Mobilesurvey 2012

Mobile Survey 2012

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Kount The Fraud Practice CardNotPresent.com

Š 2013 Kount. All rights reserved. Do not copy, reproduce, or duplicate without written permission. Please email requests to: don.bush@kount.com.

Mobile Survey 2012

presented by Kount | The Fraud Practice | CardNotPresent.com

EXECUTIVE SUMMARY

3

SURVEY RESPONDENTS

6

Merchants

7

Non-Merchants

10

MOBILE IN E-COMMERCE

15

Support for the Mobile Channel

15

Importance of Mobile to Growth Plans

18

Importance of Detecting Mobile Devices

20

CRITICAL ASPECTS OF MOBILE E-COMMERCE

23

How the Mobile Channel Adds Value

23

Resources Employed to Enable Mobile E-Commerce

26

Preferred Forms of Payment for Mobile Transactions

28

Key Geographic Regions for Mobile Effort

30

Obstacles to Adoption of Mobile E-Commerce

31

Fraud Risk in the Mobile Channel

34

Fraud Tools for Mobile E-Commerce

36

Ability to Detect Mobile Devices in Transactions

42

MOBILE E-COMMERCE - TODAY AND TOMORROW

44

Revenue from the Mobile Sales Channel

44

Support for Mobile OS Platforms

49

Mobile Capabilities and Infrastructure

51

Tools Deployed to Combat Mobile Fraud

56

CONCLUSION

61

ABOUT THE SPONSORS

62

2

Mobile Survey 2012

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3

Executive Summary Many merchants and merchant services businesses have big plans and expectations for mobile, but it is a relatively small portion of most companies’ overall revenues today. More than half of all merchants and merchant services businesses estimate that less than 5% of their business comes from the mobile sales channel today, and 88% of respondents estimate that the mobile sales channel represents 20% or less of their business. However, these businesses expect mobile to account for a more sizeable share of their revenues soon.

Nearly nine out of 10 respondents believe that more than 5% of their business will come from the mobile sales channel within two years. By that time, almost a third of businesses estimate that 10-20% of their sales will come through the mobile channel.

29% of businesses estimate that 10-20% of their sales will come through the mobile channel by 2014

When looking at current and future estimated sales, smaller merchants expect more growth in the mobile channel. Nearly half of merchants with annual revenues less than $5 million and 57% of merchants with annual revenues greater than $50 million currently have less than 5% of their business coming through the mobile channel. In two years, however, 89% of the smallest merchant group expects the mobile channel to comprise more than 5% of their business, compared to only 20% of merchants with annual revenues greater than $50 million per year. While large merchants expect mobile to grow as a percentage of their annual business, they predict a gradual increase. Most expect to have just 10 to 20% of their business coming through the mobile channel two years from now.

Also, smaller merchants are almost as likely to have a mobile app for online shopping and are more likely to currently support mobile payments than merchants with annual revenues greater than $50 million. Around 70% of all merchants in the Apparel/Accessories, Books/ Music/Video, Home Improvement, Sporting Goods, and Digital Goods sectors already have a dedicated mobile website. Planned support for mobile payment methods also varies quite a bit by retail segment. More than half of merchants from industries such as Food/Drug and Gaming plan to support mobile payments for 2013 while fewer than a third of merchants in the Home Improvement, Toys/Hobbies, and Office Supplies sectors plan to support mobile payments for 2013.

The market segment in which a merchant operates has a strong impact on expectations for mobile. Currently, only two industries reported having more than half of their business coming through the mobile channel: Food/Drug and Specialty Non-Apparel. However, nearly half of the merchants in these areas did 5% or less of their business through the mobile channel.

Some of the retail segments expecting the biggest growth with mobile are Jewelry, Digital Goods, and Gaming where merchants expect to have at least 5% of their business come through the mobile channel.

Merchants of all sizes think that making it easier for consumers to transact is the most important factor in growing mobile adoption. While all merchants tend to be less concerned with managing fraud risk in the mobile channel, larger merchants are far less likely to view this as the biggest obstacle to mobile adoption growth. Less than 2% of the largest merchants surveyed think managing fraud risk is the biggest obstacle, compared to 20% of merchants with annual revenues between $10 and $25 million, 15% of merchants with annual revenues between $5 and $10 million, and 11% of merchants with less than $5 million in annual revenue.

Mobile Survey 2012

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Also, different retail sectors tend to perceive different obstacles to mobile adoption. Industries such as Apparel/Accessories, Books/Music/Video, Hardware/Home Improvement, Health & Beauty, Sporting Goods, and Gaming are most focused on making it easier for consumers to transact. The Computers/Electronics, Office Supplies, and Toys/Hobbies verticals are most focused on addressing consumer concerns about mobile security.

Merchants and merchant services business already are using a wide variety of tools and services for preventing mobile fraud. Overall, 32% of respondents have implemented ID authentication and secure mobile payment methods, 29% are using rules and 23% use AVS (Address Verification Service). In the aggregate, we see merchants are using virtually all of the fraud tools currently available. However, only 11% of merchants are using device identification for mobile fraud prevention, compared to 45% of service providers, 40% of card issuers, and half of the acquirers and card associations. The most common tools used by merchants today are AVS—which does not provide a very strong signal for fraud when used by itself—and secure mobile payment methods.

The size of a merchant and the vertical market in which the merchant operates affect which tools it uses currently and which tools it plans to add in the coming year. For example, only 17% of smaller merchants (annual revenue less than $5 million) are currently using a complete fraud platform, compared to more than a quarter of merchants with annual revenues greater than $50 million. A complete fraud platform, however, is the tool that smaller merchants plan to add in 2013. In addition, smaller merchants are also less likely to use fraud scoring and device ID today, and only 6% plan to add fraud scoring and just 13% plan to add device ID. On the other hand, 14% of the largest merchants are already using device ID today for mobile fraud prevention and 22% plan to add it this year.

Merchants think that making transactions easier is key to growing mobile e-commerce

At present, 55% of merchants cannot detect whether or not a transaction originates from a mobile device. This holds true across nearly all segments. In fact, more than two-thirds of merchants in the following retail segments are not able to detect if a transaction originates from a mobile device: Computers/Electronics, Specialty Non-Apparel, Books/Music/Video, Toys/Hobbies, Office Supplies, Digital Goods, Gaming, and Travel (this inability is particularly surprising for segments such as Digital Goods and Gaming). Merchants in Hardware/Home Improvement, Housewares/Home Furnishings, and Sporting Goods are more likely to be able to tell if a transaction is coming from a mobile device.

Even though more than half of merchants are not able to detect transactions initiated from mobile devices, nearly 60% believe it’s “important” or “very important” to have this capability; and just 4% of merchants describe it as “not very important.” What’s more, of the 45% of merchants who are able to detect if a transaction originates from a mobile device, just 16% are able to identify from which type of mobile device the transaction is coming, i.e., smartphone, tablet, or gaming system.

Merchant opinions regarding the best tools for fighting mobile fraud vary by merchant size.

Only 3% of the largest merchants (annual revenues greater than $50 million) think AVS is one of the top three tools for preventing fraud on mobile devices, while 10% or more of most other merchant groups rank AVS in the top three. In addition, large merchants are least

Mobile Survey 2012

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5

likely to choose mobile geolocation as one of the top three mobile fraud prevention tools.

Instead, they are more likely to view velocity checks and NFC (Near Field Communications) as important tools, more so than small or midsize businesses.

A merchant’s vertical segment also affects how it evaluates various mobile fraud prevention tools. Merchants selling Digital Goods, Office Supplies, Books/Music/Video or Health and Beauty Goods, and Services online are the most likely to rank device identification as one of the top three tools for preventing fraud on mobile devices. Merchants in the Apparel/ Accessories, Specialty Non-Apparel, Toys/Hobbies, and Flowers/Gifts verticals are the most likely to rank fraud scoring in their top three tools. While mobile geolocation was not often listed as a top three tool by merchants, industries that favored this tool most were Direct Response, Financial Services, Jewelry, Housewares/Home Furnishings, Gaming, and Electronics.

Overall, a majority of merchants believe mobile is no riskier than standard e-commerce. This finding holds true, regardless of market segment, although merchant size does impact their assessment of risk somewhat. For example, a small percentage of merchants with annual revenues below $10 million believe mobile is “less risky” than standard e-commerce (no midsize merchants consider it “less risky”). Larger merchants are less likely to consider mobile “far riskier” than small/mid-size merchants, although nearly one-third of the largest merchants ($50 million+ in annual revenue) do rank mobile as “somewhat riskier.”

42% of merchants believe mobile e-commerce is riskier than standard e-commerce

Merchants’ perspectives on what form of payment—credit card, PayPal, debit card, etc.— consumers prefer to use on their mobile devices vary by the types of goods and services that the merchants sell. For example, merchants in the Home Improvement/Hardware, Health/ Beauty, Direct Response, and Sporting Goods segments emphasize PayPal, with more than a quarter of these merchants ranking PayPal as the preferred payment form for mobile devices.

Merchants, and service providers have different opinions on which mobile features— convenience, conversion, loyalty or opportunity—are most important for adding value to their business. Overall, opportunity was considered “most important,” however, size of business affected opinions. For instance, nearly one-third of businesses with annual revenues of less than $5 million find conversion “most important” for adding value, second only to opportunity at 35%, while 42% of large companies consider convenience “least important” and 40% rank opportunity as “most important.”

About one-fifth of the merchants surveyed believe that mobile is “not very important” to growth in 2013, although this varies slightly by merchant size. Four in 10 merchants with annual revenues greater than $50 million or between $10 and $25 million think mobile is “very important” to their 2013 growth plans, compared to one-third of merchants with annual revenues of less than $5 million, and 31% of merchants with annual revenues between $5 and $10 million. It’s noteworthy that among merchants with revenues from $25 to $50 million, just 20% consider mobile “very important” to growth. Not surprisingly, these same merchants were most likely to find mobile strategies “not very important” to their 2013 growth plans (30%). Merchants with $5 to $10 million annual revenues were next most likely to consider mobile strategies “not very important” at 23%.

Mobile Survey 2012

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Survey Respondents The 2012 Mobile Payment & Fraud Survey asked 405 fraud and payment industry professionals the most pertinent questions about how they perceive the growth potential and risks for the mobile channel. Survey respondents represented different types of CNP and mobile businesses including merchants, service providers, acquirers, card issuers and card associations.

Industries surveyed

Merchant

5.2% 3.0% 1.5%

Service Provider Card Issuer

55.1%

Acquirer Card Association

35.3%

Survey respondents represented businesses of all sizes, with 36% coming from businesses with less than $5 million in annual revenue and 33% coming from enterprises with more than $50 million in annual revenue.

Annual revenue of respondents

Less than $5 million

32.8%

$5 million - $10 million

36.4%

$10 million - $25 million $25 million - $50 million More than $50 million

8.5%

Annual revenue Less than $5MM $5MM - $10MM $10MM - $25MM $25MM - $50MM More than $50MM

11.7%

10.5%

Acquirer

Card Association

Card Issuer

Merchant

Service Provider

14.3% 0% 0% 14.3% 71.4%

0% 0% 0% 0% 100%

7.7% 23.1% 7.7% 23.1% 38.5%

41.0% 8.3% 9.6% 6.4% 34.6%

34.8% 14.5% 18.8% 10.1% 21.7%

Mobile Survey 2012

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Merchants Merchants with annual revenue of less than $5 million and over $50 million accounted for the majority (75%) of merchant participants.

Annual revenue (merchants)

Less than $5 million

41.0%

34.6%

$5 million - $10 million $10 million - $25 million $25 million - $50 million More than $50 million

6.4%

9.6%

8.3%

Merchants participating in the survey sell a wide variety of goods and services online: Type of goods/services sold online Apparel/Accessories

30.8%

Housewares/Home Furnishings

16.7%

Food/Drug

16.0%

Books/Music/Video

14.7%

Hardware/Home Improvement

14.1%

Health/Beauty

14.1%

Specialty/Non-Apparel

14.1%

Toys/Hobbies

14.1%

Computer/Electronics

13.5%

Jewelry

13.5%

Sporting Goods

12.2%

Office Supplies

10.9%

Digital Goods

8.3%

Flowers/Gifts

8.3%

Gaming

6.4%

Other Services

3.2%

Travel

3.2%

Financial Service

2.6%

Mass Merchant

2.6%

Insurance

1.9%

Telecom

1.9%

Direct Response

1.9%

8

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Mobile Survey 2012

The merchant respondents provide a representative sample of annual revenue and types of goods and services sold online. For example, 44% of merchants that sell Apparel/ Accessories online have more than $50 million in annual revenue while 27% have annual revenues of less than $5 million and 30% have revenues between $5 and $50 million.

Goods/services Apparel/Accessories Housewares/Home Furn Food/Drug Books/Music/Video Hardware/Home Improve Health/Beauty Specialty/Non-Apparel Toys/Hobbies Computer/Electronics Jewelry Sporting Goods Office Supplies Digital Goods Flowers/Gifts Gaming Other Services Travel Financial Service Mass Merchant Insurance Telecom Direct Response

<$5MM

$5-10MM

$10-25MM

$25-50MM

>$50MM

27.1% 34.6% 44.0% 27.3% 27.3% 27.3% 27.3% 31.8% 28.6% 19.0% 15.8% 52.9% 7.7% 23.1% 10.0% 60.0% 0% 0% 25.0% 0% 0% 0%

10.4% 11.5% 4.0% 18.2% 9.1% 18.2% 9.1% 9.1% 14.3% 9.5% 10.5% 11.8% 30.8% 7.7% 20.0% 0% 20.0% 25.0% 25.0% 33.3% 33.3% 50.0%

12.5% 7.7% 0% 4.5% 18.2% 0% 13.6% 4.5% 4.8% 14.3% 10.5% 5.9% 7.7% 7.7% 10.% 20.0% 20.0% 0% 0% 0% 0% 0%

6.3% 3.8% 12.0% 4.5% 0% 4.5% 9.1% 4.5% 0% 14.3% 0% 0% 7.7% 0% 0% 0% 0% 0% 0% 0% 0% 0%

43.8% 42.3% 40.0% 45.5% 45.5% 50.0% 40.9% 50.0% 52.4% 42.9% 63.2% 29.4% 46.2% 61.5% 60.0% 20.0% 60.0% 75.0% 50.0% 66.7% 66.7% 50.0%

Most merchants represented in the survey have been selling online for five or more years, but about 10% of merchants have less than one-year experience selling goods or services online.

Years experience selling online

Less than 1 year

10.3%

1-2 years

13.5%

3-4 years 5 or more years

64.1%

12.2%

Mobile Survey 2012

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The data regarding length of time in selling online was further segmented by types of goods and services sold. For example, the table below shows that 83% of merchant respondents selling Apparel/Accessories have more than 5 five yearsâ&#x20AC;&#x2122; experience selling online.

Years selling online

< 1 yr

1-2 yrs

3-4 yrs

> 5 yrs

Apparel/Accessories Housewares/Home Furn Food/Drug Books/Music/Video Hardware/Home Improve Health/Beauty Specialty/Non-Apparel Toys/Hobbies Computer/Electronics Jewelry Sporting Goods Office Supplies Digital Goods Flowers/Gifts Gaming Other Services Travel Financial Service Mass Merchant Insurance Telecom Direct Response

4.2% 7.7% 16.0% 0% 4.5% 4.5% 4.5%

6.3% 11.5% 16.0% 13.6% 4.5% 18.2% 0%

6.3% 11.5% 4.0% 9.1% 22.7% 18.2% 0%

83.3% 69.2% 64.0% 77.3% 68.2% 59.1% 95.5%

4.5% 9.5% 0% 5.3% 5.9% 0% 0% 10.0% 40.0% 0% 0% 0% 0% 0% 0%

9.1% 14.3% 4.8% 5.3% 17.6% 23.1% 7.7% 10.0% 20.0% 0% 25.0% 25.0% 0% 0% 0%

4.5% 14.3% 9.5% 10.5% 5.9% 7.7% 0% 10.% 0% 20.0% 25.0% 25.0% 0% 0% 50.0%

81.8% 61.9% 85.7% 78.9% 70.6% 69.2% 92.3% 70.0% 40.0% 80.0% 50.0% 50.0% 100.0% 100.0% 50.0%

Merchant survey respondents have experience in online, mobile, and other channels. Nearly 90% of merchant respondents manage or influence the online channel while 46% manage or influence the mobile channel for their companies.

Sales channels (merchants)

100%

Brick & Mortar 80%

60%

Call Center Mail Order Mobile

40%

20%

0%

Multi-Channel (including online) Online

Mobile Survey 2012

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Nearly 80% of merchant respondents influence risk management decisions or are ultimately responsible for the risk management responsibility within their companies.

Involved in risk management (merchants)

Donâ&#x20AC;&#x2122;t get involved with risk Influence decision

20.5%

35.9%

Ultimately responsible

43.6%

Non-Merchants Among non-merchant survey respondents (service providers, acquirers, card issuers, and card associations), nearly 30% are large enterprises with annual revenue greater than $50 million. The card associations and merchant acquirers, however, have a much larger percentage of survey respondents representing business that exceed $50 million in annual revenue, 100% and 71% respectively. Meanwhile, service providers represent the most diverse group of companies by annual revenue, with 35% of service providers having annual revenues less than $5 million, 19% in the $10 to $25 million range, and 22% with annual revenues over $50 million.

Annual revenue (non-merchants)

Less than $5 million $5 million - $10 million

28.6%

29.7%

$10 million - $25 million $25 million - $50 million More than $50 million

14.3%

12.1% 15.4%

Annual revenue by type (non-merchants) Less than $5MM $5MM - $10MM $10MM - $25MM $25MM - $50MM More than $50MM

Acquirer

Card Association

Card Issuer

Service Provider

14.3% 0% 0% 14.3% 71.4%

0% 0% 0% 0% 100.0%

7.7% 23.1% 7.7% 23.1% 38.5%

34.8% 14.5% 18.8% 10.1% 21.7%

Mobile Survey 2012

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The service providers, acquirers, card issuers and card associations surveyed also offer a wide variety of payment and fraud prevention services. Overall, 42% of non-merchants surveyed offer identity authentication or verification services while 30% offer gateway services, 27% offer fraud scoring and 30% offer payment or fraud consulting services.

The distribution of services offered does vary across the different non-merchant business types. For example, 86% of acquirers surveyed offer gateway services compared to less than 25% of service providers.

Payment/fraud services offered (non-merchants)

Services offered by type (nonmerchants)

Analytics

28.0%

Consulting Services Pmts or Fraud

30.1%

Data Sharing

10.8%

E-Commerce Platform

47.3%

Fraud Scoring

26.9%

Gateway Business

30.1%

Identity Authentication or Verification

41.9%

Media

11.8%

Operational Provider - Solution

38.7%

Technology Services - Fraud

30.1%

Analytics Consulting Services 100%

Data Sharing eCommerce Platform

80%

Fraud Scoring Gateway Business

60%

Identity Authentication Verification

40%

Media 20%

Operational Provider Solution Technology Services Fraud

0%

Acquirer

Card Association

Card Issuer

Service Provider

12

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Mobile Survey 2012

The service providers, acquirers, card issuers, and card associations in the survey offer services to support a variety of channels, services, and types of products. 53% of all non-merchants offer services to support digital goods while 42% offer services to support tangible/shippable goods and 83% support services.

Services offered (non-merchants)

Services offered All - Payments Digital Goods Face-to-Face Mobile Payments Money Transfer Search & Online Media Services Shippable Goods

All - Payments

1.1%

Digital Goods

52.7%

Face-to-Face

1.1%

Mobile Payments

1.1%

Money Transfer

1.1%

Search and Online Media

1.1%

Services

82.8%

Shippable Goods

41.9%

Acquirer

Card Association

Card Issuer

Service Provider

14.3% 71.4% 0% 0% 0% 0% 0% 100.0% 57.1%

0% 0% 0% 0% 0% 0% 0% 100.0% 0%

0% 69.2% 0% 0% 0% 0% 0% 76.9% 61.5%

0% 50.7% 1.4% 1.4% 1.4% 1.4% 1.4% 84.1% 39.1%

Mobile Survey 2012

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Non-merchant survey respondents have experience in online, mobile and other channels.

72.5% of non-merchant respondents manage or influence the online channel while 54% manage or influence the mobile channel. However, this distribution of channels influenced or managed is different when broken down by service provider, acquirer, card issuer and card association. Service providers have a larger percentage of respondents that manage or influence the mobile and online channels but have the lowest representation for the brickand-mortar and call-center channels.

Sales channels (non-merchants)

Channels that respondents manage or influence by type (nonmerchants)

Brick & Mortar

34.1%

Call Center

28.6%

Mail Order

16.5%

Mobile

53.8%

Multi-Channel (including online)

47.3%

Online

72.5%

100%

Brick & Mortar 80%

Call Center Mail Order

60%

Mobile Multi-Channel (including online)

40%

Online 20%

0%

Acquirer

Card Association

Card Issuer

Service Provider

Mobile Survey 2012

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More than 75% of non-merchant respondents influence risk management decisions or are ultimately responsible for risk management within their companies.

Involved in risk management by type (non-merchants)

Donâ&#x20AC;&#x2122;t get involved with risk Influence Decision

23.1%

27.5%

Ultimately Responsible

49.5% Looking at the difference between how the various types of respondents answered, service provider and acquirer respondents were the most likely (29% ) to be ultimately responsible for risk management within their company.

Involved in risk mgmt (non-merchants)

Acquirer

Card Association

Card Issuer

Service Provider

Not involved with risk Influence decision Ultimately responsible

14.3% 57.1% 28.6%

0% 100.0% 0%

23.1% 53.8% 23.1%

24.6% 46.4% 29.0%

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Mobile Survey 2012

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Mobile E-Commerce This section examines three key aspects of mobile e-commerce: • Current and future levels of support for mobile channel • Importance of mobile to growth plans • Importance of mobile device detection in e-commerce transactions

Support for the Mobile Channel An overwhelming majority of merchants, service providers, acquirers, card issuers, and card associations either support mobile today or plan to support it in 2013. Not only merchants, but service providers and merchant payment service businesses, have put strong emphasis on the mobile channel. Less than 10% of all respondents have no current plans for mobile, while the rest either actively support mobile or plan to support it in 2013.

Emphasis on mobile channel

We are actively supporting it

9.7%

We plan to support it in 2013 We have no plans for mobile currently

30.4% 59.9%

When analyzing the importance of mobile by type of business, card associations are clearly out front, with 100% actively supporting mobile. Service providers and acquirers are next, with 86% and 73% respectively actively supporting mobile. Merchants and card issuers place less emphasis on mobile. Just over half of merchants and just under half of card issuers actively support mobile now. However, both plan to support mobile in 2013, with 34% of merchants and 54% of card issuers declaring those intentions. It’s worth noting that a not insignificant 12% of merchants have no future plans for mobile at the moment.

Support for mobile channel by type

100%

We are actively supporting it

80%

We plan to support it in 2013 We have no plans for mobile currently

60%

40%

20%

0%

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Mobile Survey 2012

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Although merchants were most likely to have no current plans for mobile or plans to support it in 2013, this varied quite a bit by merchant size. Larger merchants are most likely to support mobile (70% are actively supporting it now), however, 15 percent of merchants this size have no plans for mobile. Merchants with annual revenue less than $5 million, on the other hand, were the least likely to support mobile at 39%. However, nearly half of these smaller merchants plan to support it in 2013, although 12% have no plans for mobile.

Support for mobile channel by revenue (merchants)

80% 70%

We are actively supporting it

60%

We plan to support it in 2013

50%

We have no plans for mobile currently

40% 30% 20% 10% 0%

<$

5M

M $5

-10

MM

$1

0-2

5M

M $2

5-5

0M

M

>$

50

MM

Mobile Survey 2012

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The distribution of merchants that actively support or plan to support mobile in 2013 differs by the types of goods or services they sell online. For example, two-thirds of merchants that sell Apparel/Accessories online actively support mobile while only 6% have no mobile plans.

55% of merchants that sell Specialty Non-Apparel and 68% that sell Toys/Hobby products online actively support mobile while less than 5% have no mobile plans and the remaining portion plan to support it in 2013. Vertical segments more likely to have no plans for mobile include Health/Beauty, Office Supplies, Computer/Electronics and Jewelry.

Support for mobile by market segment Apparel/Accessories Housewares/Home Furn Food/Drug Books/Music/Video Hardware/Home Improve Health/Beauty Specialty/Non-Apparel Toys/Hobbies Computer/Electronics Jewelry Sporting Goods Office Supplies Digital Goods Flowers/Gifts Gaming Other Services Travel Financial Service Mass Merchant Insurance Telecom Direct Response

Actively Support

Plan to Support in 2013

No Plans to Support

66.7% 50.0% 68.0% 50.0% 63.6% 50.0% 54.5% 68.2% 52.4% 66.7% 73.7% 41.2% 76.9% 76.9% 80.0% 80.0% 60.0% 75.0% 50.0% 100.0% 100.0% 50.0%

27.1% 42.3% 24.0% 40.9% 27.3% 31.8% 40.9% 27.3% 33.3% 19.0% 21.1% 41.2% 23.1% 23.1% 20.0% 20.0% 40.0% 25.0% 50.0% 0% 0% 50.0%

6.3% 7.7% 8.0% 9.1% 9.1% 18.2% 4.5% 4.5% 14.3% 14.3% 5.3% 17.6% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Mobile Survey 2012

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Importance of Mobile to Growth Plans Overall a large majority of all business types surveyed find a mobile strategy to be “somewhat important” or “very important” to their company’s growth plans for 2013. Only 16% of respondents said a mobile strategy is “not very important” to growth.

Importance of a mobile strategy to growth

Very important

16.3%

Somewhat important

43.9%

Not very important

39.7% Merchants place less emphasis on mobile than other business types. Only about one-third of merchants think mobile strategies are “very important” for their company’s 2013 growth plans and 19% say it is “not very important.” Service providers, card issuers, and card associations are the business types most likely to consider mobile strategies important, with 50% or more of each type stating that mobile strategies are “very Important” for their 2013 growth plans.

Importance of a mobile strategy to growth by type

100%

Very important 80%

Somewhat important Not very important

60%

40%

20%

0%

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Overall, about 20% of merchants believe that mobile is “not very important” for their 2013 growth plans, although this varies slightly by merchant size. About 40% of merchants with annual revenues between $10 and $25 million and greater than $50 million in annual revenues think mobile is “very important” for their 2013 growth plans compared to just 33% of merchants with annual revenues less than $5 million, 31% of merchants with annual revenues between $5 and $10 million, and only 20% of merchants with revenues from $25 to $50 million. Merchants in the $25-$50 million annual revenue range were also the most likely to find mobile strategies “not very important” for their 2013 growth plans at 30%, followed by merchants in the $5 to $10 million in annual revenues at 23%.

Mobile Survey 2012

19

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Importance of a mobile strategy to growth by revenue (merchants)

50%

Very important 40%

Somewhat important Not very important

30%

20%

10%

0%

<$

5M

M $5

-10

MM

$1

0-2

5M

M $2

5-5

0M

M

>$

50

MM

Certain merchant types are more likely to consider mobile strategies important to growth in 2013. These market segments include Gaming, Travel, Financial Services, Telecom, Direct Response, and Food/Drug. 40% or more of each of these segments consider mobile strategies to be â&#x20AC;&#x153;very importantâ&#x20AC;? for their growth plans in 2013. Industries where mobile strategies are less likely to be considered important are Housewares/Home Furnishings, Computers/Electronics, Jewelry, and Mass Merchants.

Importance of mobile strategy to growth by segment Apparel/Accessories Housewares/Home Furn Food/Drug Books/Music/Video Hardware/Home Improve Health/Beauty Specialty/Non-Apparel Toys/Hobbies Computer/Electronics Jewelry Sporting Goods Office Supplies Digital Goods Flowers/Gifts Gaming Other Services Travel Financial Service Mass Merchant Insurance Telecom Direct Response

Very Important

Somewhat Important

Not Very Important

39.6% 38.5% 40.0% 31.8% 36.4% 22.7% 36.4% 31.8% 38.1% 28.6% 36.8% 35.3% 30.8% 38.5% 50.0% 20.0% 60.0% 50.0% 0% 33.3% 66.7% 100.0%

43.8% 42.3% 48.0% 50.0% 50.0% 63.6% 45.5% 54.5% 42.9% 52.4% 52.6% 52.9% 61.5% 61.5% 40.0% 80.0% 20.0% 50.0% 25.0% 66.7% 33.3% 0%

16.7% 19.2% 12.0% 18.2% 13.6% 13.6% 18.2% 13.6% 19.0% 19.0% 10.5% 11.8% 7.7% 0% 10.0% 0% 20.0% 0% 75.0% 0% 0% 0%

20

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Mobile Survey 2012

Importance of Detecting Mobile Devices The survey also revealed that most merchants and other businesses think it is important to be able to detect if a transaction originates from a mobile device. 34.5% of merchants find this to be “very important” while 25% believe it is “important.” Only 4% of merchants think it is “not very important” to be able to detect if transactions come from mobile devices, while 16% had neutral opinions or were unsure. Interestingly, while a majority of merchants think it is important to be able to recognize mobile devices, the survey later reveals that less than half of merchants are actually able to detect mobile devices.

Important to detect if transaction comes from mobile device

10.3% 4.3%

6.0%

Very important Important

34.5%

Somewhat important Not very important Neutral

19.8%

Not sure

25.0% A merchant’s annual revenue has little effect on whether or not that merchant considers it “very important” to “not very important” to recognize if transactions come from mobile.

Merchants with annual revenues greater than $50 million are most likely to say this is “very important,” while merchants with less than $5 million in annual revenue are more likely to be unsure or have neutral opinions.

Detect from mobile by revenue (merchants)

<$5MM

$5-10MM

$10-25MM

$25-50MM

>$50MM

Very important Important Somewhat important Not very important Neutral Not sure

32.1% 20.8%

33.3% 8.3% 50.0% 8.3% 0% 0%

37.5% 50.0% 12.5% 0% 0% 0%

16.7% 16.7% 16.7% 16.7% 33.3% 0%

40.5% 32.4% 18.9% 2.7% 2.7% 2.7%

15.1% 3.8% 17.0% 11.3%

Mobile Survey 2012

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21

Certain market segments find it more important to recognize if transactions originate from mobile devices. The sectors that think it is “very important” include Direct Response, Mass Merchants, Gaming, Flowers/Gifts and Computers/Electronics. Merchant types such as Specialty Non-Apparel, Health/Beauty and Sporting Goods are more likely to view the ability to recognize that transactions are coming from mobile devices as only “somewhat important.”

Detect from mobile by segment (merchants)

Apparel/Accessories Housewares/Home Furnishings Food/Drug Books/Music/Video Hardware/Home Improvement Health/Beauty Specialty/Non-Apparel Toys/Hobbies Computer/Electronics Jewelry Sporting Goods Office Supplies Digital Goods Flowers/Gifts Gaming Other Services Travel Financial Service Mass Merchant Insurance Telecom Direct Response

Very Important

Important

Somewhat Important

Not Very Important

Neutral

Not Sure

42.4% 42.9% 30.0% 43.8% 43.8% 42.9% 31.3% 29.4% 47.1% 37.5% 18.2% 42.9% 30.0% 54.5% 50.0% 20.0% 33.3% 50.0% 100.0% 0% 50.0% 100.0%

24.2% 9.5% 20.0% 6.3% 12.5% 26.8% 31.3% 11.8% 5.9% 31.3% 27.3% 21.4% 10.0% 18.2% 0% 40.0% 33.3% 50.0% 0% 50.0% 50.0% 0%

24.2% 28.6% 15.0% 25.0% 18.8% 7.1% 31.3% 41.2% 23.5% 25.0% 45.5% 7.1% 30.0% 18.2% 16.7% 0% 0% 0% 0% 0% 0% 0%

6.1% 4.8% 5.0% 6.3% 6.3% 7.1% 0% 5.9% 5.9% 0% 0% 7.1% 0% 0% 0% 20.0% 0% 0% 0% 0% 0% 0%

3.0% 14.3% 20.0% 18.8% 12.5% 7.1% 6.3% 11.8% 11.8% 6.3% 9.1% 14.3% 20.0% 9.1% 33.3% 20.0% 33.3% 0% 0% 50.0% 0% 0%

0% 0% 10.0% 0% 6.3% 7.1% 0% 0% 5.9% 0% 0% 7.1% 10.0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

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Mobile Survey 2012

Acquirers, issuers and service providers find it important to be able to recognize if transactions originate on mobile devices—more so than merchants. Less than 5% of non-merchants found it to be “not very important,” 20% had neutral opinions, and nearly two-thirds found it to be “important” or “very important”.

Detect transaction from mobile device (non-merchants)

Very important Important

19.8%

38.5%

Somewhat important

4.4%

Not very important

9.9%

Neutral

27.5%

Detect transaction from mobile device by type (nonmerchants)

60%

Very important

50%

Important 40%

Somewhat important Not very important

30%

Neutral 20%

10%

0%

Acquirer

Card Association

Card Issuer

Service Provider

22

Mobile Survey 2012

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23

Critical Aspects of Mobile E-Commerce This section looks at how key aspects of the mobile sales channel are viewed in the industry: • How the mobile channel adds value • Resources employed to enable mobile e-commerce • Preferred forms of payment in the mobile channel • Which geographical regions are most important • Obstacles to adoption of mobile e-commerce • Fraud risk in the mobile sales channel • Fraud tools for mobile e-commerce • Ability to detect mobile devices

How the Mobile Channel Adds Value There are many capabilities and value-added services offered in the mobile channel, but most businesses tend to focus their efforts in a few key areas. There are a number of goals a business can target for their mobile strategy, and merchants as well as non-merchant businesses were asked to rank which areas were most important.

There are four major areas where the mobile channel can add value: • Convenience through speedier checkout and processing of payments • Increased conversions with upsells, cross-sells and location-based promotions • Increased customer loyalty from mobile punch cards and other rewards programs • Increased sales opportunity via more leads and sales generation into all channels Respondents were asked how important each of these aspects is to them. Overall, 36% of respondents indicated that opportunity is the most important factor businesses are trying to achieve through their mobile strategies. Conversely, conversion was chosen by the most respondents overall as the least important aim of their mobile payment efforts.

Rank areas of mobile value-add

100%

21.1% 80%

36.1%

12.9%

11.5% Opportunity

19.4%

14.1

28.6%

Conversion

60%

36.0%

25.7%

47.4%

23.7%

40%

17.7% 20%

20.5%

26.6%

Most Important

Important

Loyalty

31.7%

26.9%

0%

Less Important

Least Important

Convenience

Mobile Survey 2012

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24

When the type of business is factored into the equation, the results are a little different.

Nonetheless, both merchants and non-merchants find opportunity to be the most important aspect and conversion to be the least important aspect that they are trying to achieve with their mobile strategies.

Rank areas of mobile value-add (merchants)

100%

18.9%

14.0%

9.3% 16.7%

80%

19.4%

40.5%

Loyalty

29.7%

Conversion

60%

34.4%

24.5%

Opportunity

48.1%

Convenience

22.0%

40%

18.6% 20%

29.3%

32.3%

Important

Less Important

Least Important

11.4%

14.3%

16.4% 0%

Rank areas of mobile value-add (nonmerchants)

Most Important

25.9%

100%

24.0% 80%

60%

40%

31.7%

20.0%

17.1%

0%

Most Important

42.9% Convenience

37.1%

28.1%

20%

26.0%

Loyalty Conversion

29.2% 25.2%

18.8% Important

Opportunity

9.5%

31.4%

Less Important

33.3%

Least Important

Mobile Survey 2012

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25

While merchants and non-merchants have somewhat different opinions about which aspects of mobile are most and least important, there is greater disagreement when the results are sorted by annual revenue. Businesses with annual revenues of less than $5 million are most likely to find conversion the “least important” goal and opportunity as the “most important” followed closely by convenience. Companies with annual revenues greater than $50 million, however, are much less concerned with convenience. For 42% of them, convenience received “least important” votes and only 14% of “most important” votes.

Rank areas of mobile value-add (revenue <$5MM)

100%

35.4%

19.6%

9.1% 21.9%

4.5%

80%

Opportunity Loyalty

18.8% 60%

25.0%

31.8%

Conversion 72.7%

40%

20%

17.7%

32.8%

17.8%

Convenience

37.5%

30.8% 21.9%

13.6%

0%

Most Important

Rank areas of mobile value-add (revenue >$50MM)

Important

100%

Less Important

Least Important

9.1%

10.5%

24.2%

21.1%

27.3%

26.3%

39.4%

42.1%

Less Important

Least Important

20.2% 80%

40.0%

Opportunity

27.4% 60%

Conversion

23.8% 26.2%

40%

22.5% 20%

26.2% 13.8%

0%

Most Important

Important

Loyalty

Convenience

Mobile Survey 2012

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26

Resources Employed to Enable Mobile E-Commerce The Mobile Survey found that many businesses are using both in-house and outside resources for their mobile implementations. While 65% of all respondents are using in-house resources, nearly 50% outsource exclusively or in addition to other resources.

Resources used for mobile implementation In-house resources

64.0%

Outsourced resources

49.4%

Periodic contractors

20.2% 1.6%

Other

Among different types of businesses, merchants tend to focus on in-house and outsourced resources, with a small percentage using periodic contractors. Acquirers, issuers and service providers, on the other hand, are much more likely to engage periodic contractors, but are just as likely as merchants to have in-house resources and tap outsourced resources.

Mobile resources employed (by type)

100%

In-house resources 80%

Outsourced resources Periodic contractors

60%

Other 40%

20%

0%

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Mobile Survey 2012

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27

When company size is taken into consideration, the data shows that larger companies are less likely to rely on in-house resources than businesses with less than $5 million or between $10 and $50 million in annual revenues (43% vs. 53%). Businesses with less than $5 million in annual revenues are least likely to use outsourced resources but are the group most likely to use periodic contractors.

Mobile resources employed (by revenue)

60%

In-house resources

50%

Outsourced resources 40%

Periodic contractors Other

30%

20%

10%

0%

<$

5M

M $5

-10

MM

$1

0-2

5M

M $2

5-5

0M

M

>$

50

MM

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Mobile Survey 2012

28

Preferred Forms of Payment for Mobile Transactions Because mobile is a relatively new channel, there are still many unknowns. Survey participants were asked which form of payment consumers would prefer to process from mobile devices, and the responses varied quite a bit based on who was being asked. Overall, however, there is a strong perception that traditional card-based paymentsâ&#x20AC;&#x201D;mainly credit cards but also debit and prepaid cards (72% total)â&#x20AC;&#x201D;will be the preferred payment method used with transactions coming from mobile devices.

Form of payment consumers prefer using mobile

Credit Card Debit Card

5.3% 2.0% 1.6%

Prepaid Card Gift Card

18.6% 53.0%

0.8% 6.9%

PayPal ACH Bill2Phone

11.7%

Other

While all types of business believe credit cards will be the preferred form of payment consumers use for mobile transactions, merchants and service providers are more likely to think that PayPal will be a form of payment that consumers will prefer to use. 22% of merchants and 16% of service provider voted for PayPay, versus 0% of card associations, card issuers and acquirers. Meanwhile, 62% of card issuers think prepaid cards will be the form of payment consumers prefer to process from mobile devices.

Form of payment consumers prefer using mobile by type

80% 70%

Acquirer

60%

Card Association

50%

Card Issuer Merchant

40%

Service Provider

30% 20% 10% 0%

dit

Cre

d d d d al Car it Car id Car ft Car PayP b Gi De Prepa

r e H AC Phon Othe 2 Bid

29

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Mobile Survey 2012

Merchantsâ&#x20AC;&#x2122; perspectives on what form of payment consumers prefer for mobile transactions varies by the types of goods and services the merchants sell online. The merchant segments that put the most emphasis on PayPal are Home Improvement/Hardware, Health/Beauty, Direct Response and Sporting Goods. More than 25% percent of merchants in these segments believe consumers will prefer to use PayPal from their mobile devices.

Form of pmt consumers prefer by market segment

Credit Card

Debit Card

Prepaid Card

Gift Card

PayPal

ACH

Bill2Phone

Other

Apparel/Accessories

66.7%

8.3%

2.1%

0%

14.6%

0%

2.1%

6.3%

Housewares/Home Furnishings

61.5%

7.7%

0%

0%

23.1%

0%

3.8%

3.8%

Food/Drug

52.0%

12.0%

0%

4.5%

16.0%

4.0%

4.0%

8.0%

Books/Music/Video

72.7%

0%

0%

4.5%

18.2%

0%

4.5%

0%

Hardware/Home Improvement

63.6%

0%

0%

0%

36.4%

0%

0%

0%

Health/Beauty

68.2%

4.5%

0%

0%

27.3%

0%

0%

0%

Specialty/Non-Apparel

45.5%

18.2%

0%

0%

18.2%

0%

13.6%

4.5%

Toys/Hobbies

77.3%

4.5%

0%

0%

9.1%

0%

4.5%

4.5%

Computer/Electronics

81.0%

0%

0%

0%

14.3%

0%

0%

4.8%

Jewelry

71.4%

9.5%

0%

0%

14.3%

0%

0%

4.8%

Sporting Goods

63.2%

5.3%

0%

0%

26.3%

0%

0%

5.3%

Office Supplies

82.4%

0%

0%

0%

17.6%

0%

0%

0%

Digital Goods

76.9%

0%

0%

7.7%

15.4%

0%

0%

0%

Flowers/Gifts

69.2%

7.7%

0%

0%

23.1%

0%

0%

0%

Gaming

90.0%

0%

0%

0%

10.0%

0%

0%

0%

Other Services

80.0%

0%

0%

0%

20.0%

0%

0%

0%

Travel

80.0%

0%

0%

0%

20.0%

0%

0%

0%

Financial Service

75.0%

25.0%

0%

0%

0%

0%

0%

0%

Mass Merchant

75.0%

0%

0%

0%

25.0%

0%

0%

0%

Insurance

66.7%

0%

0%

0%

33.3%

0%

0%

0%

Telecom

100.0%

0%

0%

0%

0%

0%

0%

0%

Direct Response

50.0%

0%

0%

0%

50.%

0%

0%

0%

Mobile Survey 2012

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30

Key Geographic Regions for Mobile Efforts According to all respondents, North America is the region of greatest priority for their mobile efforts (56%), followed by the European Union (11%). The regions with the lowest priority are Africa and the Middle East.

Highest priority regions for mobile

100%

South America North America

80%

Middle East 60%

European Union 40%

Eastern Europe Asia Pacific

20%

Africa 0%

1 Highest Priority

2

3

4

5

6

7 Lowest Priority

Looking at merchants only, 70% rank North America as the number one region for their mobile efforts, with 39% naming the European Union as the second most important region.

Highest priority regions for mobile (merchants)

100%

South America North America

80%

Middle East 60%

European Union 40%

Eastern Europe Asia Pacific

20%

Africa 0%

1 Highest Priority

2

3

4

5

6

7 Lowest Priority

Mobile Survey 2012

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31

41% of service providers also name North America as their highest priority region, although when compared with merchants, a greater number rank the European Union as the region of highest priority. Service providers, like merchants, rank the European Union as their second highest priority.

Highest priority regions for mobile (service providers)

100%

South America North America

80%

Middle East 60%

European Union 40%

Eastern Europe Asia Pacific

20%

Africa 0%

1 Highest Priority

2

3

4

5

6

7 Lowest Priority

Obstacles to Adoption of Mobile E-Commerce While mobile brings new growth opportunities, it isnâ&#x20AC;&#x2122;t without challenges. Overall, respondents think the biggest obstacle to growing mobile adoption is the difficulty consumers encounter when transacting on a mobile device (versus merely shopping). The second biggest obstacle: consumer security concerns with the mobile platform.

Biggest obstacles to mobile adoption

Addressing consumer security concerns with the platform

19.4%

Addressing how to manage fraud risk

14.2%

Making it easier for consumers to transact versus just shopping

36.0%

Making it possible to take payments more efficiently

12.6%

New payment types Other

6.5% 11.3%

Mobile Survey 2012

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32

36% of service providers and more than 40% of merchants indicate that making it easier for consumers to transact would overcome the biggest obstacle to mobile adoption.

Merchants are less concerned about consumer security worries, with only 17% of merchants considering this the biggest obstacle, whereas 26% of service providers consider consumer security concerns the biggest obstacle. As for fraud risk, only 8% of merchants and 13% of service providers consider this biggest obstacle. However, fraud risk is much more likely to be named as the biggest obstacle to mobile adoption by card issuers (77%), card associations (50%) and acquirers (28.6%).

Biggest obstacles to mobile adoption by type

80%

Addressing consumer security concerns with the platform

70% 60%

Addressing how to manage fraud risk

50%

Making it easier for consumers to transact versus just shopping

40% 30%

Making it possible to take payments more efficiently

20%

New payment types

10%

Other

0%

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Regardless of annual revenue, merchants of all sizes think that making it easier for consumers to transact via mobile is key to overcoming the biggest obstacle to growing mobile adoption. Further, merchants overall tend to be less concerned with managing fraud risk in the mobile channel. Merchants with more than $25 million in annual revenue are far less likely to view this as the biggest obstacle. Less than 2% of the largest merchants think managing fraud risk is the biggest obstacle, compared to 20% of merchants with annual revenues between $10 and $25 million, 15% of merchants with annual revenues between $5 and $10 million, and 11% of merchants with less than $5 million in annual revenue.

Biggest obstacles to mobile adoption by revenue (merchants)

60%

Addressing consumer security concerns with the platform

50%

40%

Addressing how to manage fraud risk

30%

Making it easier for consumers to transact versus just shopping

20%

Making it possible to take payments more efficiently New payment types

10%

Other

0%

<$

5M

M $5

-10

MM

$1

0-2

5M

M $2

5-5

0M

M

>$

50

MM

Mobile Survey 2012

presented by Kount | The Fraud Practice | CardNotPresent.com

33

Different merchant segments tend to perceive different obstacles to widespread mobile adoption. Segments like Apparel/Accessories, Books/Music/Video, Hardware/Home Improvement, Health & Beauty, Sporting Goods and Gaming are most focused on making it easier for consumers to transact. The Computers/Electronics, Office Supplies and Toys/ Hobbies segments are most focused on consumer security concerns.

Obstacles to mobile adoption by market segment

Consumer Security Concerns

Apparel/Accessories Housewares/Home Furnishings Food/Drug Books/Music/Video Hardware/Home Improvement Health/Beauty Specialty/Non-Apparel Toys/Hobbies Computer/Electronics Jewelry Sporting Goods Office Supplies Digital Goods Flowers/Gifts Gaming Other Services Travel Financial Service Mass Merchant Insurance Telecom Direct Response

14.6% 11.4% 24.0% 18.2% 18.2% 4.5% 13.6% 22.7% 33.3% 19.0% 10.5% 23.5% 15.4% 15.4% 20.0% 20.0% 40.0% 0% 100.0% 0% 0% 0%

How to Transaction Manage Fraud Ease for Risk Consumers

4.2% 7.7% 0% 9.1% 9.1% 0% 4.5% 9.1% 4.8% 4.8% 0% 5.9% 7.7% 7.7% 10.0% 40.0% 0% 25.0% 0% 0% 0% 50.0%

50.0% 38.5% 24.0% 45.5% 45.5% 54.5% 40.9% 40.9% 38.1% 33.3% 52.6% 41.2% 38.5% 38.5% 50.0% 20.0% 40.0% 50.0% 0% 66.7% 100.0% 0%

Take Payments Efficiently

New Payment Types

Other

14.6% 19.2% 36.0% 18.2% 9.1% 18.2% 18.2% 13.6% 9.5% 19.0% 21.1% 5.9% 23.1% 30.8% 10.0% 0% 0% 0% 0% 0% 0% 50.0%

4.2% 11.5% 8.0% 4.5% 4.5% 9.1% 9.1% 9.1% 9.5% 9.5% 10.5% 11.8% 7.7% 7.7% 10.0% 20.0% 20.0% 0% 0% 33.3% 0% 0%

12.5% 11.5% 8.0% 4.5% 13.6% 13.6% 13.6% 4.5% 4.8% 14.3% 5.3% 11.8% 7.7% 0% 0% 0% 0% 25.0% 0% 0% 0% 0%

Mobile Survey 2012

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34

Fraud Risk in the Mobile Channel New channels and payment methods bring new threats and risks. While merchants and payment service businesses are excited about the opportunities that mobile brings, they are also concerned about and aware of the fraud risks. Overall, more than half of the survey respondents perceive mobile to be just as risky as standard web e-commerce, while another 42% believe mobile is somewhat riskier or far riskier than standard e-commerce. Only 5% of respondents think mobile is less risky.

Risk of mobile fraud

Far Riskier

5.3%

Somewhat Riskier

18.6%

Just as Risky Less Risky

23.5% 52.6%

Looking at specific business types, merchants are more inclined to consider mobile just as risky as standard web e-commerce (60% of merchants). Less inclined to feel this way are service providers (42%), acquirers (43%), and card issuers (31%). Card associations, service providers, and card issuers are most likely to perceive mobile as riskier than standard web e-commerce: 50% of card associations, 31% of card issuers, and 25% of service providers believe mobile is far riskier, while 50% of card associations, 16% of card issuers, and 26% of service providers think mobile is somewhat riskier. Just 2% of merchants and 7% of service providers say mobile is less risky, while acquirers and card issuers are more likely to think mobile is less risky, at 29% and 23% respectively.

80%

Risk of mobile fraud by type

70%

Far Riskier

60%

Somewhat Riskier

50%

Just as Risky Less Risky

40% 30% 20% 10% 0%

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Mobile Survey 2012

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35

Looking at merchant size and the effect that annual revenue has on their opinions of fraud risk, the data show that they are most likely to consider mobile just as risky as standard e-commerce, regardless of their size. While only a small percentage of merchants with annual revenues below $10 million believe mobile is less risky, none of the merchants surveyed with annual revenues $10 million or greater think mobile is less risky. Larger merchants with annual revenues greater than $50 million are also more likely to think mobile somewhat riskier (32%) than far riskier (11%).

Risk of mobile fraud by revenue (merchants)

70%

Far Riskier

60%

Somewhat Riskier

50%

Just as Risky Less Risky

40% 30% 20% 10% 0%

<$

5M

M $5

-10

MM

$1

0-2

5M

M $2

5-5

0M

M

>$

50

MM

Mobile Survey 2012

36

presented by Kount | The Fraud Practice | CardNotPresent.com

Certain merchant segments find the mobile channel far riskier than others. One-third to one-half of all merchants in the Digital Goods, Gaming, Financial Services, Telecom and Direct Response industries think mobile is far riskier than standard e-commerce.

Risk of mobile fraud by market segment Apparel/Accessories Housewares/Home Furnishings Food/Drug Books/Music/Video Hardware/Home Improvement Health/Beauty Specialty/Non-Apparel Toys/Hobbies Computer/Electronics Jewelry Sporting Goods Office Supplies Digital Goods Flowers/Gifts Gaming Other Services Travel Financial Service Mass Merchant Insurance Telecom Direct Response

Far Riskier

Somewhat Riskier

Just As Risky

Less Risky

10.4% 15.4% 16.0% 27.3% 9.1% 9.1% 22.7% 22.7% 14.3% 19.0% 10.5% 17.6% 38.5% 23.1% 40.0% 0% 0% 50.0% 0% 0% 33.3% 50.0%

16.7% 30.8% 32.0% 18.2% 31.6% 22.7% 22.7% 31.8% 19.0% 23.8% 36.8% 23.5% 30.8% 38.5% 20.0% 60.0% 40.0% 50.0% 0% 100.0% 33.3% 50.0%

68.8% 53.8% 52.0% 50.0% 59.1% 68.2% 50.0% 40.9% 61.9% 52.4% 52.6% 52.9% 23.1% 38.5% 30.0% 40.0% 40.0% 0% 75.0% 0% 33.3% 0%

4.2% 0% 0% 4.5% 0% 0% 4.5% 4.5% 4.8% 4.8% 0% 5.9% 7.7% 0% 10.0% 0% 20.0% 0% 25.0% 0% 0% 0%

Fraud Tools for Mobile E-Commerce Although 60% of merchants perceive mobile to be just as risky as standard e-commerce, more than two-thirds believe mobile requires additional tools for managing fraud risk.

Specialized tools required to prevent mobile fraud

37.1%

17.2%

Yes, mobile requires very specialized fraud tools Yes, standard e-commerce fraud processes and tools cannot support it fully No, standard e-commerce fraud processes can support it

45.7%

Mobile Survey 2012

37

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Merchants with annual revenues between $25 and $50 million are most likely to think that standard e-commerce fraud processes can support mobile transactions. Roughly two-thirds of merchants this size, compared to about one-third of the smallest (annual revenue less than $5 million) and largest (annual revenue greater than $50 million) merchants responded this way.

Special tools to prevent mobile fraud by $

<$5MM

$5-10MM

$10-25MM

$25-50MM

>$50MM

Yes, mobile requires very specialized fraud tools

20.8%

25.0%

12.5%

0%

13.5%

Yes, standard e-commerce fraud processes and tools cannot support it fully

41.5%

58.3%

50.0%

33.3%

48.6%

No, standard e-commerce fraud processes can support it

37.7%

16.7%

37.5%

66.7%

37.8%

Merchant perspectives on whether or not standard web anti-fraud processes would be sufficient to support mobile transactions vary by market segment. The Travel, Digital Goods, Insurance, Mass Merchant, Books/Music/Video and Gaming markets are more inclined to think the mobile channel requires very specialized fraud tools.

Special tools to prevent mobile fraud by market segment Apparel/Accessories Housewares/Home Furnishings Food/Drug Books/Music/Video Hardware/Home Improvement Health/Beauty Specialty/Non-Apparel Toys/Hobbies Computer/Electronics Jewelry Sporting Goods Office Supplies Digital Goods Flowers/Gifts Gaming Other Services Travel Financial Service Mass Merchant Insurance Telecom Direct Response

Mobile Requires Very Specialized Fraud Tools

Standard E-commerce Tools/Processes Can NOT Support Mobile Fully

Standard E-commerce Tools/Processes Can Support Mobile Fully

15.2% 14.3% 30.0% 25.0% 37.5% 14.3% 12.5% 29.4% 17.6% 18.8% 18.2% 28.6% 40.0% 27.3% 33.3% 20.0% 66.7% 0% 50.0% 50.0% 0% 0%

42.4% 42.9% 35.0% 43.8% 37.5% 50.0% 56.3% 29.4% 52.9% 37.5% 63.6% 50.0% 50.0% 45.5% 33.3% 60.0% 33.3% 100.0% 50.0% 50.0% 100.0% 100.0%

42.4% 42.9% 32.0% 31.3% 25.0% 35.7% 31.3% 41.2% 29.4% 43.8% 18.2% 21.4% 10.0% 27.3% 33.3% 20.0% 0% 0% 0% 0% 0% 0%

Mobile Survey 2012

38

presented by Kount | The Fraud Practice | CardNotPresent.com

Because many respondents believe that the mobile channel does require additional tools for managing fraud, the survey asked them to rank the 14 tools/services they most prefer for preventing fraud on mobile devices. Overall, 55.2% of respondents listed ID authentication as one of the top three tools for preventing fraud on mobile devices, with secure mobile payment methods and device ID ranking second and third on the list.

0%

10%

20%

30%

40%

50%

60%

0%

10%

20%

30%

40%

50%

60%

Best tool(s) for preventing mobile fraud AVS Complete fraud platform Device ID Fraud Scoring Geolocation ID Authentication Mobile Geolocation Modeling NFC Rules Secure Mobile Payment Methods Telephone Number Identification Text Messaging - SMS Velocity Checks

presented by Kount | The Fraud Practice | CardNotPresent.com

Mobile Survey 2012

Secure mobile payment methods received the most merchant votes (60%) for preventing fraud in mobile transactions, followed by ID authentication (54%), and complete fraud platform (48%). ID authentication and device ID tied for the highest ranking from service providers (57% each).

Best tool(s) for preventing mobile fraud by type 100%

80%

Service Provider 60%

Merchant Card Issuer 40%

Card Association Acquirer

20%

Com

ple

De

Fra u

te f

rau

dp

la tf

AVS orm

vic e ID dS cor ing Ge ID A oloca tion uth ent Mo ica bile tion Ge olo ca t ion Mo del ing Sec ure NF C Pho Mobil Ru eP ne les mt Nu Me mb tho er Ide ntifi ds Me ca t ssa ion gin g -S Vel MS oci ty C hec ks

0%

39

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Mobile Survey 2012

40

Merchant opinions on the best tools for fighting mobile fraud vary by merchant size. Only 3% of the merchants with annual revenues greater than $50 million think AVS is a top three tool, while 10% or more of most other merchant groups rank do rank it in the top three.

Large merchants are also more likely to view velocity checks and NFC as important tools, compared to other merchants with less than $50 million annual revenues. Further, large merchants are the least likely to choose mobile geolocation as one of the top three mobile fraud prevention tools.

Best tool(s) for preventing mobile fraud by revenue 25%

20%

< $5 million 15%

$5 - $10 million $10 - $25 million 10%

$25 - $50 million > $50 million

5%

Com

ple

De

Fra u

te f

rau

dp

la tf

AVS orm

vic e ID dS cor ing Ge ID A oloca tion uth ent Mo ica bile tion Ge olo ca t ion Mo del ing Sec ure NF C Pho Mobil Ru eP ne les mt Nu Me mb tho er Ide ntifi ds Me ca t ssa ion gin g -S Vel MS oci ty C hec ks

0%

41

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Mobile Survey 2012

How merchants rank the various mobile fraud prevention tools differs substantially between retail market segments. Digital Goods, Office Supplies, Books/Music/Video or Health and Beauty merchants are most likely to rank device ID as one of the top three tools for preventing fraud on mobile devices. Merchants in the Apparel/Accessories, Specialty NonApparel, Toys/Hobbies and Flowers/Gifts segments are most likely to rank fraud scoring in the top three. While mobile geolocation was not often listed as a top three tool by merchants overall, 10% or more of Direct Response, Financial Services, Jewelry, Housewares/Home Furnishings, Gaming and Electronics merchants do rank it as a top three mobile fraud prevention tool.

Top 3 tools for preventing mobile fraud by segment

ID Mobile Modeling Geolocation AuthenticaGeolocation tion

NFC

Rules

Secure Mobile

0%

8.3%

10.4%

37.5%

8.3%

4.2%

10.4%

0%

7.7%

15.4%

53.8%

11.5%

11.5%

3.8%

0%

4.0%

20.0%

12.0%

56.0%

16.0%

8.0%

0%

40.9%

4.5%

9.1%

18.2%

13.6%

36.4%

18.2%

9.1%

9.1%

13.6%

22.7%

4.5%

4.5%

4.5%

13.6%

40.9%

13.6%

0%

9.1%

13.6%

36.4%

0%

0%

13.6%

13.6%

45.5%

9.1%

9.1%

9.1%

31.8%

18.2%

36.4%

4.5%

0%

9.1%

22.7%

40.9%

9.1%

13.6%

9.1%

13.6%

22.7%

18.2%

36.4%

4.5%

0%

9.1%

9.1%

27.3%

18.2%

9.1%

0%

33.3%

23.8%

19.0%

38.1%

42.9%

9.5%

0%

19.0%

14.3%

47.6%

19.0%

4.8%

4.8%

19.0%

33.3%

19.0%

9.5%

19.0%

33.3%

14.3%

0%

4.8%

9.5%

38.1%

19.0%

9.5%

9.5%

10.5%

31.6%

15.8%

15.8%

15.8%

26.3%

0%

0%

10.5%

10.5%

31.6%

21.1%

5.3%

5.3%

Office Supplies

23.5%

29.4%

29.4%

11.8%

17.6%

47.1%

0%

0%

5.9%

17.6%

52.9%

17.6%

0%

0%

Digital Goods

7.7%

38.5%

30.8%

7.7%

30.8%

30.8%

7.7%

7.7%

15.4%

15.4%

23.1%

15.4%

7.7%

0%

Flowers/Gifts

15.4%

38.5%

23.1%

23.1%

23.1%

38.5%

7.7%

0%

15.4%

15.4%

38.5%

15.4%

7.7%

0%

0%

20.0%

10.0%

0%

20.0%

40.0%

10.0%

0%

10.0%

20.0%

20.0%

10.0%

10.0%

10.0%

AVS

Complete Fraud

Device ID

Fraud Scoring

Apparel/Accessories

29.2%

18.8%

16.7%

27.1%

8.3%

41.7%

8.3%

Housewares/Home Furnishings

15.4%

38.5%

19.2%

11.5%

15.4%

30.8%

11.5%

Food/Drug

8.0%

36.0%

20.0%

12.0%

16.0%

40.0%

Books/Music/Video

18.2%

27.3%

27.3%

13.6%

22.7%

Hardware/Home Improvement

9.1%

18.2%

13.6%

22.7%

Health/Beauty

18.2%

18.2%

27.3%

9.1%

Specialty/Non-Apparel

18.2%

27.3%

18.2%

Toys/Hobbies

13.6%

36.4%

Computer/Electronics

19.0%

Jewelry Sporting Goods

Gaming

Telephone Text Number Messaging

Velocity Checks

40.0%

60.0%

20.0%

0%

0%

60.0%

0%

0%

20.0%

20.0%

60.0%

20.0%

0%

0%

Travel

0%

20.0%

20.0%

0%

20.0%

20.0%

0%

0%

0%

20.0%

40.0%

20.0%

20.0%

0%

Financial Service

0%

50.0%

0%

25.0%

25.0%

25.0%

25.0%

0%

0%

0%

25.0%

0%

0%

0%

Mass Merchant

0%

0%

0%

25.0%

50.0%

25.0%

0%

0%

25.0%

0%

0%

0%

25.0%

0%

Insurance

0%

33.3%

0%

0%

0%

0%

0%

0%

0%

33.3%

66.7%

66.7%

0%

0%

Telecom

0%

66.7%

0%

0%

0%

33.3%

0%

0%

0%

0%

66.7%

33.3%

0%

0%

Direct Response

0%

50.0%

0%

50.0%

50.0%

50.0%

50.0%

0%

0%

0%

50.0%

0%

0%

0%

Other Services

Mobile Survey 2012

presented by Kount | The Fraud Practice | CardNotPresent.com

42

Ability to Detect Mobile Devices in Transactions Merchants were also asked whether they are able to detect if transactions originate from a mobile device. Overall, 55% of merchants say their current fraud screening process cannot detect if a transaction originates from a mobile device. Of the remaining 45%, just 16% are able to identify the specific type of device being used, such as a smartphone, tablet, or gaming system. While less than half of merchants can recognize transactions initiated from mobile devices with their current fraud screening, a strong majority believe it is important to be able to do so. In fact, more than one-third of merchants find it “very important” while another 25% believe it is “important.” Only 4% of merchants think it is “not very important” to be able to detect whether or not transactions originate from mobile devices, while 16% had neutral opinions or were unsure.

Detect if transactions originate from mobile device

Yes, can detect type of device, i.e. smartphone, tablet, game console, etc.

16.4%

Yes, can detect if mobile device No

28.4%

55.2%

While a majority of merchants overall are not able to detect if a transaction originates from a mobile device, smaller merchants are more likely to lack this capability. 75% of merchants with annual revenues between $5 and $10 million and 60% of merchants with less than $5 million in annual revenues cannot detect if a mobile device is involved in a transaction. Larger merchants fare better, with more than half able to detect a mobile device. As for identifying the specific device type, larger merchants also outperform smaller merchants. 24% of merchants with more than $50 million annual revenues can identify the type of mobile device being used, compared to just 11% of merchants with annual revenues under $5 million.

Detect if originate from mobile device by revenue

80%

60%

Yes, can tell what type of device, i.e. smartphone, tablet, game console, etc.

50%

Yes, can tell if it is a mobile device

40%

No

70%

30% 20% 10% 0%

<$

5M

M $5

-10

MM

0 $1

-25

MM

5 $2

-50

MM

>$

50

MM

Mobile Survey 2012

43

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The market segment in which a merchant operates does impact whether or not their current fraud prevention systems can detect if a transaction involves a mobile device. For example, more than two-thirds of merchants lack this capability in the Computers/Electronics, Specialty Non-Apparel, Books/Music/Video, Toys/Hobbies, Office Supplies, Digital Goods, Gaming and Travel segments. It seems surprising that Digital Goods (70%) and Gaming (67%) merchants are not able to recognize whether or not transactions are coming from mobile devices. On the other hand, Hardware/Home Improvement (71%) and Sporting Goods (66%) merchants are more likely to be able to tell if a transaction is coming from a mobile device.

Detect if originate from mobile device by market segment Apparel/Accessories Housewares/Home Furnishings Food/Drug Books/Music/Video Hardware/Home Improvement Health/Beauty Specialty/Non-Apparel Toys/Hobbies Computer/Electronics Jewelry Sporting Goods Office Supplies Digital Goods Flowers/Gifts Gaming Other Services Travel Financial Service Mass Merchant Insurance Telecom Direct Response

Yes, And What Type of Mobile Device

Yes, But Only That is Mobile

No

15.2% 14.3% 20.0% 0% 35.7% 12.5% 5.9% 6.3% 17.6% 12.5% 18.2% 7.1% 0% 9.1% 0% 20.0% 0% 50.0% 0% 0% 0% 50.0%

33.3% 38.1% 25.0% 25.0% 35.7% 25.0% 23.5% 25.0% 11.8% 37.5% 45.5% 21.4% 30.0% 36.4% 33.3% 60.0% 33.3% 0% 50.0% 100.0% 50.0% 0%

51.5% 47.6% 55.0% 75.0% 28.6% 62.5% 70.6% 68.8% 70.6% 50.0% 36.4% 71.4% 70.0% 54.5% 66.7% 20.0% 66.7% 50.0% 50.0% 0% 50.0% 50.0%

Mobile Survey 2012

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44

Mobile E-Commerce - Today and Tomorrow This section examines how companies currently operate in the mobile sales channel and their plans and projections for the next two years: • Revenue from the mobile sales channel • Support for mobile OS platforms • Mobile capabilities/infrastructure • Tools deployed against mobile fraud

Revenue from the Mobile Sales Channel Many merchants and merchant services business have big expectations and significant plans for mobile, but presently, mobile is a fairly small portion of most companies’ overall revenues. Nearly 9 in 10 respondents estimate that mobile contributes less than 20% to their businesses currently, and 56% estimate that mobile contributes less than 5% to their business. Nonetheless, these businesses expect mobile to grow to a more sizeable share of revenues: just 11% of respondents believe that less than 5% of their business will come from the mobile sales channel within 2 years. And 29% of business estimate that in two years, 1020% of their business will come through the mobile sales channel.

Percentage of sales in mobile channel

60%

Today

50%

In 2 Years 40%

30%

20%

10%

0%

s Les

tha

n5

% 5%

-1

0% 0% 0% 0% 0% 0% -3 -2 -5 -4 n5 % % % % tha 20 10 40 30 e r Mo

Mobile Survey 2012

45

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Service providers and merchants are the two types of companies that currently generate the largest percentage of their business from the mobile sales channel. 12% of service providers and 4.5% of merchants earn 30% or more of their business through the mobile channel.

And they expect mobile revenues to increase over the next two years. 39% of service providers and 19% of merchants estimate that 30% or more of their business will come from the mobile sales channel in two years. Further, while 57% of service providers and 50% of merchants estimate that, at present, less than 5% of their business comes from mobile sales, just 12% of them say that in two years mobile sales will account for less than 5% of revenue.

Today % sales in mobile channel by type

Acquirer

Card Association

Card Issuer

Merchant

Service Provider

85.7% 0% 0% 14.3% 0% 0% 0%

100.0% 0% 0% 0% 0% 0% 0%

92.3% 0% 0% 0% 7.7% 0% 0%

50.0% 28.2% 12.8% 4.5% 1.9% 0.6% 1.9%

56.5% 11.6% 11.6% 8.7% 0% 4.3% 7.2%

Acquirer

Card Association

Card Issuer

Merchant

Service Provider

0% 28.6% 42.9% 0% 14.3% 14.3% 0%

0% 100.0% 0% 0% 0% 0% 0%

7.7% 15.4% 38.5% 30.8% 0% 0% 7.7%

12.2% 19.2% 30.8% 19.2% 5.8% 4.5% 8.3%

11.6% 18.8% 21.7% 8.7% 10.1% 11.6% 17.4%

Less than 5% 5% - 10% 10% - 20% 20% - 30% 30% - 40% 40% - 50% More than 50%

2 yrs % sales in mobile channel by type Less than 5% 5% - 10% 10% - 20% 20% - 30% 30% - 40% 40% - 50% More than 50%

Percentage of sales in mobile channel (merchants)

50%

Today 40%

In 2 Years

30%

20%

10%

0%

s Les

tha

n5

% 5%

-1

0% 0% 0% 0% 0% 0% -3 -2 -5 -4 n5 % % % % tha 20 10 40 30 e r Mo

Mobile Survey 2012

presented by Kount | The Fraud Practice | CardNotPresent.com

46

When evaluating expectations about the growth of sales in the mobile channel, smaller merchants appear more optimistic. While the percentage of small and large merchants that generate less than 5% of their business through the mobile channel today is fairly comparable (49% vs 57%), only 11% of merchants with less than $5 million in annual revenues expect the mobile channel to comprise 5% or less of their business. On the other hand, 20% of merchants with more than $50 million in annual revenues say mobile will account for just 5% or less of their business. It may be that these large merchants are simply expecting mobile to grow more slowly, as most predict that 10 to 20% of their business will come through the mobile channel in two years.

Today percentage of sales in mobile channel by revenue (merchants)

60%

< $5 million

50%

$5 million - $10 million 40%

$10 million - $25 million $25 million - $50 million

30%

> $50 million 20%

10%

0%

s Les

In 2 years percentage of sales in mobile channel by revenue (merchants)

tha

n5

% 5%

-1

0% 0% 0% 0% 0% 0% -3 -2 -5 -4 n5 % % % % tha 20 10 40 30 e r Mo

50%

< $5 million 40%

$5 million - $10 million $10 million - $25 million

30%

$25 million - $50 million > $50 million

20%

10%

0%

L

t ess

han

% 0% 0% 5% 0% 0% 0% 50 -3 -2 -1 -5 -4 an % % % % h t 0 0 5% 0 0 2 1 4 3 re Mo

Mobile Survey 2012

47

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For most merchant market segments, mobile sales account for 20% or less of overall sales.

In fact, only two segments have merchants with more than 50% of their business coming through the mobile channel: Food/Drug (8%) and Specialty Non-Apparel (4.5%). As for expectations about the growth of mobile sales, Jewelry, Digital Goods and Gaming are the merchant segments that project the biggest growth.

Today - % sales in mobile channel by market segment Apparel/Accessories Housewares/Home Furnishings Food/Drug Books/Music/Video Hardware/Home Improvement Health/Beauty Specialty/Non-Apparel Toys/Hobbies Computer/Electronics Jewelry Sporting Goods Office Supplies Digital Goods Flowers/Gifts Gaming Other Services Travel Financial Service Mass Merchant Insurance Telecom Direct Response

<5%

5-10%

10-20%

20-30%

30-40%

40-50%

>50%

31.3% 50.0% 44.0% 50.0% 50.0% 59.1% 50.0% 45.5% 42.9% 28.6% 47.4% 64.7% 30.8% 38.5% 30.0% 40.0% 20.0% 25.0% 75.0% 0% 0% 0%

41.7% 26.9% 20.0% 31.8% 40.9% 27.3% 18.2% 31.8% 42.9% 38.1% 42.1% 17.6% 30.8% 23.1% 40.0% 40.0% 40.0% 75.0% 0% 66.7% 100.0% 50.0%

16.7% 15.4% 16.0% 9.1% 0% 4.5% 13.6% 13.6% 4.8% 19.0% 5.3% 0% 23.1% 15.4% 10.0% 0% 0% 0% 0% 0% 0% 0%

8.3% 7.7% 12.0% 9.1% 9.1% 4.5% 9.1% 9.1% 9.5% 9.5% 5.3% 5.9% 15.4% 15.4% 20.0% 20.0% 40.0% 0% 25.0% 33.3% 0% 50.0%

2.1% 0% 0% 0% 0% 4.5% 4.5% 0% 0% 4.8% 0% 5.9% 0% 0% 7.7% 0% 0% 0% 0% 0% 0% 0%

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 5.9% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

0% 0% 8.0% 0% 0% 0% 4.5% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Mobile Survey 2012

48

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2 years - % sales in mobile channel by market segment Apparel/Accessories Housewares/Home Furnishings Food/Drug Books/Music/Video Hardware/Home Improvement Health/Beauty Specialty/Non-Apparel Toys/Hobbies Computer/Electronics Jewelry Sporting Goods Office Supplies Digital Goods Flowers/Gifts Gaming Other Services Travel Financial Service Mass Merchant Insurance Telecom Direct Response

<5%

5-10%

10-20%

20-30%

30-40%

40-50%

>50%

6.3% 15.4% 16.0% 13.6% 9.1% 9.1% 13.6% 9.1% 9.5% 0% 10.5% 5.9% 0% 0% 0% 0% 0% 0% 25.0% 0% 0% 0%

16.7% 19.2% 16.0% 18.2% 18.2% 22.7% 31.8% 27.3% 14.3% 9.5% 21.1% 23.5% 23.1% 23.1% 30.0% 20.0% 0% 0% 50.0% 0% 0% 0%

29.2% 23.1% 16.0% 22.7% 27.3% 36.4% 13.6% 22.7% 33.3% 28.6% 31.6% 35.3% 23.1% 15.4% 20.0% 40.0% 40.0% 50.0% 0% 0% 66.7% 0%

25.0% 19.2% 24.0% 27.3% 27.3% 9.1% 18.2% 13.6% 28.6% 28.6% 15.8% 11.8% 30.8% 15.4% 10.0% 0% 20.0% 0% 25.0% 33.3% 33.3% 0%

10.4% 7.7% 4.0% 4.5% 4.5% 9.1% 4.5% 9.1% 4.8% 14.3% 15.8% 5.9% 0% 15.4% 10.0% 0% 20.0% 25.0% 0% 33.3% 0% 0%

6.3% 11.5% 8.0% 4.5% 13.6% 9.1% 9.1% 4.5% 4.8% 9.5% 5.3% 5.9% 15.4% 15.4% 20.0% 20.0% 20.0% 0% 0% 33.3% 0% 50.0%

6.3% 3.8% 16.0% 9.1% 0% 4.5% 9.1% 13.6% 4.8% 9.5% 0% 11.8% 7.7% 15.4% 10.0% 20.0% 0% 25.0% 0% 0% 0% 50.0%

Mobile Survey 2012

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49

Support for Mobile OS Platforms Eight of 10 businesses already support Apple iOS and Android, with 44% of respondents also supporting Windows, and 30% supporting BlackBerry. In 2013, 33% plan to add support for Windows and 20% plan to add support for BlackBerry.

NOTE: In chart below, percentages for “Have Currently” and “Planned to Support in 2013” add up to more than 100% in some instances because “Planned to Support in 2013” may include enhancements to extend new features/functionality to OS platform this is currently supported.

Mobile OS support, today and in 2 years

100%

Have Currently 80%

Planned to Support for 2013

60%

40%

20%

0%

iOS

An

dro

id

Wi

nd

ow

s Bla

ckB

err

y

Oth

er

Most merchants and service providers already support the major mobile platforms with 83% of merchants and 81% of service providers supporting iOS, while 79% of merchants and 78% of service providers currently support Android. While 47% of merchants support the Windows mobile platform today, 30% plan to add support for it in 2013. Merchants and service providers are less likely to support BlackBerry, but 71% of acquirers and 100% of card associations currently do support this mobile platform.

Mobile Survey 2012

50

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NOTE: In tables below, percentages for “Current mobile OS support” and “Planned mobile OS support” add up to more than 100% in some instances because “Planned mobile OS support” may include enhancements to extend new features/functionality to OS platform this is currently supported.

Current mobile OS support by type

Acquirer

Card Association

Card Issuer

Merchant

Service Provider

iOS Android Windows BlackBerry Other

100.0% 100.0% 28.6% 71.4% 14.3%

100.0% 100.0% 100.0% 100.0% 0%

61.5% 69.2% 30.8% 23.1% 23.1%

83.0% 79.4% 46.8% 27.7% 2.8%

81.2% 78.3% 40.6% 29.0% 2.9%

Planned mobile OS support by type

Acquirer

Card Association

Card Issuer

Merchant

Service Provider

42.9% 42.9% 71.4% 28.6% 28.6%

50.0% 50.0% 50.0% 50.0% 50.0%

38.5% 61.5% 15.4% 23.1% 0%

39.4% 38.1% 30.3% 20.0% 4.5%

47.8% 50.7% 37.7% 18.8% 2.9%

iOS Android Windows BlackBerry Other

When sorting by company revenue to determine differences in the level of support for the various mobile platforms, one might expect that large merchants would be more likely to support all or most of the mobile platforms, compared to smaller companies. However, the actual results are more mixed. For example, merchants with $10 million to $50 million in annual revenues are actually more likely to support the Windows and Blackberry mobile platforms than merchants with more than $50 million in annual revenue. It is true, however, that small merchants are less likely to support mobile overall, and tend to focus their support on the more popular Apple iOS and Android platforms.

Current mobile OS support by $ (merchants) iOS Android Windows BlackBerry Other

Planned mobile OS support by $ (merchants) iOS Android Windows BlackBerry Other

<$5MM

$5-10MM

$10-25MM

$25-50MM

>$50MM

64.9% 66.7% 35.1% 14.0% 3.5%

91.7% 83.3% 50.0% 25.0% 0%

92.9% 92.9% 57.1% 42.9% 0%

87.5% 87.5% 75.0% 50.0% 0%

98.0% 88.0% 52.0% 36.0% 2.0%

<$5MM

$5-10MM

$10-25MM

$25-50MM

>$50MM

39.1% 35.9% 34.4% 20.3% 1.6%

38.5% 38.5% 30.8% 30.8% 0%

53.3% 53.3% 26.7% 26.7% 0%

33.3% 33.3% 22.2% 11.1% 11.1%

37.0% 37.0% 27.8% 16.7% 3.7%

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51

Mobile Capabilities and Infrastructure Merchants and non-merchants currently support a number of key mobile capabilities and infrastructure, and a substantial percentage have plans to enhance these 2013. While merchants are most focused on dedicated mobile sites and, to a slightly lesser degree, on mobile apps for both online and in-store shopping, non-merchants are most focused on supporting mobile payments, followed by supporting mobile apps for online shopping.

NOTE: In chart below, percentages for “Have Currently” and “Planned to Support in 2013” add up to more than 100% in some instances because some respondents may have said “Plan to Support for 2013” to indicate continued/enhanced efforts in support current capabilities.

Mobile capabilities and planned initiatives

MERCHANTS

NON-MERCHANTS

120% 110% 100%

Have Currently

90%

Plan to Support for 2013

80% 70% 60% 50% 40% 30% 20% 10%

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Mobile Survey 2012

Mobile Survey 2012

52

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All non-merchants are focused on support for mobile payments both now and in the future.

Support for mobile apps generally ranks as next highest under current capabilities, with an increasing emphasis in 2013 for deployment of dedicated mobile sites.

NOTE: In tables below, percentages can add up to more than 100% in some instances because some respondents may have said â&#x20AC;&#x153;Plan to Support for 2013â&#x20AC;? to indicate continued/enhanced efforts in support current capabilities.

Current mobile capabilities by type

Acquirer

Card Association

Card Issuer

Service Provider

Have a dedicated mobile website

42.9%

50.0%

7.7%

30.4%

Support mobile payments (NFC,mobile web, mobile wallets, etc.)

85.7%

100.0%

92.3%

47.8%

Support for mobile app for online shopping

57.1%

100.0%

38.5%

50.7%

Support for mobile app for in-store shopping

57.1%

100.0%

15.4%

27.5%

Available SDK for developers

28.6%

50.0%

15.4%

24.6%

Planned mobile capabilities by type

Acquirer

Card Association

Card Issuer

Service Provider

Plan to have a dedicated mobile website

42.9%

50.0%

53.8%

33.3%

Plan for support for mobile payments (NFC, mobile web, mobile wallets, etc.)

71.4%

100.0%

46.2%

53.6%

Plan for support for mobile app for online shopping

14.3%

100.0%

15.4%

44.9%

Plan for support for mobile app for in-store shopping

14.3%

100.0%

30.8%

34.8%

Plan to have SDK for developers

14.3%

50.0%

23.1%

24.6%

Mobile Survey 2012

53

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60% of merchants currently have a dedicated mobile website, and many merchants have several other mobile efforts planned for 2013. While less than 8% of merchants have mobile apps for in-store shopping today, 15% plan to set up an in-store mobile shopping app in 2013. More merchants are focused on mobile apps for online shopping, as 33% of merchants support this currently and 45% plan to add this feature in 2013. While less than a quarter of all merchants currently support mobile payment methods, 40% plan to support mobile payments for 2013.

NOTE: In chart below, percentages for “Have Currently” and “Planned to Support in 2013” add up to more than 100% in some instances because some respondents may have said “Plan to Support for 2013” to indicate continued/enhanced efforts in support current capabilities.

120% 110%

Mobile capabilities and planned initiatives (merchants)

100% 100%

Have Currently

100%

Have Currently 80%

90%

Plan to Support

Have Currentl

for 2013 Plan to Support for 2013

60%

80% 80%

40%

Plan to Suppo for 2013

70% 20%

60% 60%

0%

50% 40% 40% 30% 20% 20% 10%

0%0% Have Dedicated Mobile Website

Support for Mobile Payment

Mobile App for Online Shopping

Mobile App for In-store Shopping

Mobile Survey 2012

54

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A merchantâ&#x20AC;&#x2122;s size affects its current mobile capabilities, as well as its plans for future enhancements. For example, two-thirds of merchants with more than $50 million in annual revenues already offer a dedicated mobile website, compared to 46% of merchants with less than $5 million in annual revenues. Similarly, 17% of large merchants have mobile apps for instore shopping versus just 2% for small merchants. Small merchants, however, are almost as likely to have a mobile app for online shopping (34% vs. 37%) and are more likely to support mobile payments (31% vs. 22%).

NOTE: In tables below, percentages add up to more than 100% in some instances because some respondents may have said â&#x20AC;&#x153;Plan to Support for 2013â&#x20AC;? to indicate continued/enhanced efforts in support current capabilities.

Current mobile capabilities (merchants)

<$5MM

$5-10MM

$10-25MM

$25-50MM

>$50MM

Have a dedicated mobile website

46.9%

69.2%

86.7%

60.0%

66.7%

Support mobile payments (NFC, mobile web, mobile wallets, etc.)

31.3%

23.1%

0%

30.0%

22.2%

Mobile app for online shopping

34.4%

38.5%

20.0%

10.0%

37.0%

Mobile app for in-store shopping

1.6%

15.4%

0%

0%

16.7%

<$5MM

$5-10MM

$10-25MM

$25-50MM

>$50MM

Have a dedicated mobile website

42.2%

46.2%

53.3%

50.0%

44.4%

Support mobile payments (NFC, mobile web, mobile wallets, etc.)

35.9%

30.8%

26.7%

60.0%

46.3%

Mobile app for online shopping

51.6%

53.8%

33.3%

30.0%

40.7%

Mobile app for in-store shopping

15.5%

23.1%

6.7%

10.0%

18.5%

Planned mobile capabilities (merchants)

Breaking out current and planned mobile capabilities by market segment, the data shows that around 70% of all merchants in the Apparel/Accessories, Books/Music/Video, Home Improvement, Sporting Goods and Digital Goods industries already have a dedicated mobile website. Regarding planned support for mobile payment methods, 50% or more of merchants from industries such as Food/Drug and Gaming plan to support mobile payments for 2013, while less than 30% of merchants in the Home Improvement, Toys/Hobbies and Office Supplies industries plan to support mobile payments for 2013.

Mobile Survey 2012

Current mobile capabilities by market segment (merchants)

NOTE: In tables on this page, percentages add up to more than 100% in some instances because some respondents may have said â&#x20AC;&#x153;Plan to Support for 2013â&#x20AC;? to indicate continued/enhanced efforts in support current capabilities.

55

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Apparel/Accessories Housewares/Home Furnishings Food/Drug Books/Music/Video Hardware/Home Improvement Health/Beauty Specialty/Non-Apparel Toys/Hobbies Computer/Electronics Jewelry Sporting Goods Office Supplies Digital Goods Flowers/Gifts Gaming Other Services Travel Financial Service Mass Merchant Insurance Telecom Direct Response

Planned mobile capabilities by market segment (merchants) Apparel/Accessories Housewares/Home Furnishings Food/Drug Books/Music/Video Hardware/Home Improvement Health/Beauty Specialty/Non-Apparel Toys/Hobbies Computer/Electronics Jewelry Sporting Goods Office Supplies Digital Goods Flowers/Gifts Gaming Other Services Travel Financial Service Mass Merchant Insurance Telecom Direct Response

Dedicated Mobile Site

Support Mobile Payments

Mobile App Online

Mobile App In-Store

70.8% 53.8% 60.0% 68.2% 68.2% 59.1% 63.6% 56.5% 52.4% 61.9% 68.4% 47.1% 69.2% 61.5% 50.0% 80.0% 40.0% 50.0% 100.0% 33.3% 66.7% 100.0%

20.8% 23.1% 24.0% 22.7% 13.6% 0% 36.4% 17.4% 23.8% 14.3% 10.5% 17.6% 23.1% 23.1% 20.0% 0% 20.0% 25.0% 25.0% 0% 0% 0%

29.2% 34.6% 36.0% 31.8% 36.4% 36.4% 27.3% 39.1% 42.9% 38.1% 31.6% 41.2% 46.2% 38.5% 70.0% 20.0% 40.0% 75.0% 50.0% 33.3% 33.3% 50.0%

14.6% 7.7% 12.0% 9.1% 9.1% 22.7% 9.1% 8.7% 14.3% 14.3% 15.8% 5.9% 23.1% 15.4% 30.0% 20.0% 40.0% 25.0% 0% 33.3% 0% 50.0%

Dedicated Mobile Site

Support Mobile Payments

Mobile App Online

Mobile App In-Store

52.1% 42.3% 28.0%

47.9% 38.5% 52.0% 45.5% 27.3% 45.5% 45.5% 21.7% 33.3% 42.9% 36.8% 23.5% 38.5% 30.8% 50.0% 20.0% 0% 25.0% 25.0% 0% 33.3% 100.0%

35.4% 42.3% 32.0% 22.7% 40.9% 50.0% 18.2% 30.4% 42.9% 28.6% 42.1% 64.7% 46.2% 15.4% 30.0% 80.0% 40.0% 50.0% 25.0% 0% 33.3% 0%

14.6% 11.5% 16.0% 18.2% 18.2% 13.6% 13.6% 13.0% 28.6% 14.3% 15.8% 17.6% 53.8% 7.7% 50.0% 20.0% 40.0% 25.0% 25.0% 33.3% 33.3% 50.0%

50.0% 50.0% 31.8% 59.1% 43.5% 38.1% 47.6% 36.8% 23.5% 7.7% 53.8% 10.0% 20.0% 60.0% 25.0% 50.0% 66.7% 33.3% 0%

Mobile Survey 2012

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56

Tools Deployed to Combat Mobile Fraud Merchants and merchant services business are using a wide variety of tools and services to prevent mobile fraud. Overall, the most popular are ID authentication and secure mobile payment methods (both 32%), followed by rules (29%) and device ID (23%).

Tools and services used to prevent mobile fraud AVS

22.7%

Complete fraud platform (includes

12.7%

several of the technologies listed) Device ID

23.2%

Fraud Scoring

22.1%

Geolocation

14.4%

ID Authentication

32.0%

Mobile Geolocation

3.9%

Modeling

7.7%

NFC

2.2%

Rules

28.7%

Secure Mobile Payment Methods

31.5%

Telephone Number Identification

14.9%

Text Messaging - SMS Velocity Checks

6.6% 16.0%

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Mobile Survey 2012

57

Comparing the different business types and which fraud tools they prefer, the survey results show that merchants deploy the widest variety of fraud tools. Even so, only 11% of merchants are using device ID for mobile fraud prevention, compared to 45% of service providers, 40% of card issuers and 50% of acquirers and card associations. Instead, the tools most commonly used by merchants are secure mobile payment methods (32%) and AVS (23%), even though AVS does not provide a very strong signal for fraud when used by itself.

Mobile fraud solutions in use by type

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Acquirer

Card Association

Card Issuer

Merchant

Service Provider

AVS

Geolocation

NFC

Text Messaging - SMS

Complete Fraud Platform

ID Authentication

Rules

Velocity Checks

DeviceID

Mobile Geolocation

Secure mobile pmt methods

Fraud Scoring

Modeling

Phone Number Identification

Mobile Survey 2012

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58

While a relatively small percentage of merchants deploy various mobile fraud prevention tools today, many merchants plan on adding more of these tools to their arsenal in 2013. The tools that most merchants plan to add in 2013 are a complete fraud platform (37%), secure mobile payment methods (17%) and device ID (15%). The fraud prevention tools and techniques that merchants are least likely to deploy in 2013 include velocity checks (3%) and mobile geolocation (5%).

Mobile fraud solutions in use by type (merchants) 60%

50%

40%

30%

20%

10%

0%

AVS Complete fraud platform Device ID60% Fraud Scoring Use Today

Geolocation

50%

ID Authentication

Plan to Add in 2013

Mobile Geolocation

40%

Modeling

NFC Rules30% Secure Mobile Payment Methods Telephone Number Identification20% Text Messaging - SMS Velocity Checks

10%

0%

10%

20%

30%

40%

50%

Use Today

Plan to Add in 2013

0%

60%

59

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Mobile Survey 2012

The size of a merchant affects their preference for the mobile fraud tools they use today and plan on adding tomorrow. For example, large merchants are more likely than small merchants to use a complete fraud platform (27% vs. 17%). Interestingly, small merchants are slightly more likely (35%) to add a complete fraud platform in 2013 than large merchants (32%).

Device ID is less common among small merchants (9%) and only 13% plan to add it in 2013, whereas 14% of the largest merchants already use device ID and 22% plan to add it in 2013.

Current mobile fraud tools by $ (merchants)

<$5MM

$5-10MM

$10-25MM

$25-50MM

>$50MM

AVS

28.3%

25.0%

37.5%

16.7%

24.3%

Complete fraud platform

17.0%

8.3%

25.0%

16.7%

27.0%

Device ID

9.4%

16.7%

12.5%

0%

13.5%

Fraud Scoring

15.1%

25.0%

25.0%

16.7%

21.6%

Geolocation

11.3%

16.7%

0%

16.7%

13.5%

ID Authentication

20.8%

16.7%

12.5%

16.7%

27.0%

0%

8.3%

0%

0%

0%

Modeling

1.9%

0%

0%

0%

8.1%

NFC

1.9%

0%

0%

0%

0%

Rules

7.5%

25.0%

12.5%

50.0%

35.1%

Secure Mobile Payment Methods

37.7%

25.0%

37.5%

33.3%

18.9%

Telephone Number Identification

3.8%

8.3%

0%

16.7%

16.2%

Text Messaging - SMS

1.9%

0%

0%

0%

5.4%

Velocity Checks

5.7%

8.3%

0%

16.7%

10.8%

<$5MM

$5-10MM

$10-25MM

$25-50MM

>$50MM

AVS

7.5%

8.3%

12.5%

0%

2.7%

Complete fraud platform

35.8%

16.7%

62.5%

83.3%

32.4%

Device ID

13.2%

16.7%

0%

0%

21.6%

Fraud Scoring

5.7%

16.7%

12.5%

0%

8.1%

Geolocation

1.9%

8.3%

0%

0%

10.8%

ID Authentication

9.4%

25.0%

0%

0%

13.5%

Mobile Geolocation

11.3%

8.3%

0%

0%

0%

Modeling

3.8%

8.3%

12.5%

0%

0%

NFC

5.7%

0%

0%

0%

2.7%

Rules

7.5%

16.7%

12.5%

0%

18.9%

Secure Mobile Payment Methods

11.3%

33.3%

25.0%

16.7%

18.9%

Telephone Number Identification

13.2%

0%

0%

16.7%

5.4%

Text Messaging - SMS

13.2%

0%

0%

0%

0%

Velocity Checks

1.9%

0%

0%

0%

5.4%

Mobile Geolocation

Planned mobile fraud tools by $ (merchants)

60

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Mobile Survey 2012

The types of mobile fraud prevention tools a merchant uses varies substantially based on the market segment the merchant is in. Computers/Electronics, Gaming, and Telecom merchants rely most on device ID today, while a significant percentage of merchants in the Toys/Hobbies, Hardware/Home Improvement and Flowers/Gifts industries plan to add it in 2013. Very few merchants use mobile geolocation, but two segments where a significant number of merchants plan to add it in 2013 are Computers/Electronics and Gaming.

Current top tools for preventing mobile fraud

ID Mobile Modeling Geolocation AuthenticaGeolocation tion

NFC

Rules

Secure Mobile

2.1%

0%

16.7%

16.7%

6.3%

2.1%

6.3%

0%

0%

26.9%

19.2%

11.5%

3.8%

7.7%

4.0%

0%

4.0%

12.0%

36.0%

12.0%

12.0%

0%

0%

4.5%

4.5%

0%

22.7%

22.7%

9.1%

9.1%

9.1%

AVS

Complete Fraud

Device ID

Fraud Scoring

Apparel/Accessories

25.0%

14.6%

6.3%

18.8%

2.1%

10.4%

0%

Housewares/Home Furnishings

15.4%

19.2%

7.7%

11.5%

15.4%

7.7%

0%

Food/Drug

8.0%

12.0%

0%

4.0%

8.0%

16.0%

Books/Music/Video

13.6%

18.2%

13.6%

9.1%

13.6%

Telephone Text Number Messaging

Velocity Checks

Hardware/Home Improvement

9.1%

0%

18.2%

13.6%

13.6%

13.6%

0%

0%

0%

27.3%

22.7%

4.5%

0%

4.5%

Health/Beauty

13.6%

4.5%

9.1%

4.5%

9.1%

9.1%

0%

0%

0%

13.6%

22.7%

4.5%

4.5%

4.5%

Specialty/Non-Apparel

13.6%

36.4%

0%

18.2%

4.5%

4.5%

0%

0%

4.5%

13.6%

13.6%

4.5%

4.5%

0%

Toys/Hobbies

13.6%

27.3%

9.1%

13.6%

13.6%

4.5%

0%

0%

0%

18.2%

18.2%

9.1%

4.5%

9.1%

Computer/Electronics

19.0%

23.8%

23.8%

23.8%

19.0%

14.3%

0%

4.8%

0%

23.8%

19.0%

14.3%

9.5%

14.3%

Jewelry

23.8%

28.6%

0%

14.3%

9.5%

9.5%

0%

0%

0%

28.6%

9.5%

9.5%

4.8%

9.5%

Sporting Goods

21.1%

10.5%

5.3%

21.1%

21.1%

0%

0%

0%

0%

26.3%

10.5%

10.5%

5.3%

10.5%

Office Supplies

23.5%

11.8%

11.8%

17.6%

17.6%

11.8%

0%

11.8%

0%

17.6%

35.3%

11.8%

0%

17.6%

Digital Goods

15.4%

23.1%

15.4%

23.1%

30.8%

7.7%

7.7%

7.7%

0%

30.8%

0%

15.4%

7.7%

30.8%

Flowers/Gifts

15.4%

23.1%

0%

7.7%

7.7%

15.4%

0%

0%

0%

15.4%

23.1%

15.4%

15.4%

7.7%

Gaming

10.0%

20.0%

30.0%

30.0%

10.0%

20.0%

0%

10.0%

0%

20.0%

0%

10.0%

10.0%

10.0%

Other Services

40.0%

20.0%

0%

0%

0%

40.0%

0%

20.0%

0%

20.0%

20.0%

20.0%

0%

0%

Travel

0%

20.0%

0%

0%

20.0%

0%

0%

0%

0%

20.0%

0%

20.0%

0%

0%

Financial Service

0%

25.0%

25.0%

25.0%

0%

50.0%

0%

0%

0%

0%

25.0%

0%

0%

0%

Mass Merchant

0%

25.0%

25.0%

0%

0%

0%

0%

0%

0%

25.0%

0%

0%

0%

0%

Insurance

33.3%

0%

0%

33.3%

33.3%

0%

0%

0%

0%

66.7%

0%

33.3%

0%

33.3%

Telecom

66.7%

33.3%

33.3%

66.7%

66.7%

0%

0%

33.3%

0%

66.7%

0%

0%

0%

66.7%

0%

50.0%

50.0%

50.0%

0%

100.0%

0%

0%

0%

0%

0%

0%

0%

0%

AVS

Complete Fraud

Device ID

Fraud Scoring

NFC

Rules

Secure Mobile

Direct Response

Planned top tools for preventing mobile fraud

ID Mobile Modeling Geolocation AuthenticaGeolocation tion

Telephone Text Number Messaging

Velocity Checks

6.3%

25.0%

6.3%

8.3%

4.2%

4.2%

0%

0%

4.2%

8.3%

10.4%

6.3%

4.2%

4.2%

Housewares/Home Furnishings

0%

34.6%

15.4%

7.7%

7.7%

11.5%

3.8%

3.8%

3.8%

11.5%

3.8%

3.8%

7.7%

7.7%

Food/Drug

0%

32.0%

20.0%

4.0%

8.0%

12.0%

4.0%

0%

0%

12.0%

28.0%

12.0%

4.0%

0%

Books/Music/Video

0%

36.4%

18.2%

9.1%

13.6%

18.2%

0%

4.5%

0%

13.6%

13.6%

4.5%

0%

0%

Hardware/Home Improvement

0%

13.6%

22.7%

18.2%

13.6%

9.1%

0%

9.1%

0%

18.2%

13.6%

4.5%

0%

4.5%

Health/Beauty

4.5%

22.7%

18.2%

9.1%

4.5%

13.6%

0%

4.5%

0%

13.6%

0%

4.5%

4.5%

4.5%

Specialty/Non-Apparel

4.5%

40.9%

4.5%

9.1%

4.5%

9.1%

0%

0%

0%

4.5%

9.1%

9.1%

9.1%

0%

Toys/Hobbies

0%

27.3%

22.7%

13.6%

9.1%

9.1%

0%

4.5%

4.5%

9.1%

4.5%

4.5%

4.5%

0%

Computer/Electronics

0%

28.6%

19.0%

19.0%

23.8%

14.3%

14.3%

4.8%

4.8%

14.3%

14.3%

14.3%

4.8%

0%

4.8%

38.1%

9.5%

9.5%

4.8%

9.5%

0%

4.8%

4.8%

9.5%

4.8%

4.8%

4.8%

4.8%

Sporting Goods

0%

21.1%

21.1%

5.3%

10.5%

10.5%

0%

5.3%

5.3%

10.5%

5.3%

10.5%

5.3%

0%

Office Supplies

5.9%

29.4%

17.6%

5.9%

5.9%

17.6%

5.9%

5.9%

0%

11.8%

5.9%

11.8%

0%

0%

Digital Goods

0%

15.4%

15.4%

15.4%

15.4%

15.4%

7.7%

15.4%

0%

15.4%

7.7%

15.4%

0%

0%

Flowers/Gifts

0%

38.5%

23.1%

7.7%

15.4%

15.4%

7.7%

7.7%

0%

7.7%

15.4%

7.7%

7.7%

0%

Gaming

0%

10.0%

10.0%

20.0%

20.0%

10.0%

20.0%

0%

10.0%

10.0%

0%

20.0%

0%

0%

Other Services

0%

20.0%

40.0%

20.0%

20.0%

20.0%

0%

0%

0%

7.7%

40.0%

20.0%

0%

0%

Travel

0%

20.0%

20.0%

40.0%

20.0%

0%

0%

0%

0%

20.0%

0%

20.0%

0%

0%

Financial Service

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

0%

Mass Merchant

0%

0%

25.0%

25.0%

25.0%

0%

0%

0%

0%

25.0%

25.0%

0%

0%

0%

Insurance

0%

0%

66.7%

33.3%

33.3%

33.3%

0%

33.3%

0%

33.3%

0%

33.3%

0%

0%

Telecom

0%

0%

33.3%

0%

0%

0%

0%

33.3%

0%

0%

0%

0%

0%

0%

Direct Response

0%

0%

0%

0%

50.0%

0%

50.0%

0%

0%

0%

50.0%

0%

0%

0%

Apparel/Accessories

Jewelry

Mobile Survey 2012

presented by Kount | The Fraud Practice | CardNotPresent.com

61

Conclusion Based on the results of the 2012 Mobile Survey, it’s clear that mobile e-commerce is in the early stages of development. Nonetheless, merchants and merchant services companies are moving to capitalize on this new opportunity. Some overall findings include: • Mobile e-commerce currently accounts for less than 5% of revenue for a majority of organizations, yet 29% predict it will account for 10% to 20% of their sales within two years and certain merchant segments and/or larger organizations predict that mobile will generate 30% to 50% or more of their revenues by 2014 • While larger organizations are more sophisticated in most aspects of mobile e-commerce, smaller organizations do not lag significantly and many have plans to catch up • Mobile capabilities vary greatly, but most merchants have or plan to have a dedicated mobile website within the next two years; other popular mobile capabilities (current or planned) include apps for online shopping and support for mobile payments • Merchants and service providers think that difficulty of mobile transactions is the biggest obstacle to the increased adoption of mobile e-commerce and seem somewhat unconcerned about fraud risk, whereas acquirers, card associations, and card issuers view fraud risk as the biggest obstacle to mobile e-commerce adoption and discount transaction difficulty almost entirely • Although a slight majority of organizations think the risk of fraud in mobile e-commerce is no greater than with standard e-commerce, another 42% feel mobile e-commerce involves greater risk • Preferences vary widely depending on size of organization and business type; however, a small but significant minority are deploying specific tools and techniques to combat mobile fraud, and a substantial number plan to add fraud tools in the near future

Mobile Survey 2012

About the Sponsors Kount helps online businesses boost sales by reducing fraud, regardless of the device used to place the order, allowing them to accept more orders from more people in more places than ever before. Our all-in-one, SaaS platform is designed for merchants operating ecommerce and mcommerce businesses in all card-not-present environments, simplifying fraud detection and dramatically improving bottom line profitability.

Kount provides a single, turnkey fraud solution that is easy-to-implement and easy-to-use. Kount’s proprietary technology provides maximum protection for small and medium business as well as some of the world’s best-known brands. For more information about Kount, please visit www.kount.com.

The Fraud Practice is a privately held US LLC based in Sarasota, Florida. The Fraud Practice provides consulting services, training, and research on eCommerce payments, fraud prevention and credit granting. Businesses throughout the world rely on The Fraud Practice to help them build and manage their fraud and risk prevention strategies. For more information about The Fraud Practice, please visit www.fraudpractice.com.

CardNotPresent.com is an independent voice generating original news, information, education and inspiration for and about the companies and people operating in the card-not-present space—one of the only sources of content focused solely on this growing segment of the payments industry. Our only product is information. Our only goal is to provide it in an unbiased manner to our subscribers.

The company’s media platforms include the CardNotPresent.com portal, the hub for news, information and analysis about the payments issues that most affect merchants operating in the space; the CNP Report, an e-newsletter delivering that focused information directly to your email inbox twice a week with no extraneous clutter; the CNP Expo, an annual gathering of the leading companies in the space from the smallest e-commerce Websites and technology providers to global retailers and payment processors; and the CNP Awards, an annual event honoring the products and solutions CNP merchants rely on most to increase sales. For more information about CardNotPresent.com, please visit www.CardNotPresent.com.