New Ventures in Financial Services

Focus on Payments and Mobile

Posts Tagged ‘FX

Vendor Review: hyperWALLET Systems

leave a comment »

18 May 2010

I’ve been fairly negative on a few vendors lately. In the long term, Capital is attracted to success and growth and it is time to look at a few “successful” start ups.

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

hyperWALLET Systems

The first step in assessing any company is to look at their customer base and legacy. hyperWALLET is a 10 yr old private Canadian company that delivers both a software platform and payment network to over 200 companies and government agencies. They have references in telecommunication (Enstream), banking (HSBC, Canadian Banks and credit unions), Government (paylution), Commercial B2P payments (Monavie), Card (FIS, First Data, ..), online/mobile wallet, and are themselves a licensed money services business (in Canada).

The focus of hyperWALLET is payments to an individual, supporting payments from: another individual (P2P), a corporation (B2P) or government (G2P). The key issue in supporting payments to individuals is addressing lack of homogeneity in banking relationships and preferences. For example, an unbanked consumer may have preference for a pre-paid card or distribution through an agent network. Similarly a banked consumer may have preference for funds deposited directly in their bank, or split between banks depending on whether the payment is for dividends, commission or pension.

hyperWALLET has 2 businesses that support this focus: Platform and Network. Their platform provides white label payment services in either a license or hosted model. Allowing customers to “brand” payments and integrate into the online customer experience. For example, Canadian credit unions which allow customers to move funds to other banks internationally would have the “transfer funds” service as another tab to their existing online banking service. In addition to supporting white label, the platform upports 12 languages and 15 currencies in multiple channels (online, VRU, CSR and mobile phone). As an ex Oracle and ex Citi exec I couldn’t help but be impressed by the product design and architecture. Certainly a credit to the MIT educated CEO Lisa Shields.

The platform can serve as either the system of record for multiple products (ex. Card, ACH, Wallet, Airtime) or aggregate this information from other sources. For example, as a certified ISO 8583 issuing platform hyperWALLET can issue pre-paid cards and serve as processor, or it can integrate to systems from FIS, First Data (…etc.) and act as a program manager.  Another example is where hyperWALLET acts as an agent of the bank to provide customers with an “integrated” account view of card, ACH and other (Airtime, wallet, ..etc.) balances IN MULTIPLE CURRENCIES. Customer’s have the capability to turn these functions on and off in order to restrict functions based upon customer segment and location (regulatory regime).

The key barrier for HW’s competition is their payment network. By establishing banking relationships in over 40 countries over the last 10 years, HW can process both domestic and international payments through local ACH networks. This allows HW to centrally manage Treasury, and FX (thereby cost) which provides them with the capability for disruptive pricing. For readers of my previous blogs, I consistently credit PayPal and Cashedge for their payment operations teams. I now put hyperWALLET into this group and place them in the leader category from an international perspective. The HW team manages card, ACH, MSB, SWIFT, Agent networks, MNOs, and Wire across their broad customer portfolio (consumers, banks, corporates and government) for 40 core markets and their associated regulatory regimes. They even have a call center that speaks 12 languages.  Truly a rarified group.

The only companies that come close to offering this level of functionality are within commercial banks (Citi GTS, Deutsche, JPMorgan, HSBC GTB, Barclays GPU). Unfortunately for the banks, few are adapt at making their transaction services functions consumer friendly. Thus these institutions largely focus on the top end needs of large corporations, leaving everyone else to companies like hyperWALLET. 

HyperWALLET is a payments company in the hot spot of payments to consumers. They sell their platform to MNOs like Enstream as they lead Canada into mobile payments, and deliver cost effective global transfers through their Global clearing network in a way that allows individual consumers to manage where and how they get their funds. The deep payment expertise, and diverse customer base, leads them to rock solid product design based on real world problems.

HyperWALLET recently expanded its board of directors with the addition of Peter Burridge, former CEO of Travelex Global Business Payments and President of Seibel Asia Pacific and Japan. hyperWALLET’s CEO Lisa Shields is a leader in Canadian Payment community. In addition to her role as Co-Chair of the Canadian Payment Association meeting in June, and her 200+ customers, she is heavily involved in working to address the needs of the unbanked.

As you can tell, I’m quite high on this vendor. They are light on marketing and high on references, product, payment operations and thought leadership. The key market opportunities which will drive hyperWALLET are:

  • Pre-paid card
  • Mobile Money (from Enstream, Apple, Bharti, …)
  • Business payments to Consumers (dividends, commission, expense, …)
  • Government Payments to Consumers

Valuation

hyperWALLET is a private company with no published financials. As a payment network, they are classified within Payment Processors. Not withstanding the inflationary multiples from the Visa/CYBS transaction, companies within this group have average 2009 P/E multiples of 14.3, and 12.9 for 2010. Comparable acquisition transactions are listed below

Thus, I estimate hyperWALLETs current value between $70M and $120M

Written by tomnoyes

May 18, 2010 at 2:38 pm