New Ventures in Financial Services

Focus on Payments and Mobile

Vendor Review – Monitise

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November 13, 2009

I’ve been fairly negative on a few vendors lately. In the long term, Capital is attracted to success and growth. Perhaps it is time to look at a few “successful” start ups. Success is a relative term in the mobile payments space as both public and private companies have been challenged to generate revenue. What we see today is established players making “bets” in the form of investment capital and revenue guarantees. Because of the breadth of this space, there are multiple (overlapping) bets being made by existing players.

Once investment capital flows into a venture whose business model is “in progress” information concerning its current state is hard to obtain. A top VC constantly reminds me that Google had no plan for revenue when it first started. However, it remains to be seen HOW the highly regulated and highly competitive world of payments will adapt to this “innovation” and invested capital.  The complexity and profitability of mobile payments within the emerging market “sector” is further aggravated by new participants: Philanthropic Organizations and NGOs. These groups see tremendous potential in mobile to address financial infrastructure issues in developing markets (CGAP Articles).

Criteria for “success”:

  • Consumer Metrics (Active Customer Growth, Revenue)
  • Dependencies (Behavior, infrastructure, technology, …)
  • Value Proposition
  • Market Opportunity
  • Financials (Invested Capital, Burn Rate)
  • Competition
  • Ability to Execute (Team/Partnerships/Regulatory Issues)
  • Intellectual Property

A more detailed list can be found here

Vendor Assessments

Monitise PLC (MONI on London Exchange)

Investor Relations Website

As one of the few public companies in this space, an analysis of their annual report (Aug 2009) is highly recommended. They have evolved substantially over the last 6 years morphing from a closed mobile banking fat client that resembled an ATM (in direct conflict with Bank brand), to a bank friendly vendor with over 150 active bank customers globally and over 1 million users globally.

Just 2 years ago, Monitise and Firethorn were in direct competition, both agreeing on a future in which fat mobile clients would reign, all while resisting the iPhone (dismissing it as being a small niche). The current service has some substantial short comings as their card-centric approach means that a customer cannot get access to all their accounts, but rather just those linked to a particular card. Another example is that their card-centric “ATM like” approach results in a paucity of transactional information — for instance: “DEBIT $25.32” instead of say “Walmart $25.32”.

Monitise tends to emphasizes that mobile as a separate channel from online and that more consumers have cards vs. online banking, but the bankers don’t like offering a product that is deficient to their online banking. US banks have realized with Firethorn, it is rather expensive to create yet another servicing channel, particularly one that is used infrequently (see Firethorn is dead).  Recent PR indicates that they are continuing to make progress as an account servicing tool (Lloyds TSB 6/09).

Today, Monitise is attempting to move from its role as a “mobile banking” application provider to mobile payment platform. Currently, no bank customers for this service have been published. Monitise has a solid reputation with banks, and existing bank contractual agreements represent a substantial asset. Because of these contractual agreements, and their global footprint, Monitise is the vendor best positioned to execute against a “bank play” in mobile payments.Monitise Vendor Assessment

4Q09 financials show that Monitise had a 2009 operating loss of £13.1 MM on £2.66 MM in Revenue.  They have taken on additional capital as Visa International subscribed for £4.2MM shares (announced on 30 June 2009) and is now the largest shareholder representing a 14.4% stake (in the issued share capital). Visa’s agreement also provides revenue worth a minimum of $13MM over a five year period.  Visa’s capital has enhanced MONI’s cash to just over £10MM, with the expectation of the 2010 burn rate coming down from £13.1MM, they will have sufficient liquidity for the next fiscal year but will be challenged to generate new revenue streams from their existing customer base without substantial consumer marketing assistance from Visa.

The Visa partnership may provide an avenue for MONI to expand their footprint within their existing customer base, and also help them expand addressable market by leveraging Visa’s Brand and Marketing prowess. The initial focus of Monitise mobile payment services seems to be cash replacement with current customers, increasing card use (debit/credit/pre-paid) in both Tier 1 OECD countries and emerging markets. Although their bank friendly model will insulate them from many of regulatory issues (which affect their competitors), they will be severely challenged to generate incremental revenue from a new payments business. Banks hold the keys to success here, and will not invest until: consumer demand for mobile payment picks up, or other revenue streams (interchange) enable them to fund the expansion.

Key challenges for Monitise to execute in mobile payments:

  • Making the Visa relationship work (marketing)
  • Consumer Interest/Competing models ( ex. http://www.payforit.co.uk)
  • Financial crisis impact on bank customers
  • Bank Consumer marketing budgets
  • Risk Management (mobile fraud)
  • Regulatory initiatives as SEPA/ UK Faster Payment

http://www.paymentsnews.com/2009/06/visa-monitise-form-strategic-alliance-for-mobile-payments.html

Vendor 2 – BlingNation

See Blog here

Vendor 3aKos Corp

Coming Soon

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Written by tomnoyes

November 13, 2009 at 9:37 pm

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