New alliances in mobile money as pressure builds to win deals from the banked and the unbanked

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The pace of change in mobile money is speeding up, with major financial institutions such as Visa building a new presence in the industry, while operators set up their own joint venture

Aletha Ling, Fundamo: Visa already plays a unifying role in the
financial services industry, and it has the connectivity 

Bill Gajda, Visa: We are going to use Fundamo’s platform to
bring hundreds of millions of new Visa accounts to the unbanked 
A series of deals between operators, financial institutions and mobile money specialists has given new confidence that mobile banking is about to become big business for the mobile industry.
Of course mobile banking is already big in emerging markets — as the GSM Association’s Gavin Krugel says in his interview on pages 32-33. But now it is making the breakthrough to the mobile industry in the developed world, spurred on by the development of smartphones and the related spread of mobile banking apps.
Juniper Research reported in June that there are already 1.8 billion mobile phone users making payments for digital goods, and this number will rise to 2.5 billion by 2015: tickets for transport and entertainment are driving the growth, said the market research company.
Senior analyst David Snow gave more details: “While the mobile payments sector offers substantial growth opportunities, it needs to be seen by innovative players as a platform from which to develop new value added applications and services such as personalised mobile coupons, loyalty schemes, and novel augmented reality offerings.”
However, the Juniper report also warned that fraud levels with certain types of payments are on the increase — making mobile security a key issue in the near future.
A report by opinion pollster YouGov in association with research company Antenna found that 13% of US mobile internet users are using banking apps, and so are 15% of UK users.
Antenna’s research also found that most users are wary about using banking apps that do not come from their own banks: 1% of US respondents and less than 1% of UK respondents said the preferred a banking app not provided by their own bank, and 69% of UK users said they have security concerns about mobile banking services and would stop using the service if they felt their data was not secure.
Overall, 40% of US mobile internet users and 25% of UK users have used mobile banking. Almost as many — 36% in the US and 21% in the UK — have used mobile banking to find local branches or ATMs.
Jim Hemmer, CEO of Antenna, says: “Mobile banking has now taken hold. The public clearly want to fit their banking chores around their lives and not their lives around their banking chores, and using their mobiles, they can.”
He adds: “Banks need to start offering full mobile banking services which allow their customers to make deposits, balance transfers and the like as soon as possible, because it’s those banks which build up mobile trust in the short-term who are going to gain the most when m-commerce becomes commonplace.”
And a series of agreements involving major companies has shown that m-commerce is on the brink of becoming commonplace. 
Visa alliance 
Credit card giant Visa is the centre of two of them. In early June the company renewed its agreement with Monitise, a specialist in mobile money. A new five-year alliance between the two represents minimum annualised revenues to Monitise in excess of $10 million in the first three years, with potential for greater revenues in years four and five as key milestones are achieved.
The agreement is intended to enable Visa to mobilise existing Visa account holders in the US and in other parts of the world to use their phones to replicate traditional card payments.
“Mobile money is an industry that will have a big societal impact as the 5+ billion mobile phone users around the world discover new ways to bank, pay, trade and shop,” says Alastair Lukies, the CEO of Monitise. “This agreement validates Monitise’s strategy of becoming the leading trusted enabler in the space and cements our role in this ever growing ecosystem.”
Only one day later Visa made a further move in the industry by buying another mobile money company, Fundamo, for $110 million. Fundamo, based in South Africa, has provided the systems for more than 50 deployments of mobile payment projects in over 40 countries, mainly in emerging markets.
Bill Gajda, Visa’s global head of mobile, says: “We are going to use Fundamo’s platform to bring hundreds of millions of new Visa accounts to the unbanked. Fundamo has a long track record and a senior management team that has decades of experience.”
The deal was negotiated in less than three months, says Gajda, formerly COO of the GSM Association.
Fundamo, which has provided the technology for operators in Africa, Latin America, the Middle East, Pakistan and India, was actively looking for a new owner, says Aletha Ling, the company’s COO. “We selectively contacted a number of partners. We’d come to the conclusion that — seeing the industry entering this phase in its lifecycle — we felt sure that though we had the industry’s leading platform the industry needed a step change and we set our minds to what that might be.”
She points out: “Visa already plays a unifying role in the financial services industry, and it has the connectivity.” A deal with Visa enables Fundamo “to close the loop of existing mobile payments operators”.
Fundamo worked with mobile operators and banks, but that was not enough to give the company scale, she adds. “You need somebody that bridges both.” 
Exclusive discussions 
She would not say which other organisations Fundamo was talking to before it began exclusive discussions with Visa.
Back at Visa, Gajda says the card company “has been leading the way with contactless payments for four or five years”. The deal with Monitise — which is not a takeover — will allow it to help banks extend their mobile banking solution.
What was attractive about Fundamo “is the emerging markets strategy”, he says. “We can extend services and Visa accounts to the banked and the unbanked.” That includes what he calls under-banked segments in countries such as the US, he adds.
There are billions of people who have a pay-as-you-go mobile phone but no bank account. Many of them, thanks to systems from companies such as Fundamo, have started to rely on mobile payments. “But payment services today are only in closed loop platforms,” says Gajda. The company wants to reproduce in the world of mobile payments what it has done over the past decades with the conventional Visa card.
The idea is to enable mobile banking, within the same operator or between different operators, whether the individuals have bank accounts or not. “I don’t think the operators become banks. But the mobile operators become issuers — they will issue a Visa account.” Fundamo will provide the technology to do that. There will always “be a bank in the background”, he notes.
For Fundamo the deal gives a new opportunity for growth after 10 years of development in emerging markets. “We’ve been seeing maturity in these markets,” says Ling.
Visa plans “a significant investment” in the company, says Gajda, to expand Fundamo’s reach in existing areas and to develop new areas, including Latin America and south-east Asia.
The takeover may see a change from Fundamo’s traditional way of doing business. Until now it has licensed its platform to banks, but Visa is examining the idea of running a fully managed service that would be provided to operators and banks “so they can focus on their core business”.
And, in the hands of Visa, Fundamo will be able “to create a product overlay over the existing closed loop, to allow basis e-commerce and m-commerce transaction”. Services include Western Union money movements, payments to government agencies and private payments.
Why the two almost simultaneous deals, with Monitise and Fundamo. The Monitise deal does not create new Visa accounts, says Gajda. “It is focused on high-ground mobile banking services.” 
Integrated with banks 
Android and iPhone apps are “integrated with banks’ own back offices”. On the other hand, Fundamo creates for Visa a whole range “of brand new accounts”. The Fundamo deal “is very strategic for Visa”, he says.
Meanwhile in the UK four of Europe’s biggest operators came together in a bid to regain the initiative in mobile commerce, by creating their own joint venture.
This mobile marketing and payments joint venture is backed by Vodafone, Telefónica and Everything Everywhere, itself a joint venture of France Telecom and Deutsche Telekom: three of Europe’s biggest integrated operators and the biggest mobile operator in one powerful group.
“There’s been a proliferation of standards,” said Tom Alexander, announcing the move as one of his last public roles as CEO of Everything Everywhere. This is “an opportunity to create a commercial joint venture for mobile commerce, for mobile payments and for mobile advertising”.
Ronan Dunne, CEO of Telefónica UK, sees the JV as “an accelerator”, which will be built on existing standards. The is “no danger of having to change technology tracks”.
It’s a UK-only venture, but Guy Laurence, CEO of Vodafone UK, admitted that there is “potential for this as a model”. The UK “has the highest adoption of smartphones in Europe”, so “the need is more pressing” there, he added.
The advantage for partners — banks and others — is that there will be a single point of contact when wanting to deal with the mobile industry.
Of course, that’s just what the others, such as Visa and Monitise, are hoping too. GTB