DIGITAL TECHNOLOGY An Evolution in the Payment Landscape. AMEX Digital Solutions

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1 DIGITAL TECHNOLOGY An Evolution in the Payment Landscape AMEX Digital Solutions

2 The Anatomy of Digital Payments Integration with leading digital wallet platforms such as Apple Pay, Android Pay and Samsung Pay makes paying simple and convenient. NFC/Contactless terminals at point-of-sale optimize transactions for both the consumer and the merchant. HCE is an additional option for issuers to deploy mobile wallets. With the addition of token services, digital wallets are even more secure.

3 A Closer Look at Digital Payments: NFC Hardware (Secure Element) & Software (Host Card Emulation) Traditional Secure Element (SE) Architecture Payment App Consumer selects an active card (tokenized account). Account Data Stored on a secure cloud server. Host Card Emulation (HCE) Architecture When making a transaction, communication between the owner of the secure element and the issuer is required. Account Data Stored on device hardware or on a SIM card. NFC Controller Payment App Obtains the tokenized account data from the secure cloud. NFC Controller A secure cloud server is used to store customer account data, which is transmitted to the NFC mobile device at pointof-sale. Transmits the payment information to the contactless point-of-sale terminal. Transmits the payment information to the contactless point-of-sale terminal. Contactless Payment Terminal Contactless Payment Terminal Needs to be upgraded with the NFC specifications to accept mobile payments. Needs to be upgraded with the NFC specifications to accept mobile payments.

4 A Closer Look at Digital Payments: NFC Hardware (Secure Element) & Software (Host Card Emulation) A Trusted Service Manager (TSM) acts as a neutral broker to securely share Account Data between the Issuer and the owner of the Secure Element. Issuer TSM Network Mobile Network Operator Acquirer Acquirer Network Remote Server Issuer HCE connects the mobile device directly with the Issuer s servers to transfer Account Data securely with cryptographic keys.

5 Over the Next Few Years, the Number of Transactions and Revenue From Digital Payments Are Projected to Grow $1T+ $11.2Bn $450Bn $660Bn $1.7T $1.8Bn Worldwide mobile payment revenue 1 Total active wallet transaction global volume will double in the next 5 years 2 Forecasted global NFC mobile payment transactions over the next 5 years 3 1 The worldwide mobile payment revenue was $450Bn in 2015 and is expected to surpass 1Trillion in The expectation to have active wallets in these handsets is also high, growing from 19.9% in 2015 to 32.7% in 2020 and the total transaction volumes growing from $ 660Bn in 2015 to $1.7T in The forecasted volume of NFC mobile retail payment transaction volume is expected to grow from 1.8Bn in 2015 to 11.2Bn by

6 More Consumers Adopt NFC Enabled Smartphones 32.7 % of people globally will expect to have active wallets in their handsets by By 2017, more than 50% of global mobile handsets will be smartphones 6 30% of global, total mobile wallet users will have NFC enabled handsets by Although the growth of mobile handsets globally is slight, as most markets, especially developed, are saturated with mobile handset penetration, going from 6.3Bn in 2015 to 7.2Bn in 2020, the shift to smartphones is high, expecting to grow from 34% in 2015 to more than 50% in The number of NFC enabled handsets will increase from 148M to +665M by 2020 (approx 30% of total mobile wallet users). 8 The expectation to have active wallets in these handsets is also high, growing from 19.9% in 2015 to 32.7% in 2020 and the total transaction volumes growing from $ 660Bn in 2015 to $1.7T in

7 Consumers Will Be Able to Access Digital Payment Solutions at an Increasing Number of Locations 14M 33 % NFC-ready POS terminals to be shipped globally by Nearly a third of all US retail establishments will be accepting NFC mobile payments by Global shipment of NFC-ready POS terminals are forecasted to grow from 3.9M (2012) to 14M (2017) and to represent 66% of the total POS base by smartphones-the-ultimate-shopping-companion.html; 5 It is forecast that nearly a third of all US retail establishments will be accepting NFC mobile payments by (source:

8 1 The worldwide mobile payment revenue was $450Bn in 2015 and is expected to surpass 1Trillion in The expectation to have active wallets in these handsets is also high, growing from 19.9% in 2015 to 32.7% in 2020 and the total transaction volumes growing from $ 660Bn in 2015 to $1.7T in researchstore/commerce-fintech/mobile-wallets 3 The forecasted volume of NFC mobile retail payment transaction volume is expected to grow from 1.8Bn in 2015 to 11.2Bn by Global shipment of NFC-ready POS terminals are forecasted to grow from 3.9M (2012) to 14M (2017) and to represent 66% of the total POS base by It is forecast that nearly a third of all US retail establishments will be accepting NFC mobile payments by (source: 6 Although the growth of mobile handsets globally is slight, as most markets, especially developed, are saturated with mobile handset penetration, going from 6.3Bn in 2015 to 7.2Bn in 2020, the shift to smartphones is high, expecting to grow from 34% in 2015 to more than 50% in mobile-wallets 7 The number of NFC enabled handsets will increase from 148M to +665M by 2020 (approx 30% of total mobile wallet users). nfc-mobile-payments;-handsets-wearables 8 The expectation to have active wallets in these handsets is also high, growing from 19.9% in 2015 to 32.7% in 2020 and the total transaction volumes growing from $ 660Bn in 2015 to $1.7T in researchstore/commerce-fintech/mobile-wallets