mobile wallets.
Mobile Purchase Venues and Access Technology

The purchase venues and access technologies within those venues must also be
considered in the evaluation of mobile wallet and payment options. The list below is an
example of the different purchase venues to be considered for a mobile wallet provider.
Multi-lane retailer Single lane merchant

Fine or casual dining (pay at table or bar) QSR drive thru
Petroleum self-service pump Vending machines
Printed advertisement prompted purchase Television prompted purchase
Online electronic commerce P2P
Pay upon delivery CCA at ATMs
Picture bill payment In-app purchase
Embedded payment (e.g., Uber, biller direct) Micro-merchant

Once again the cloud-based options utilizing the open access technologies (e.g., bar
codes, BLE, HCE, ultrasonic, and presence detection) provide the greatest potential for
consistently deploying ubiquitously across the greatest number of purchase venues.
Mobile Banking App: Platform for Mobile Wallets

and Tender Reciprocity
For many financial institutions, mobile banking usage is growing exponentially faster
than Internet banking did, and will grow to dominate the majority of service interactions
conducted between financial institutions and their customers. For this reason, the
mobile banking platform plays a prominent role in expanding the services that a
financial institution will deliver to its customers now and in the future. Payment
transactions are the most frequent and voluminous touchpoints between customers,
members and their financial institutions.3 It is for this reason financial institutions
consider mobile payment an important new product opportunity as it can be the
springboard to other new value-added mobile functionality and services. The mobile
banking app, in and of itself, is viewed as a new provisioning, issuing and servicing
platform, not only for payments and funded accounts, but many other services yet to be
developed or widely available.
The key concept to keep in mind is the mobile banking app is provisioned,
authenticated and managed by the issuing financial institution. In addition to branding,
the financial institution is the System of Record (SoR) for the KYC requirements, account
registration, authentication and CRM. Thus, the security and authentication risk factors
for provisioning a mobile wallet are greatly minimized when conducted by the financial
institution where the consumer originally opened the account in the first place.
The financial institution-branded mobile wallet should be thought of as a new access

token (replacing the magnetic stripe and chip-based card). As a new account access
token, the mobile wallet can provide POS payment and CCA at ATMs to funded
accounts that are not currently card-enabled through network-branded payment
schemes. This could include, for example, accessing and creating new payment
functionality for business, home equity and personal revolving lines of credit; money
market accounts; brokerage and mutual funds, cash-balance insurance and other
prepaid accounts. Any funded account that supports the mobile wallet API could
be used.
Chase Pay: A Case Study

Chase Pay is an excellent example of how a bank-branded mobile wallet can be used
to open the door for new clearing and settlement arrangements and tender reciprocity.
Chase Pay will provide its own mobile wallet API leveraging its own Chase Paymentech
merchant processing division relationships, enabling retailer acceptance of its API
through MCX for processing on-us debit and credit transactions. It combines this large
merchant acquiring business with its dominant card-issuing business (50 percent of all
U.S. households have a Chase-issued credit or debit card, according to Chase), to
create a new closed loop system of on-us mobile payments. But this is only the
3
Crone Consulting LLC Best Practices Benchmark Database™ and Service Interaction Analysis™

beginning for the Chase Pay API, because it could be used to access other funded and
lending accounts at Chase…and any other entity willing to support the Chase Pay
mobile payment protocols.
Just as Bank of America’s early BankAmericard franchise became the framework for
multiple financial institutions’ participation, ultimately rebranded as Visa, so too could
Chase Pay be for others that want to reach the POS for mobile payments. The most
obvious and immediate would be those servicing entities providing private label credit
card (PLCC) and PLPD and ACH debit support for retailers. Chase could use its
common acceptance platform to make sharing the acceptance of bank-based and
retailer-based tenders in each other’s respective mobile wallets possible, setting the
stage for tender reciprocity between retailers and financial institutions.
Certainly the release and promotion of bank-built mobile wallets from Chase Pay,
Capital One and Royal Bank of Canada signify the potential for other financial
institutions of issuing their own bank-branded mobile wallets. These offerings play into
the repeated independent surveys indicating that consumers overwhelmingly prefer
their primary financial institution for a mobile wallet.
For retailers, acceptance of bank-branded mobile wallets represents a new

opportunity to negotiate mutually agreeable business terms and redefine the
compensation structure and working relationship for providing not only mobile
payment but other valued-added services to retailers through the mobile connection.
The starting point for merchant and financial institution collaboration on these points
begins with gaining agreement around an open common acceptance platform for the
financial institution branded wallet, and the support for the funding accounts registered
between financial institutions and retailers, described above as tender reciprocity.
The business terms publically disclosed in the press release for Chase Pay exemplify
the new opportunity for retailers and financial institutions to redefine their working
relationship. Key to the Chase Pay offering is the open common acceptance platform
that is promoted by Chase Pay, namely the use of bar codes in a cloud-based model.
Chase Pay can be deployed using existing POS equipment with merely a software
upgrade, and facilitates the value-added services for loyalty, offer activation and
automatic redemption, support for merchant tenders, electronic receipts and the like
through its cloud-based platform. In this way, Chase can offer up the value of its 94
million card holder base as a “distribution play” for acceptance by merchants to
ncrease sales. And through its merchant acquiring processing division, Chase
Paymentech, render the payment processing support for enabling the retailers. In its
release, Chase also announced support by the largest consortium of merchants
pursuing mobile payment options, MCX.
In the case of Capital One and Royal Bank of Canada (RBC), their offerings are also
cloud-based, but limited to Android phones supporting HCE. This approach allows
Capital One and RBC to launch riding the coattails of existing NFC deployments.
However, the downside is that they do not have the ability to offer the same
functionality on Apple phones equipped with NFC, since Apple does not provide
open access to the antenna.

ACH Applications
One of the beneficiaries of the stronger authentication available today with a mobile
device and the added functionality of a mobile wallet is the ACH Network. As the
payments landscape has shifted over the past 40 years, the flexibility and adaptability
of the ACH Network have provided a platform to support innovation and growth in
electronic payments, and NACHA has adopted Rules that have enabled new uses of the
ACH Network, including P2P payments and Internet/mobile transactions.
Since 2000, the number of ACH transactions has more than tripled, and currently the
Network moves more than $41 trillion and over 24 billion electronic financial
transactions each year and supports more than 90 percent of the total value of all retail
electronic payments in the U.S. On the debit side, ACH is one of the preferred and
dominant payment types for recurring billers through automatic debit programs and
biller-direct initiated bill payments. On the credit side, ACH has grown to dominate
payroll with more than 80 percent of all paychecks deposited directly into checking
accounts by payroll processors on behalf of employers.
Fundamentally, ACH is a batch-based, negative acknowledgement system. This is

especially true for debit pull payments initiated by billers and retailers through their
financial institution or Originating Depository Financial Institution (ODFI). In the case
of debits for bill payments, POS payments, or in-app, embedded mobile or traditional
electronic commerce, a consumer authorizes the biller/merchant (Originator) to initiate
a debit that pulls funds from his or her checking or savings account. This could be set
up on a preauthorized, recurring basis, or as a one-time payment. The ODFI sends the
transaction through the ACH Network to the consumer’s financial institution (the
Receiving Depository Financial Institution or RDFI), which processes the debit against
the consumer’s account.
Credit push payments can also be used in the ACH for bill payments or P2P payments.
In this case, the consumer, through his/her financial institution, pushes a credit
transaction through the ACH Network to the biller’s/person’s financial institution (RDFI),
which processes the credit to the Receiver’s account.
With its long history and established procedures, best practices, governance and rules,
the ACH Network is well suited to extending its capabilities to mobile wallet-initiated
debits from and credits to DDAs. Recently NACHA adopted a rule to provide a new,
ubiquitous capability for moving ACH payments faster, which will enable the same-day
processing of virtually any ACH payment. This will allow ACH Originators that desire
same-day processing to send same-day ACH transactions to accounts at any consumer’s
financial institution. Currently, most ACH payments are settled on the next business day;
however, same-day processing will benefit both businesses and consumers in many
different cases, including the use of ACH in a mobile wallet.

Mobile Wallets and Same Day ACH – Benefits to Businesses and Consumers
Debit/Credit Use Case Benefits Other Considerations
Credit P2P Payment: Same Day ACH will The latest that a Same Day ACH credit can be
consumer uses a move money more initiated by the originating financial institution
mobile wallet to push quickly. This will reduce is 2:45 p.m. ET / 11:45 a.m. PT on a banking
money to another risk and provide for day. ACH credits sent after this time would
consumer. A near faster funds availability settle on the next banking day.
real-time message is for the receiving
usually sent to the consumer.
receiver outside of
the ACH Network.
Credit Bill Payment: Same Day ACH will The latest that a Same Day ACH credit can be
mobile wallet to push quickly. This will reduce is 2:45 p.m. ET / 11:45 a.m. PT on a banking
funds to a company risk, improve funds day. ACH credits sent after this time would
to pay a bill. availability for the settle on the next banking day.
biller, and help the
consumer avoid late
fees and possible
disruption of a
needed service.
Credit POS Payment: Same Day ACH will The latest that a Same Day ACH credit can be
mobile wallet to push quickly, which enables is 2:45 p.m. ET / 11:45 a.m. PT on a banking
funds to a merchant faster funds availability day. ACH credits sent after this time would
at the physical POS. for the receiving settle on the next banking day.
merchant.
A credit at the POS with immediate
confirmation gives the merchant greater surety
of payment, in that the payment cannot be
returned for insufficient funds or as
unauthorized at a later time.
This use case would require the creation of

significant new infrastructure in order for the
wallet issuer to determine the merchant’s
account credentials. In addition, there would
be potential reconciliation issues for the
merchant, and changes to the NACHA
Operating Rules might be required.

Mobile Wallets and Same Day ACH – Benefits to Businesses and Consumers
Debit/Credit Use Case Benefits Other Considerations
Debit In-app, Embedded, Same Day ACH’s The latest that a Same Day ACH credit can be
Mobile or Traditional faster processing and initiated by the originating financial institution
Electronic Commerce settlement time is 2:45 p.m. ET / 11:45 a.m. PT on a banking
Payment: consumer allows for the receipt day. ACH credits sent after this time would
uses a mobile wallet of returns sooner and settle on the next banking day.
to provide the lowers the risk for the
merchant information provider of goods and
so the merchant can services.
pull funds from the
consumer to make a
payment.
Debit Bill Payment: Same Day ACH will The latest that a Same Day ACH credit can be
mobile wallet to quickly and will help is 2:45 p.m. ET / 11:45 a.m. PT on a banking
provide the biller the consumer avoid day. ACH credits sent after this time would
information so that late fees and possible settle on the next banking day.
the biller can pull disruption of a needed
funds from the service. The faster
consumer to make processing and
a payment. settlement time also
allows for the receipt
of returns sooner and
lowers the risk for the
merchant.
Debit POS Payment: The faster processing The latest that a Same Day ACH credit can be
consumer uses a and settlement time initiated by the originating financial institution
mobile wallet to allows for the is 2:45 p.m. ET / 11:45 a.m. PT on a banking
provide the receipt of returns day. ACH credits sent after this time would
merchant information sooner and lowers the settle on the next banking day.
so the merchant can risk for the merchant.
pull funds from the
consumer to make a
payment.
The lower, fixed-fee pricing schedules associated with ACH have typically outweighed
the settlement risk concerns in the processing venues in which ACH has grown to
dominate, such as recurring payments. In addition, the pre-authenticated and ongoing
relationship that the consumer has with the Originator has limited or mitigated some of
the clearing and settlement risk factors associated with ACH processing. At the point
of sale, processors have stepped in to provide account validation and transaction
guarantee services (e.g., eliminating the settlement risk of a negative acknowledgement
batch-based system) and as such can put ACH on nearly equal footing as other online,
real-time transaction-based services from the major payment brands.
There are some innovative platforms, such as Buy It Mobility Networks (BIM), which
provide solutions to mitigate prior limitations for consumers’ and merchants’ use of the
ACH in a mobile wallet at the POS. BIM, for example, offers guaranteed ACH
transactions at the POS and authenticates and validates the DDA and routing and
transit numbers for instant provisioning. In the past, the cost of these services have
typically eroded the fixed-fee cost advantage of ACH; however, with real-time account
information becoming available, and stronger authentication made possible by the
mobile device, it is likely that a different guarantee model will continue to emerge,
with a cost that is lower than current services.
Currently, ACH transactions result in a lower unauthorized return rate than credit cards
and signature debit cards, and less than three of every 10,000 ACH debits are returned
by consumers claiming they are unauthorized. One can make the case that multifactor
authentication, access to federated identification, and other features inside a mobile
wallet, issued and provisioned by a reliable entity, combined with guarantee services
could contribute materially to reducing the risk and increasing the functionality of ACH
in more vulnerable transaction-based use cases and venues such as the physical POS,
in-app mobile and electronic commerce purchases and P2P payments.
The starting point for leveraging ACH in a mobile wallet is streamlining the registration
and activation by reliable and trusted entities while also improving the integrity of the
process to limit the risk of provisioning and transaction processing fraud. A mobile
wallet establishes a pre-authenticated, validated and ongoing relationship between
the wallet issuer and the consumer in similar fashion as an ACH debit might with a
recurring biller. Registering ACH payment options within a mobile wallet happens in
advance of payment and allows time for validation of the DDA credentials, as well as
authentication of the account holder.
To help those building out these capabilities, it may be beneficial to have NACHA
establish some sort of indicator for mobile wallet-provisioned and processed payments.
By providing this new ACH indicator, both NACHA and industry stakeholders can
develop a new set of metrics for measuring the added benefits of ACH-provisioned
mobile wallets. Additionally, there is an opportunity to establish an ACH tokenization
scheme that is compatible with the existing or predominantly used tokenization scheme
for credit and debit cards in order to simplify retailers’ payment processing.
MCX CurrentC: A Case Study

Extending the ACH payment type, with its biller/retailer favorable business terms such
as fixed fee processing costs, to the physical POS through mobile payments is what
attracted the MCX to initially form and launch its mobile payment platform.
MCX, through its CurrentC mobile wallet, simplified the registration process for its
ACH-based debit option by utilizing BIM to eliminate delays involved in some other
methods of account validation. BIM leverages online banking registration to
authenticate and validate the DDA account and routing and transit numbers, for
provisioning instantly the mobile payment option. Additional means of consumer
enrollment/verification are expected to be rolled out over time.
With the MCX CurrentC platform, the debit option becomes an embedded payment
button, similar to PayPal or a biller-direct bill payment. It can also be subsumed into
the purchase process as a buy button by the provisioning entity for in-app, mobile and
traditional electronic commerce purchases.
The faster payment processing initiatives already underway for ACH, combined with
account validation and transaction guarantee services, makes the MCX direct debit
option rival the ease and functionality of PIN and signature debit options from the
major branded payment networks at a much lower cost for retailers.
This process can greatly expand the funding sources available to the mobile wallet,
using the ACH framework as the foundation for providing POS payment utilizing other
funded accounts, not just checking accounts.
Merchant and Financial Institution Collaboration

As mentioned previously, building a bridge between merchants and financial
institutions for the acceptance of bank-branded mobile wallets with tender reciprocity
will require addressing the common ground between them. To establish the common
ground required between financial institutions and retailers in any of these scenarios,
existing stakeholders will need to update their thinking, and define, or in some cases
redefine, existing business terms for such items as:
• Determining if card present or card not present interchange rates are appropriate
for mobile wallet payments;
• Data rights and responsibilities: who owns or sees the customer data and what
responsibilities do those entities have;
• Incorporation of activation, automatic redemption and net settlement of offers;
• Storage Keeping Unit (SKU) purchase confirmation and guidelines for cost
allocation and revenue sharing;
• The use of deep links for opening the customer’s preferred app to enhance the
shopping experience and complete the payment; and
• Determining the importance of a consistent User Experience (UX) at the POS,

in-app, or via buy buttons.
For example, the open cloud-based options hold the most promise, but require the
recognition by the existing payment networks that the safety, security and multifactor
authentication applied to these payment options, if they rival or enhance the security
provided by their own tokenization schemes, would indeed qualify for card-present
debit and credit processing rates by the major networks.
As we reviewed above, current tokenization schemes make it nearly impossible for

retailers to identify their customers, so the sharing of opt-in customer data and/or loyalty
integration is an important component of having retailers accept bank-branded wallets.
Incorporating the activation, automatic redemption and net settlement of pre-activated

offers is important functionality to both retailers and financial institutions, regardless of
which mobile wallet the consumer ultimately utilizes for payment.
And finally, creating an open pathway and integrated deep links for opening each
respective entity’s own branded mobile application, be it a retailer’s shopping app or
a financial institution’s mobile banking app, is vital to respecting the consumer’s desire

and the respective stakeholders’ opportunity to best serve their respective and mutual
customers.
It is the acknowledgement of these basic terms in any mobile payment platform that
establishes the foundation for defining the best practices for accepting bank-branded
mobile wallets with tender reciprocity.
Conclusion
Like Internet access and personal computer wars of the past, mobile wallets are subject
to the classic “open versus closed” system arguments. Hardware makers will favor the
closed approach, which gives them end to end control of the process and user
experience. Ultimately, both the open and closed models have their pros, cons, risks
and costs; but until hardware manufacturers provide open, full access to proprietary
hardware-based methods of storing account credentials and accessing the physical
POS, cloud-based approaches can be used to launch wallets with ubiquitous access for
all phones, all tender types, in all purchase venues.
Because the mobile wallet does more than just facilitate payment, both retailers and
financial institutions have a vital interest in providing mobile payment as a part of their
shopping or banking app experience. While the most successful mobile payment
systems so far are those launched and controlled entirely by merchants, to achieve open
ubiquitous mobile payment platforms at the physical POS will require moving beyond
these private label merchant proprietary systems. Financial institution mobile wallet
solutions will need to gain the acceptance of retailers by providing them the benefits
they require, including tender reciprocity and the ability to leverage different account
options at the POS such as ACH. This will also give consumers the flexibility to use any
payment type they wish: open-loop, financial institution-issued debit and credit
accounts, general purpose reloadable (GPR) prepaid debit accounts, private label,
merchant-issued credit, pre-paid or stored value account, direct debit accounts and
loyalty/reward points – which will be essential to mass adoption.
The Alliance believes that there will not be one wallet that “wins.” Instead consumers
will utilize multiple payment apps or wallets, especially if they are bundled with the
essential customer service, information, discounts and other functionality they already
seek from their primary financial institution and favorite retailers. Indeed, there may
be as many mobile payment apps as there are providers with compelling content.
However, while it is likely that retailers and financial institutions will create their own
mobile wallet solutions, to truly remove the friction from the POS and achieve
widespread adoption, retailers and financial institutions will need to work together to
achieve interoperability.
Ultimately, the “safe bet” for any financial institution, retailer or Third-Party Service
Provider will always be that which reinforces their customer relationships, their
accounts, their brand and their own app. This white paper seeks to illustrate the
benefits of each approach, and provide a blueprint for retailers and financial institutions
to work together for their mutual benefit, empowering both financial institution- and
retailer-branded mobile wallets with tender reciprocity for all payment types, using a
common, open acceptance technology.

Acronym Glossary
API - Application Programming Interfaces
BLE - Bluetooth Low Energy
CCA - Cardless Cash Access
CPA – Cost Per Acquisition/Action
CPC - Cost Per Click
CPG - Consumer Packaged Goods
CPM - Cost Per Thousand Impressions
CRM - Customer Relationship Management
DDA - Demand Deposit Account
ERP - Enterprise Resource Planning
GMV - Gross Merchandise Value
GPR - General Purpose Reloadable
HTML - Hypertext Markup Language
ICCID - Integrated Circuit Card Identifier
IMETI - International Manufacturer Equipment Identifier
KYC - Know Your Customer
MAP - Merchant Acquirer Processors
MCX - Merchant Customer Exchange
MDES - MasterCard Digital Enablement Service
MNO - Mobile Network Operators
MST - Magnetic Secure Transmission
NFC - Near-Field Communication
OMI - One More Item

OMV - One More Visit
P2P - Person to Person
PAN - Primary Account Number
PCI DSS - Payment Card Industry Data Security Standard
PIN - Personal Identification Number
PLCC - Private Label Credit Card
PLPD - Private Label Prepaid Debit
POS - Point of Sale
POV - Point of View
QSR - Quick Service Restaurants
ROI - Return on Investment
SE - Secure Element
SIM - Subscriber Identity Module
SKU - Storage Keeping Unit
TSP - Token Service Provider
UDID - Universal Device Identification
UI - User Interface
UX - User Experience


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THE WINNING MOBILE

About the Payments Innovation Alliance Mobile Wallet Team

About the Payments Innovation Alliance

2 © 2016 NACHA – The Electronic Payments Association.

Access Softek, Inc. Fiserv

© 2016 NACHA – The Electronic Payments Association. 3

The mobile wallet is a consumer-facing application for managing payment types,

Mobile wallet functionality can be rendered as a standalone payments app such as

The marketing platform potential is game-changing and disruptive to traditional forms

Acquiring Stakeholders Issuing Stakeholders

© 2016 NACHA – The Electronic Payments Association. 5

Mobile Wallet Business Case

Processing, Acquiring and Cost Efficiencies Mobile Wallet Issuing Upside

6 © 2016 NACHA – The Electronic Payments Association.

Payment Account Aggregation

GMV Regardless Of Tender Type Used

© 2016 NACHA – The Electronic Payments Association. 7

Greater Security, Multifactor Authentication and Reduced Fraud

8 © 2016 NACHA – The Electronic Payments Association.

It is the combination and utilization of these multiple factors of authentication in a

CRM and Loyalty Platform

© 2016 NACHA – The Electronic Payments Association. 9

1. Discovery, locating and navigating

10 © 2016 NACHA – The Electronic Payments Association.

1. Discovery, locating and navigating – Discovery is one of the game-changing aspects

2. Presence detection, check-in & data-driven personalized offers – If customers use

3. In-store enhanced self-service – When a customer needs help or more information

© 2016 NACHA – The Electronic Payments Association. 11

In-Context Data Feeds with Machine Learning and Artificial Intelligence

12 © 2016 NACHA – The Electronic Payments Association.

Data-Driven Customized, Opt-In Advertising, Promotion and Offers

Because a mobile wallet is an interactive, location-aware platform, new value-added

• Cost per thousand impressions (CPM)

• Cost per click (CPC)

• Cost per acquisition/action (CPA)

© 2016 NACHA – The Electronic Payments Association. 13

New Payment Types with Alternative Clearing and Settlement Options

The announcement by JPMorgan Chase of Chase Pay is an example of an alternative

1 Crone Consulting LLC Best Practices Benchmark Database™

14 © 2016 NACHA – The Electronic Payments Association.

• Access to customer data to improve OMI and OMV to increase sales;

• Reducing payment processing costs;

• Enabling tender reciprocity (allowing open-loop bank-originated debit and credit

© 2016 NACHA – The Electronic Payments Association. 15

• Required effort and changes to the POS and acceptance technology.

Mobile Payment Deployment Models

• Closed hardware-based models where the credential or token stored is in the

Closed Hardware-Based Deployment Models and Tokenization

In the hardware-based model, the tokenized account credentials stored physically in

16 © 2016 NACHA – The Electronic Payments Association.

© 2016 NACHA – The Electronic Payments Association. 17

• Hardware upgrades by retailers at the physical POS to support NFC;

Open Cloud-Based Deployment Models and Tokenization

18 © 2016 NACHA – The Electronic Payments Association.

Mobile Purchase Venues and Access Technology

Multi-lane retailer Single lane merchant

© 2016 NACHA – The Electronic Payments Association. 19

Mobile Banking App: Platform for Mobile Wallets

The financial institution-branded mobile wallet should be thought of as a new access

Chase Pay: A Case Study

20 © 2016 NACHA – The Electronic Payments Association.

For retailers, acceptance of bank-branded mobile wallets represents a new

2 © 2016 NACHA – The Electronic Payments Association.

© 2016 NACHA – The Electronic Payments Association. 3

© 2016 NACHA – The Electronic Payments Association. 5

6 © 2016 NACHA – The Electronic Payments Association.

© 2016 NACHA – The Electronic Payments Association. 7

8 © 2016 NACHA – The Electronic Payments Association.

© 2016 NACHA – The Electronic Payments Association. 9

10 © 2016 NACHA – The Electronic Payments Association.

1. Discovery, locating and navigating – Discovery is one of the game-changing aspects

2. Presence detection, check-in & data-driven personalized offers – If customers use

3. In-store enhanced self-service – When a customer needs help or more information

© 2016 NACHA – The Electronic Payments Association. 11

12 © 2016 NACHA – The Electronic Payments Association.

© 2016 NACHA – The Electronic Payments Association. 13

14 © 2016 NACHA – The Electronic Payments Association.

• Reducing payment processing costs;

• Enabling tender reciprocity (allowing open-loop bank-originated debit and credit

© 2016 NACHA – The Electronic Payments Association. 15

• Closed hardware-based models where the credential or token stored is in the

16 © 2016 NACHA – The Electronic Payments Association.

© 2016 NACHA – The Electronic Payments Association. 17

• Hardware upgrades by retailers at the physical POS to support NFC;

18 © 2016 NACHA – The Electronic Payments Association.

© 2016 NACHA – The Electronic Payments Association. 19

20 © 2016 NACHA – The Electronic Payments Association.

© 2016 NACHA – The Electronic Payments Association. 21

22 © 2016 NACHA – The Electronic Payments Association.

© 2016 NACHA – The Electronic Payments Association. 23

• Incorporation of activation, automatic redemption and net settlement of offers;

• Determining the importance of a consistent User Experience (UX) at the POS,

26 © 2016 NACHA – The Electronic Payments Association.

© 2016 NACHA – The Electronic Payments Association. 27

28 © 2016 NACHA – The Electronic Payments Association.

© 2016 NACHA – The Electronic Payments Association. 29