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NokiaMoney/Obopay – The Wallet

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January 19, 2010 

See previous posts

My quote of the day is from a good friend now running all financial services and mcommerce for one of the major telcos in India: “[reaching the unbanked is a] goldrush with not a spec of gold dust in sight yet”.

The question most asked by MNOs and start ups: “what on earth is Obopay doing w/ $126M?”. Obopay and Nokia (Obopay’s largest shareholder) seem to be putting much emphasis on an embedded wallet application which will be an essential part of Nokia’s larger services strategy (Ovi) and Nokia Money. Nokia’s approach is “directionally” sound given that Apple has yet to succeed in monetizing either the app store or the iPhone (as a payment vehicle). However Nokia may be best serve its “network” of handset customers by opening itself (and mobile applications) to many payment types and formats. Nokia’s emphasis on Obopay significantly alienates both banks and MNOs both of which will be in a much better position to incent an agent network to market (and educate) consumers.

The Nokia Money “wallet” strategy is highly suspect, particularly in India.  As a quick background for those of you in the US, although prepaid accounts for only about 20% of subscribers in the US, internationally it represents approx 70% of plans (74% in Asia, 68% EU, 90% India). This means consumers purchase unsubsidized handsets which are not tied (or locked) to an MNO.

Nokia’s has developed a low cost handset strategy for India which will add a broad services component in order to maintain its 55%-60% market share (of 10M new Customers per month). Last week Nokia’s EVP of Handsets Rick Simonson gave an interview with the Economic Times and provided insight into Nokia’s plans on  service growth.

Nokia has a large number of developers, but you are way behind competitors when it comes to the number of apps you offer?

… We will win because our size and scale enables us to have an active dialogue with over a billion customers who use our products. We describe an active user as a Nokia consumer who has used at least one of our services or any other service in the past six months at least once and we have reached out to him/her at least once during this period (with his/her permission).

For instance, we can ask them: ‘Hi, we realised that you have activated Nokia Messaging on your E72. Would you like us to activate your Music Store too?’ And then we do it very simply. Thus, this active dialogue also opens up a very cheap way of marketing our services too. We have 80 million active users now within months of launching this concept. By the first half of 2010, we target to have 115 million active users and 300 million by end of 2011. …

Within India, a Nokia wallet will likely succeed in digital content (Ovi) but face tremendous competition (and regulation) for use at POS or for remote payment. India’s regulators recognized Obopay’s plans earlier this year and specifically formulated the RBI regulation with them in mind. The challenge for Nokia is to deliver value on both the existing bank and MNO networks, either separately or in conjunction with both. A more effective payment strategy may be for Nokia to provide an open platform that supports multiple standards for payment and authentication. Ovi and NokiaMoney have the feeling of a proprietary closed system… Google Android will compete very effectively here if this is indeed the approach.

Written by tomnoyes

January 19, 2010 at 6:18 pm

Investor’s Guide to Mobile/Money

with 2 comments

November 10, 2009

Breaking Down Mobile Money Opportunities – Part 1

Does anyone else feel challenged keeping up w/ vendors, regulations, alliances, pilots and investments in the mobile space? As I get older, my tendency is to categorize and sort for storage in my decaying gray matter. Upon encountering a new idea, I’m fortunate to have some very good friends to help me analyze it and assess it. I’ve certainly learned that my ability, to categorize and sort in isolation, has a very high error rate. The added benefit of conversation is to further the human network (as I can depend less on my decaying neural one).

I have never seen such global fragmentation of: ISVs, ASPs, FSIs, MNOs, regulators, TSMs (Trusted Service Managers), Merchants, Acquirers, Handset Manufacturers, Standards, and Customers (this may well be a 100 part series).  Two of my favorite attempts at market segmentation are below

 Mobile Market Breakdown

Jan Ondrus INFORGE – Ecole des HEC

Even these diagrams are not comprehensive as they fail to take into account such things as microfinance (unbanked/underbanked), regulatory issues (cross border, AML, KYC),  consumer protection, carrier dominance, credit bureaus, merchant POS infrastructure, customer education, broadband/3G availability,  …etc.

After speaking with over 50 start ups globally (and several VCs, FSIs and MNOs), my opinion is that mobile payments is likely to stay “regional” for the next 5-10 years. Success will be driven by well established, trusted companies with an existing mobile/financial network or with large payees/beneficiaries (government, transit, retailers, …) capable of creating a critical mass of consumers with a strong convenience play (ex. HK Oyster Card).

Within Tier 1 OECD countries, there is opportunity in chaos. From a banking perspective, NFC integration into mobile handsets is the top global opportunity, with a significant consumer convenience play. The ability to pull out your mobile phone to pay at a cash register, open a locked door, store coupons, receive marketing, send money across the globe, and store all of your other “digital keys” will combine with the unique capabilities of mobile (location, always on, …) and financial services (demographic, spending ability, spending habits, …) to provide a tremendous “wave” of innovation, investment and M&A activity.

Over the next 10 years, emerging markets will be riding an even greater wave as the absence of infrastructure is bridged by access to low cost mobile devices capable of providing both access to information and services. The developments here will likely take on a much different focus then developed countries, but with a much larger global impact on the quality of life of 80% of the world’s population. In the West we take for granted such basic infrastructure as: consumer protection, contracts, law and access to an unbiased judiciary.  Given these challenges, concepts such as: “Trust” external to one’s community, and “banking” are foreign. The bank opportunity, in the developing market, is to leverage mobile as a platform to serve 600M-800M new customers over the next 6-8 year.

There will likely be great differences in development of mobile payment between the developed and “developing” world, hence banks should strongly consider separating the responsibility for approaching them. Banks and payments, typically play an infrastructure role to commerce handling such things as authorization, clearing, settlement, reporting, … etc. Banks are uniquely chartered to serve this function and commerce is served by having a reliable, regulated entity responsible for the exchange values between parties.

Evaluating Mobile Opportunities

I would greatly appreciate your feedback on the following thoughts below (as I evolve my categorization process). Yesterday I was on the phone with one of my friends, payments head top US bank, over 30 years experience in structuring some very large M&A in both card and retail… a “realist” is an understatement. Prior to my call with Him, I had a well structured set of questions to assess mobile initiatives for investment:

1. Who is the customer?
     a. Geography(s)
     b. Profitability
     c. Existing Bank Relationships/Products
    d. Access to mobile
    e. Access to broadband
2. What is the consumer value proposition?
    a. Why is it so urgent that the consumer cannot wait until they get home or office access to their computer?
    b. Speed
    c. Convenience
    d. Cost
    e. Loyalty
    f. Alignment to trends
    g. Distribution: Customer acquisition costs
    h. Other
3. What is the merchant value proposition?
    a. Pricing/MDR
    b. Loyalty
    c. Risk
    d. Technology/Cost
    e. Regulatory
    f. Speed
    g. Refund/Dispute
4. Banking/Payment Network Value Proposition
    a. Competes or aligns with existing products?
    b. What current products target this consumer?
    c. What is transaction volume and growth?
    d. What is their primary market (ex PayPal – eBay) and are they expanding?
    e. Does it connect to an existing payment network? Who manages switch risk?
5. What are the Dependencies
    a. What change is required?
    b. Consumer Behavior? (Who bears marketing expense)
    c. Merchant POS?
    d. Regulatory (US/EU/ Other)
    e. IP/IP Access
6. Is it a separate network? If so,
    a. Who makes the rules?
    b. What is compliance burden?
    c. Who is responsible for compliance?
    d. Have regulators reviewed?
    e. Servicing: Who owns customer dispute/resolution?
    f. How are rates/fees set? Who negotiates them?
    g. How long has it existed? Fraud/weaknesses?
    h. Has it been tested at volume (ex. Paypal has 300+ person team in risk)
    i. …etc (additions appreciated)
7. Financials
    a. Invested capital, valuation, BOD experience?
    b. How does it support Parent’s business model?
    c. Pricing: Sensitivity, sustainability
    d. Revenue, Burn rate, Cost Structure, Debt
    e. Market share.
    f. Distribution: costs
    g. Sales Pipeline (realism) or Direct to Consumer (marketing plans)
    h. Capital raising plans
8. Exec team
    a. Knowledge of Customer, Market, Competition, Value Prop
    b. Customer Reference (consistency)
    c. B2B vs. B2C
    d. Experience in payments
    e. Experience in financial services
    f. Global/US
    g. Network
9. Partnerships

(As you can tell.. I am a list person). As I spoke of some new opportunities, my “bank” friend put the new companies through his much simplified filter:

  1. What service does it provide that I can’t do today?
  2. Why do I care?

The shocking result is that there were very differences in the results of our decision frameworks. The purposes of this Blog are: engage community in defining categories, increase investment (where appropriate) by assisting those with capital in their assessment, identify new opportunities in payments. 

The first 2 opportunities seem to be universally agreed to as an opportunity for mobile money (“new payment” mechanism), as they are not services that banks provide today:

  1. CASH REPLACEMENT – Developed Countries
  2. UNBANKED – Emerging Markets (multiple subcategories)

Categorization of payment schemes that do not fall into the categories above are challenging. Which attributes should drive the categorization? My tendency, in process of categorization, is to always segment based upon customer or customer usage. This approach leads to market quantification and I will proceed in this vein until it stops working for me. Separating the unbanked (above emerging markets), the draft category list is below.


Yes this is too complex. Since I’m not writing a novel here I will focus on the ones which I’ve had some interaction, or which are exhibiting exciting growth trends. The complexity and potential for mCommerce is precipitating some very curious investment decisions, some of which can only be categorized as a “bet” that a team will “figure it out” sometime in the future (See Nokia-Obopay). Companies which are able to deliver a focused value proposition, build core competencies, partner, and adapt their plans will be best positioned to ride the storm. I’m attempting to take on the role of a weather forecaster, while investing in the areas that are likely to have the best harvest.

“Mobile Money” Assumptions

Prior to reading any of further, perhaps I should state my “payment” assumptions that predicate many of the views to follow. Of course good people will disagree, and I appreciate the dialog.

             I.      Banks compete where there is profit incentive, and there are very few “new” payment types where a bank cannot compete with an existing product. Retail Banks have 2 competing internal organizations: Banking and Card. Retail Bank earnings are tightly tied to the products that surround payment. 

          II.      Banks and MNOs are notoriously hard to partner with. There seems to be (at least) 4 communities that don’t collaborate frequently: Banks, MNOs, Start Ups/VCs, NGOs, … Each of these has their own (competing) objectives.

       III.      The US payment market is much different than the rest of the world (not better). Add another dimension to the parties listed above.

       IV.      Developing ecosystems will display much chaos before clear trends emerge. Chaos in payments is anathema to trust. Trust is necessary for mainstream customer adoption.

          V.      The most successful non bank which has emerged in payments is PayPal, their success is due to their ability to focus. Initially on eBay, then leveraging its success and focusing on 2 unique “weakness” in card transactions: Card Not Present (risk management) and the inability of the existing Card network to adapt (complexity).

       VI.      Silicon Valley hype machine surrounding mobile is in full gear. There are some gems, but hard to separate from the dirt. Most private valuations and M&A transactions to date have very little connection to reality.

    VII.      Europe’s “success” in mobile payments adoption provides insight into profitability of the service(s). In almost every case, the margin opportunities exist separate from the transaction. This “evolved” ecosystem seems to model cash, particularly in the Nordics where Mobile Payments are becoming “ubiquitous”.

 VIII.      Emerging market dynamics are completely unique, and there will be many unexpected “leap frog” developments as business, technology, financial services and regulations adapt to serve the world’s developing nations. Any broad categorization of these opportunities is difficult separate from the market dynamics (Example Vodafone has an 80% market share in Kenya that drove MPesa).

       IX.      US MNOs are working to define how they can take part in transaction revenue (e.g. control). International markets are much different.


For investors assessing start ups attacking the confluence of “payments” and “mobile”, historical view of past transactions and investments is of little value. In the US, the big players (MNOs and Banks) have not acted yet, and when they do it will impact every mCommerce company in your portfolio.  Take a look at Japan, HK, Nordics, SG to see alternate visions of what the future could hold. Ensure the prospect has a sustainable value prop in the current market, and a management team capable anticipating market moves to adapt it.

Select Transactions

Select Capital Raising Transactions

MobileMonday provides an excellent overview of the current deal flow in mobile.  A few select transactions are listed below (further detail is available).

 mobileMonday investment pic

Mobile Monday

It is apparent (from the complete data set) that capital raising valuations for “mobile services” have very little basis. FT Partners provides an excellent detailed look at M&A activity in financial services space, and should be considered when evaluating mobile money investments.


Payment Providers – Valuation (Source JPMC)

JPMC Analysis

Next Post – Assessing Cash Replacement

Written by tomnoyes

November 10, 2009 at 6:26 pm

Posted in Mobile

Tagged with , , , , , ,

BlingNation raises another $20M

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In the US, most mobile money start ups are far from establishing momentum. As a matter of coincidence I just receive notice today that Obopay and Citi  that they are terminating the “pilot” (As there were only 2000 users I can see why). BlingNation is an exception to this rule.. I really like this company and their CEOs, as I said in my blog last month… John Reed does not get involved in much since Citi. These guys have the vision, team, board, value prop … and now CAPITAL to run a long way.

Bling’s $33M in invested capital may be all they need to turn the corner. They currently have 10 community bank  pilots going very well, and are ramping up regional teams to lead sales, marketing and service  additional “on us” communities. Its great to see an experienced team with a solid BOD AND a solid business plan. I’m looking forward to the marketing promotions. I would also love to see some innovative partnerships which banks have been loathe to tackle.. perhaps PayPal integration….

Written by tomnoyes

October 30, 2009 at 11:23 pm