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Business Plan

Group BASO

Arief Christoph 791126-2876 (Group Leader) Armina Arazm 891104-0403 Bruck Urgressa 7806165499 Onome Bekibele White 7708227652 Jun Xie 860402-1033 Suleiman Nadabo 8207247597

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Table of Contents I.

Executive Summary ................................................................................................................................ 3

II.

General Company Description ............................................................................................................. 4

III.

Products and Services ............................................................................................................................. 6

IV.

Marketing Plan ......................................................................................................................................... 9

V.

Operational Plan .................................................................................................................................... 15

VI.

Management and Organization ........................................................................................................... 16

VII.

Startup Expenses and Capitalization .................................................................................................. 17

VIII. Financial Plan ......................................................................................................................................... 18

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I.

Executive Summary

QPayment is the first company in Sweden to offers account to account transfer by only using SMS. By using QPayment service, bank customer will be able to perform transaction in about 1 minute by using mobile phone without any Internet connectivity and installed mobile application. The service is offered to big four biggest bank in Sweden with flexible agreement that will benefit QPayment, bank and as well as telco company. As banking sector is the largest player in Sweden financial market, which comprises of 40% of market share, QPayment service has high business prospect in Sweden. Moreover, 97% of population in Sweden owned mobile phone. Hence, QPayment service will give alternative delivery channel for banking services other than ordinary banking services such as mobile and internet banking. Moreover, adequate number of mobile user still not uses Internet for various banking services. As a result, QPayment is aiming to give new perspective in managing finances. Our management team consists of highly dedicated people from various business and technical background. As the future of mobile phone industry increase significantly in recent years, QPayment service will be able to be market leader in Sweden mobile industry which operated in niche market and thrived to offer more innovative product in the near future.

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II.

General Company Description

Business Concept By the rapid increase of mobile users in recent years, various mobile applications have been developed to accommodate market demand. One of the emerging trends is mobile banking application, which provides various banking features such as account to account transfer. However, complexity of mobile banking application user interfaces might cause inflexibility to some mobile users. Moreover, it requires smartphone (high-end mobile phone built on a mobile computing platform) and Internet connection in order to run mobile banking application. Thus, we strive to establish business which will overcome all of these limitations. QPayment will launch the first mobile payment service in Sweden which offers account to account fund transfer by only using mobile phone SMS. By using our service, customer can perform account to account fund transfer without using either sophisticated device or internet connection. There is no need to wait for mobile application screen loading and excessive mobile application user interface navigation. Thus, mobile users will be able to perform transaction less than 1 minute.

Mission and Vision Vision: To be the primary choice of mobile payment service by customers. Mission: Provide mobile payment service nationwide for mobile users in Sweden.

Goal and Objectives Goal: To be market leader of mobile payment business in Sweden Objectives: 1. To gain 50% of mobile payment users in Sweden by first year of operation 2. To established partnership with all of big four Swedish bank by third year of operation 3. To offer other mobile payment service other than account to account transfer

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Strength and Core Competencies •

Unique service which not yet offered anywhere in Sweden.

•

Service does not require application installation to mobile payment user.

•

Owner’s commitment and dedication towards mobile payment services

Business Philosophy Our business philosophy is “We always listen to our customer” so that we ensure that customer demands are accommodate through our service.

Company Ownership QPayment will be established as Kommanditbolag since we believe that it is the most suitable type of ownership for our business based on discussion with all owners.

Customer QPayment's target customers are commercial banks in Sweden as we do not approach directly to mobile user. The typical customer of our service is bank which already established as well known bank in Sweden such as SEB, SwedBank, Handelsbanken and Nordea. However, other banks could be our secondary target customer if beneficial deal could be reached from them as well.

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III. Products and Services QPayment Service The idea behind QPayment service is the involvement of GSM network provider, Bank, QPayment and enduser. This service will allow user to transfer money from his or her bank account to other user in the same bank or any other bank by only using SMS message. Whenever user wants to perform transaction to transfer money to other person, he or she just need to type SMS message to initiate transaction and the receiver will receive SMS alert message if the transaction successfully processed. This process will give QPayment an advantage over its competitors that utilize other mobile application for money transfer processes since usually require internet and high end mobile device. The only disadvantage of the service is mobile network failure from GSM network provider. Pricing Structure As our business not directly interacts with end user, the pricing structure of the service is entirely depending on contract agreement with banks as our customer. There are two different pricing structures that could be established with our customers: 1. Transaction based pricing This is our primary choice of pricing with customers when we approach customer. In this pricing QPayment will receive commission fee for every transaction perform by end user. The value of commission fee may vary for each customer. 2. Time based pricing This is our secondary choice of pricing with customers if deal with transaction based pricing could not be reached. In this pricing, QPayment will receive fixed amount from service fee from customers based on specific service period (monthly, quarterly, yearly) The amount could be modified during renewal process for each customer.

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The following diagrams bellow illustrate end to end flow of QPayment service (See Figure 1)

Figure1. SMS payment process flow The customer sends a SMS to our company’s SMS server by GSM network. Server will work with SMS banking agent and handle the transaction according to data in SMS from the customer. After the SMS banking agent receives and validates the identity, amount, account of the transaction and other related data, it will send a message to SMS server to validate the deal. When SMS server receives a validation SMS from SMS banking agent, it will send a SMS to the customer by GSM network to inform them that transaction is finished.

QPayment Application Security In order to established necessary security for the application, cooperation with GSM network provider will be required. QPayment will use specific VPN channel to connect with end user, banks and GSM provider. This channel will carry necessary information to perform transaction such as PIN confirmation code and bank account number. There are two different VPN channels that will be used; they are Ingoing and Outgoing channels. When end user initiates transaction via SMS, it will be directed to QPayment by Ingoing VPN channel. Then, by still using Ingoing VPN channel, QPayment will forward transaction information to bank for next transaction process. Once transaction authorized by the bank, transaction information send back to QPayment VPN via outgoing VPN channel containing PIN confirmation code. Next, QPayment will forward PIN confirmation code to end user via Outgoing channel. Finally, end user will receive transaction message in SMS containing PIN code to be replied back. The same channel process will be used for transmitting confirmation transaction message to bank until user received success message. If problem occur during message transmission, then message explaining the problem will be displayed instead. GSM network provider will be responsible to continuously monitoring flow of transmission should security threat occur eg: hacker attacks and as well as performing security audit on periodic basis.

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QPayment Application Ownership SMS agent application that will be developed for providing service is entirely owned by QPayment and will be patented according to European Patent Convention (EPC) regulation. However, we will accommodate each application customization request from customer, but they are not allowed to request source code of application. The agreed customization is given to customer only as a service, which can be classified into two different category, they are core modification or minor enhancement. For core modification category, customers must pay certain amount of cost before changes can be implemented, whereas no cost required to be paid by customers in minor enhancement category. The classification of these two categories is defined by QPayment development team after receiving request from customers. QPayment Service Initial Customer Approach Prior establishing QPayment service, we will make an early approach to prospective customer about our business and assess any feedback from them. One of the best methods to get contact with prospective customer is to communicate with banker association in Sweden. Once banker association give positive signal, then we will proceed with more direct approach such as create open seminar to banker executive, arrange onsite presentation to bank premise or obtain contact of vendor management PIC which usually responsible in the bank to make deal with external parties. In by doing this, we will be able to avoid timeframe risk to get first customer when the business officially launched.

QPayment Sales Forecast There are 10,6 million mobile subscribers in Sweden (Chartsbin.com) and about half of those numbers are banking users (Swedishbankers.se). If half of those banking users are using QPayment transaction at least once in a month, then the expected forecast as followed below: Sales Summary

Year 1

Year 2

Year 3

Average Transaction Revenue

SEK 31,800,000

SEK 47,700,000

SEK 63,600,000

150%

200%

(Based on Transaction Based Pricing with 1 krona commission per transaction) Growth Rate

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IV. Marketing Plan Market Analysis Mobile industry is one of the most lucrative businesses in Sweden due to huge number of mobile phone users (10,6 million mobile subscribers according to Chartbins.com). Our closest product competitor is mobile banking which require internet connection as prerequisite to operate and as well as mobile phone with decent specification to run the application. However, according to statistic released by .SE, the percentage of people using internet with their mobile phone in Sweden is only about 50% from all age range and the percentage decreasing for older users (See Figure 1). Hence, it implies that there is space for non-mobile internet users in the market that may be interested to use our service especially for older people. In this case, QPayment service will operate in niche market as potential business opportunity.

Figure 1.

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Porter Five Forces Assessment Threat of Entry Since QPayment will establish new unique business model in Sweden mobile industry, there is no direct competitor In order to offer the exact same business model, competitor must implement and develop technology equivalence to QPayment. Moreover, QPayment will perform software patent as soon as first working prototype of application developed. Thus, as long as new competitor unable to develop and deliver same technology to the market, then the threat of entry is considered low. Supplier power Due to many telco companies in Sweden which can offer required service for QPayment. QPayment will renew contract on periodic basis by comparing offer from available telco companies which are suitable with available budget and favourable term. In this case, supplier power is low. Buyer Power Since no similar service offered in Sweden mobile industry, therefore QPayment has advantage if customers become interested and uses our product. However, buyer might still choose other payment channel alternatives which are available in the market such as mobile banking. Thus, buyer power is moderately favourable. Threat of substitutes Currently there is no other exactly similar service that could substitute QPayment service, unless all of bank customers tend to use other kind of method which requires internet connection such as internet banking and mobile banking. Therefore, until same service offered in the market, threat of substitutes is moderately favorable. Industry Competitors The main industry competitor of QPayment is the change of new technology trend in mobile industry. However, as long as our business keeps offering efficient and low cost service, it will sustain its competitiveness in the market. Thus, industry competitors are moderately favourable.

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QPayment Business Barrier Since we are new with the business and lack of start up experience, there here are some typical barriers that we may encounter:

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-High capital costs: The initial cost to set up the business is far beyond us as students that do not have any major source of income. We will overcome this barrier by trying to convince investors to invest in our idea which is unique and have growth potential in Sweden and other Scandinavian countries. - Consumer acceptance and brand recognition: due to uniqueness and sensitivity of our services dealings with financial transaction it may be hard for our client to accept our service because we don’t have any brand recognition for providing such services before. we will overcome this barrier by having strong board of trustees that will help us in getting confidence from the financial services companies because they will be people with tracks records. -Training and skills: Although we have the competence to run the business successfully with our commitment but we still lack of experience in providing IT services to companies. We will overcome this barrier through rigorous training by IT specialist that have experience in IT services as well as our board and our mentors that supported our idea. -Unique technology and patents: our service is unique but might be replicated or the banks may decide to create such services themselves. We will get patent of the SMS agent application to overcome this barrier which will not allow any company to replicate the kind of our service. Influencing Factor of QPayment business -Change in technology trend: technology trend may affect our business since we are primarily providing an IT enabling solutions. Thus, it may cause negative or positive depending on the nature of the change. For example, if the number of people using mobile lines increase, then we will enhance our growth. However, if more and more people owned smart phone and internet, then it may also reduce our market share although we are operating in -Change in government regulations: Well government may decide to change laws about mode of financial transaction or issues license for bigger companies that can easily muscle us out of business. -Change in the economy: This affects every business. We can easily thrive when there is economic growth and have slow growth if the economy is not growing or is contracting. -Change in your industry: this may affect us if there is drastic change in financial services offers by the bank. QPayment Services Our service is technology enabled service which offer communication between banks to its customers, where customers are allowed to operate some selected banking services over their mobile phones via SMS

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messaging (account to account transfer for initial service launch). If bank customer already registered to use QPayment service, they just need to type transaction information in SMS message contain customer identity number, target account number and amount of transaction which separated by number. The target phone number for SMS is reserved 4-digits number which represents bank (eg: 7777 for Nordea). Once message send out and verified by the bank, SMS message will be sent back to customer containing confirmation code to be retype in SMS reply message along with other transaction information such as target account and amount. Bank customer must send retype code If the message is in invalid format or other technical issue occurs (eg: insufficient balance) then error message will be displayed describing the problem. When confirmation message has been sent out by bank customer, another SMS message will be send back to customer displaying success message. Services Core Features - Users can use SMS banking to make fund transfer to other accounts and in the future they may use it to make phone bill payments, and order bill payments via SMS as well. - Users of SMS banking can make an enquiry about their bank balance. - Banks notified a user of SMS banking whenever there is a transaction in the customer account debit or credit and tell him the specific amount that has been withdrawn, by whom and date etc. - Customers can select their desired services from a variety of options available. - Customer can block his account, in case of stolen or lost cell phone. - Customer service via SMS (manual about the service eg: usage instruction, etc) Benefits of Products - The QPayment service offers a lot of convenience to it users, it allows users to perform most of the small banking transactions at their own time and customers no need to visit bank branch or own internet connected device. - User can access their banking information from any location as long as they are connected to a mobile network coverage on their mobile phones as there is no need to have internet connections on mobile phone. - The SMS has high flexibility because it is not depend on specific software installed in mobile device, but instead it can be done from any GSM phone which support SMS features. - It saves times because it can be done in below one minute since it greatly reduces time required to perform average banking transaction due to the process automation of banking activities. - Operational cost reduction because less support are required due to less complexity in customer side. Customers Since our business is B2B, hence we will not directly interact with mobile phone end user but instead directly interact with banks as the customers. At the present, we will target four Swedish largest banks since they have

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high volume transaction that could beneficial for the continuity of our business. However, GSM network (Telia, Comviq, etc) could be approach as well to make business agreement. There are two strategies that we can use to approach targeted customers: 1. Bank Direct Approach In this approach we will contact with targeted bank to offer our service. There is no other party involved in the finalization of our business deal. Thus, all condition and term such as service pricing, service level agreement only conducted between our company and bank. This would be our primary customer approach strategy because it is the most efficient for our company. Since we assume that bank will make separate deal with GSM network provider and no other action required to establish agreement. 2. Bank and GSM Network Provider In this approach we will contact both and GSM network provider to offer our service. In this case, term and conditions of business agreement will be shared among our company, bank and GSM network provider including service commission fee, etc. This approach is used as secondary strategy if bank is not willing to make separate deal with GSM network provider. The approach more complicated because there will be need to reach agreement that can be accepted from all parties. Even though our target customer is bank, but we are indirectly target end user mobile phone user. Therefore, based on bank perspective there are two different target customer categories: a) Laggard Group: The group is considered potential customer as they are not adopted well with the use of new technology innovation or not capable to use complex technology (eg: old people). Thus, the use of simple technology will be beneficial for them. This target group can provide long term and sustainable revenue for our business. b) Business Owner Group: this group can be the most promising customer if the use of our service becomes new trend for them. As they considered dealing with large amount transaction on daily basis, the use of our service can be efficient alternative when speed and flexibility become the essence for their financial activities.

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V.

Operational Plan

The daily operational plans and purpose of QPayment business activities is similar to other IT enable service company. Our service is depending on SMS agent application that we will maintain and enhance on periodic basis. This application is functioning as channel to deliver SMS transaction message from bank to customer via GSM network. All information goes through our service will be stored on temporary basis in our premises until transaction process finish. Production The SMS agent application that we will create is solely owned by us and can only be modified under our discretion. Thus, we will build our own development team which responsible to support and improve the application according to customer requirement. The application will be developed based open source software to reduce any unnecessary cost. As our product is intangible, there is no physical inventory requirement other than backup storage device. SMS agent application offered to customer in retail package with possibility of customization according to agreement with specific customer’s request. The development of software will be conducted in our office premise, but server data center for the system will use leasing to other company to perform maintenance. Location There is no specific office location requirement other than installation of leased line of high speed broadband network to connect our office with bank and GSM network provider. Personnel Requirement There are five categories of workers that we may need to run our business, they are system engineer, network engineer, financial controller, operation staff and marketing staffs. System Engineer is professional worker who responsible to develop and enhance our SMS agent application. Network engineer is professional worker who responsible to build and maintain secure network environment. Financial Controller is professional worker who responsible for managing company cash inflow and outflow. Operation Staff is skilled worker who responsible to perform daily company administrative task such as receive our customer inquiry, ad-hoc business support, etc. Marketing Staff is skilled worker who responsible to perform our company service promotion by contacting and follow up potential customer. All of the workers will be offered contract status (per hour salary) with possibility to be converted to permanent position should such need arise.

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VI. Management and Organization Our management team combines the professional with IT and business administration backgrounds. Although we do not have entrepreneurship experience in the past, we thrived to be successful in this business with our passion toward implementing mobile payment business. Presently, we have six founders, Mr Jun, Mr Arief, Mr Suleiman. Mr Beki. Miss Armina and Mr Bruck. All of us will be responsible for all necessary works needed to move the company forward. Four of us have a background and degree business field and Miss. Armina has a background in computer and system science while Jun has a background in the technical field. Upon obtaining its first round of funding, we may hire temporary worker to assist business activities. In order to move forward BASO need to employ other professional employees with experience on business and technical filed, it will be a base on a contract level in order to accelerate the potential growth of the company. However, at the present we have not decided which one of us will hold certain position in the company but all employees being hired by QPayment will get benefit from insurance coverage and working safety rules. QPayment executive, staff and business operations will be in Stockholm, Sweden. Organization Chart At the present, all of six founders will act as permanent board of directors. There are four possible divisions that could be created to support our business if business growing according to our expectation. Each of division head will lead number of staff according to need of business. Member of board director could be the head on these divisions if required and suitable with the needs.

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VII. Startup Expenses and Capitalization Startup Expenses The start-up expenditures for QPayment are summarized below: Sources of Capital Investment requirement

SEK 200,000 −

Total Investment

SEK 200,000 ‗‗‗‗‗‗‗‗‗‗‗

Startup Expenses SMS agent application development

SEK 65,000

IT Infrastructure

SEK 100,000

Miscellaneous Fee

SEK 20,000

Marketing

SEK 10,000

Total Start-up Expenses

SEK 195,000 ‗‗‗‗‗‗‗‗‗‗‗

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VIII. Financial Plan Financial Needs Summary The amount of QPayment capital and operating expenses for yearly operation as shown below: Item

Cost

Computer/Electronic Equipment

SEK 50,000

Office Furniture

SEK 30,000

Marketing Materials/Promotions

SEK 10,000

Office Lease (for first year)

SEK 100,000

Utilities

SEK 50,000

Staff Salary (Temporary/per hour

SEK 300,000

basis) TOTAL Financing Needed:

SEK 540,000

Revenue Model QPayment revenue will be brought in through service fee agreed by our customer either transaction based or periodic based. Future avenues for revenue include training workshops of our service to customer and enhancement of our application according to customer request. Discussion of Monthly Cash Flow Statement Assuming that our business able to make agreement with one of big four bank in Sweden and no outstanding loan, QPayment can generate positive cash flow in the next six months. The amount of positive cash flow should always higher than operating expense since the nature of our business is binding contract agreement with financial activities which highly frequent on periodic basis. For example, if we received SEK 1 for every transaction and total number of monthly transaction is equivalence to 10 million transactions. Then, we will receive SEK 10,000,000 per month. If customer choose fixed monthly service fee with us, then we can expect profitable amount that cover our operating expense on monthly basis.