One of the hottest start-ups in the U.S. is Square, a credit-card reader and mobile app developed by Twitter co-founder Jack Dorsey. But Monitise and Fundamo – two technology companies that have teamed up with credit card company Visa — are helping traditional players such as mobile operators and banks to push such services to people in countries like Pakistan, where 85% of the population is unbanked, as well as customers in developed markets like the U.S. and Europe, a far bigger and more lucrative business.
Mobile operators, like financial institutions, need new revenue streams and are looking for ways to both defend and extend their businesses. The potential is huge for those players who move swiftly. The value of transactions made over mobile devices is estimated to be $240 billion this year, according to Juniper Research, growing to triple that size over the next five years.
“Banks, mobile network operators and others looking to enter this space are asking 'are we being innovative enough, can we keep up with the speed of technical innovation in the industry?'” says Monitise CEO Alastair Lukies.
That is where Monitise comes in. The British firm, which was named one of the fastest-growing technology companies in the U.K. in the Deloitte Technology Fast 50 and Deloitte EMEA Fast 500 in 2011, provides the technology behind mobile money services across the globe. It is already handling hundreds of millions of transactions annually for millions for customers. Think of it as Square squared.
Monitise, which is listed on AIM and is currently considering a float on Nasdaq, is providing technology for Visa’s debit-processing service in the U.S., which will allow bank customers to check their balances and transfer funds via their mobile phones. And, it is working with banking customers in Europe to roll out similar services. RBS, for example, is introducing a new range of apps for the iPhone, iPad and iPod Touch that Monitise helped it develop for business customers. Monitise is also playing a key role in the Mobile Money network in the U.K. and has strengthened its alliance with Visa Europe, which has invested in Monitise and asked it to assist in the credit card company’s future of payments strategy.
That is not all. The British company is also helping Visa with its stated goal to add its next 500 million customers in emerging markets. At press time Visa Inc. (the U.S.-based entity that oversees the credit card’s business in the U.S. and everywhere outside of Europe) and Monitise were getting ready to make a formal announcement about a joint venture in India. The joint venture “will operate as a trusted partner to banks and mobile network operators, to provide a mass market mobile payments service initially for airtime, utility bills and tickets,” according to a company statement.
“We have seen from our growth, working as an enabler inside the mobile money market, how the size of the prize is global,” says Monitise’s Lukies. “There are now more than seven billion people on the planet, six billion mobile phones and just over two billion people with bank accounts.”
Fundamo, a South African company which was purchased by Visa in 2011, is also helping operators and banks build out mobile money services. It offers a turnkey solution for mobile operators so that the operator can concentrate on marketing, branding and customer acquisition.
Fundamo’s customers include Easypaisa in Pakistan and bKash, a joint venture in Dhaka, Bangladesh between BRAC bank and US-based Money in Motion; the venture aims to provide mobile financial services to the 83% of the population living on less than $2 a day. In Bangladesh only 9% of the population is banked but 44% own a mobile phone.
Easypaisa, a joint venture between mobile operator Telenor and Tameer Micro Finance Bank, was launched in Pakistan in 2009. For the first year and a half it was not even necessary to have a mobile account to use the service. People could just go into any small shop that topped up mobile phones, present a national ID and then ask the agent to either pay a bill on their behalf or wire money to someone. This is because in Pakistan the volume of money transfer was so low, even compared with markets like Bangladesh and India, that it was necessary to kick start the market, says Roare Bjaerum, chief of Easypaisa and vice-president of financial services at Telenor Pakistan.
Gradually more sophisticated services are being introduced. In 2011 30 million transactions with a throughput of 50 billion rupees, or $700 million, were handled by some 16,000 agents across Pakistan. “Like all mobile operators in developing countries we have a distribution network that is second to none,” says Bjaerum. Leveraging that network is paying off. “I think in three years' time it should be possible to have around 10% of our revenues in the company come from financial services,” he says.
Telenor is rolling out different flavors of mobile money services to adapt to the different markets it serves, which include Malaysia, Bangladesh, Thailand and India.
Growth of mobile money services in Asia is relatively new. The market was pioneered in Africa by Safaricom, the leading mobile operator in Kenya, and has since spread to the rest of Africa and other emerging markets.
“The next generation of growth will come from emerging markets and that is why Visa acquired Fundamo,” says Aletha Ling, Fundamo’s chief operating officer.
Visa also intends to play an important role in linking closed-loop mobile money services offered by mobile phone operators. Often it is impossible to forward money to someone who is not using the same operator. There are an estimated 100 closed loop systems scattered around the globe. “There is a huge technical complexity involved in making the platforms talk to each other but our global network connects millions of merchants and billions of consumers so we can use our network as opposed to having each operator link systems with another operator,” says Bill Gajda, a former GSMA executive who now holds the job of global head of mobile products at Visa.
Visa mobile prepaid, which allows existing systems to transact with other banking systems, “is a big leap forward in terms of interoperability,” says Fundamo’s Ling. Once national systems are connected the next level of innovation will center on international remittances, she says.
Consumer trust, a regulated banking environment, scalable technology platforms and fail-safe interoperability, which requires partnerships between principal players, are all necessary elements for building global mobile money services.
Visa, which will be present at the Mobile World Congress in Barcelona February 27-March 1, is doing its part to help put the necessary pieces of the puzzle in place. It is playing a pivotal role in creating new types of mobile money services in the developed world as well as in emerging markets. It has, for example, licensed its technology as broadly as possible, to Google Wallet as well as to ISIS, a mobile wallet initiative led by AT&T, T-Mobile and Verizon.
“We have a key facilitation role to play to work with all of the handset vendors and as many mobile operators as we can to ensure there is an open, standardized approach to NFC,” says Visa’s Gajda (pictured on Informilo's home page).
NFC, or Near Field Communication,is a technology that promises to transform phones into mobile wallets. Most consumers still don’t have NFC phones and merchants are struggling with the necessary investments and interoperability issues. But a new global survey of NFC experts from the banking, telecom and Internet sectors predicts that NFC technology will be a standard component on smartphones of all categories as a mainstream payment method within three years. (See the NFC story on page 8.)
In the run-up to NFC services Visa Europe is saturating Europe with contactless cards and is planning to launch two new mobile services, a person-to-person payments service that can be integrated into banks’ own apps and a system that alerts consumers when their card is used on Visa’s payment network.
Visa Mobile Person-to-Person payments, developed in partnership with Monitise, allows a bank customer to use an app from their bank to send money to an address book contact, a mobile number, or a Visa account. Visa card holders might use such a service to repay loans from friends, split a restaurant bill or transfer money to relatives.
The person sending the money must have a compatible bank account and register with the service. The recipient does not need to register, but must have a Visa card.
It is part of a whole new way of thinking about the future of payments. “Visa and member banks have concentrated on security and consistency of experience at the point of sale but now we are saying that we can see ourselves expanding from the moment of transaction into pre- and post-purchase territory,” says Caroline Hawkett, vice-president of new product development at Visa Europe.
To compete not just with the likes of Square but with Google, Apple, Amazon and other interlopers, telecom operators and bankers will have to do the same, leveraging rich information about the customer to develop value-added mobile services linked to presence and preference. And Visa – which has a rich database of customer information — can help them do it, says Gadja. “We are having those discussions with mobile operators,” he says.