Monitise General Discussion

25th Jul '09 by StrollingMolby

26 comments 14929 reads

A thread for general discussion of the company and developments that affect it.

Monitise was founded in 2004 and was listed on the Alternative Investment Market (AIM) of the London Stock Exchange on 28 June 2007.

www.monitisegroup.com/

Monitise is the world's leading mobile banking and payments partner with an impressive list of clients. It has spent six years developing its Mobile Money Manager and has three distinct 'toolkits' that banks and financial institutions can sign up for and extend to their banking customers. End users can manage their finances via their mobile phone and also instruct payments.

Clients include Lloyds, Natwest, RBS, HSBC, Alliance & Leicester and all the major UK mobile networks (Vodafone, Orange, O2, T-Mobile) as well as a strategic alliance with Carphone Warehouse to bring MONILINK mobile financial services to the UK mass market. Mobile Banking is now also available on the iPhone and iPod touch. Overseas, Monitise partners with over 60 American institutions, and is working to break into India, Africa and Asia Pacific.

LloydsTSB have recently launched an advertising campaign - 'For The Journey' - including this Mobile Banking promotion which should see many users sign-up for Monitise's Mobile Banking solution http://www.youtube.com/watch?v=PxsDlTwVmhY

The share price of Monitise has risen spectacularly since late June when Visa announced that it was partnering with Monitise and buying 15% of the company in a placing (at 7p when the price was 5p).

"Visa is the world's most trusted, inclusive and innovative payments network. This alliance validates our unwavering commitment to building truly accessible, inclusive and reliable services over the past seven years. It is a landmark announcement in the mobile payment space and we are excited to collaborate with the world's foremost payments company to accelerate the convergence of payments services and mobile devices."

Including the VISA monies, Monitise now has around £15m in cash, approx 3/8 of the market cap.

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Stockhound

29th Jul '09

Part of the issue for me is that their website isn't terribly clear on what's so innovative about what they are actually selling - "3 flexible toolkits". The mobile interface can't be terribly hard to replicate. Is it the security? The Visa deal certainly provides some welcome reassurance that their technology is value-added. Clearly, the security issues with mobile banking are enormous but I would have thought that the industry would develop a common standard, rather than rely on the proprietary technology of a player like Monitise...

StrollingMolby

7th Aug '09

Stockhound,

I've been thinking about your post on and off for the last week and am still struggling with the USP of Monitise. They have obviously got some sort of technological lead embedded within the software (both in terms of functionality and security) to have signed up so many reference names - the major UK banks and mobile companies as well as 60-odd US banks. This though may be a function of firms not wishing to be left behind, so feel the need to sign-up to the current industry leader.

The 'moat' that Monitise are capitalising on currently is precisely because there is no concerted effort (that I know of) by the industry to demand a common standard for such mobile banking and payment technology.

Results on 25 August will tell us more, but for now I am happy to ride this one.

marben100

8th Aug '09

Hi Guys,

Your posts here intrigued me so, as I have an IT background, thought I'd investigate a bit. Looking at Monetise's website, their core poduct appears to be the Mobile Money Manager :

Monitise has spent 6 years perfecting its Mobile Money Manager, the gateway to mobile banking and payments. We have 3 flexible toolkits for banks and financial institutions.

and from http://www.monitisegroup.com/our_services

Our market leading platform provides a single connection point for financial institutions, merchants and network operators around the world

Their AIM admission document states:

The Monitise Business provides the switch infrastructure and software to carry out personal
banking transactions and enquiries securely on mobile phones...

...The Monitise Platform is delivered and conducted as a managed service, which the Board

believes has a number of advantages over competing offerings that use SMS, mobile internet

or software solutions, and do not offer the mass-market characteristics required for mobile

banking to become a ubiquitous banking channel.

Whilst still not entirely clear - and Monitise really ought to make their message clearer - my impression is that they have combined some proprietary server/client software with systems integration expertise (the business was spun out of Morse, a systems integrator), to offer an off-the-shelf packaged product for financial institutions, network operators and merchants. The AD further states:

The objective of the Monitise Business is that the Monitise Platform becomes the global de facto standard for mobile banking and payments. The Board believes this will be achieved through:

* being the first credible service to market;

* retail banks and mobile network operators participating in the business model and being advocates;

* offering a comprehensive set of services at a low cost;

* providing the broadest possible consumer coverage;

* use of joint ventures and licence agreements to reduce investment risk;

* expanding internationally in advance of mass consumer uptake, including through the use of joint ventures and licence agreements to reduce investment risk;

* attracting and retaining key personnel;

* delivering the best user experience; and

* building a sustainable network for financial institutions, mobile network operators, merchants and consumers that guarantees and balances the interests of all parties.

...Significant barriers to entry:

* an established joint venture with LINK;

* Monitise has been first to market in the UK with an industry platform;

* relationships have been established with switches, banks and mobile network operators in several key countries;

* robust, scaleable technology with bank-grade security architecture;

* successful integration with the LINK network, the busiest ATM switch engine in the world;

* the security model is effective in the UK, in one of the world’s more conservative, security conscious and heavily regulated financial markets; and

* the Monitise Platform leverages the existing infrastructure of banks, mobile network operators and switches.

Whilst a diagram would be helpful, my impression is that the Monitise platform is the "glue" that sits between network operators (like Vodafone) and payment processing networks, like LINK. These are two quite disparate systems that require a highly secure and standardised connection to facilitate mobile payment processing. Perhaps this picture illustrates this:

It does strike me that gaining credibility in this marketplace isn't easy and that it is hard for prospective competitors to attack an established, proven platform...

Might be worth some further research.

Regards,

Mark

A sequence of research notes from Edison is available here: http://www.monitisegroup.com/investor_relations/reports

Incidentally, if Monetise does what I understand, it is far from easy to route potentially huge numbers of transactions between bank networks and mobile operators, reliably and securely.

Mark,

Thanks for posting your research and insight into the technology.

The latest Edison note is a comprehensive 12-pager, written following the VISA deal. The revenue growth projection is an eye-opener for the mobile phone market penetration (that Monitise must have OK'd), yet MONI is still not profitable until 2012:

Year-end (June)	2009	2010	2011	2012	2013	2014	2015	2016
Integration services revenue	1.5	3.8	4.5	5.1	5.6	6.0	6.3	6.5
Average no. of JV partners	1	3	3	4	5	6	7	8
JV licence revenue @ 50% recognition	0.5	1.7	2.0	2.9	4.0	5.1	6.2	7.2
Year-end active users (m)	0.6	2.4	4.5	9.2	17	27	38	49
Royalty/transactional revenue @ 50% recognition	0.8	3.5	7.8	14.9	27.1	43.5	61.6	78.8
Total Revenue	2.7	9.0	14.3	22.9	36.8	54.7	74.1	92.5
Total Gross Profit	1.3	4.6	7.2	11.9	19.3	28.7	38.9	54.7
Operating Costs	(12.8)	(12.5)	(13.1)	(13.9)	(15.0)	(16.2)	(17.5)	(18.9)
Profit before tax & share-based payments, exceptionals	(11.5)	(7.9)	(5.9)	(2.0)	4.3	12.5	21.3	29.6

What these assumptions show is the three seperate revenue streams (integration services, JV licence revenue, and royalty/transactional revenue) and how the company needs to be approaching 17m users before turning profitable. To demonstrate how much effort is needed to get there, we hope that MONI announce they have 1m signed-up users in the results due on 25 August.

So MONI not only need many banks to adopt their mobile banking offering, but also for banks to aggressively market and sign customers up to the service. This really is the key sensitivity for turning profitable. The integration services and JV licence revenue is nice to have, but it is the many million users worldwide that are needed to bring in the royalty/transactional revenue that offers the potential for MONI to be a very successful investment.

Gradders73

13th Aug '09

http://news.prnewswire.com/ViewContent.aspx?ACCT=109&STORY=/www/story/08-13-2009/0005076948&EDATE=

I think this is a great development for the company. My personal experience of the chaos of personal banking business in Sub Saharan Africa tells me this could be their best market. Mobile phone penetration is very high, Visa is not as widespread as you would imagine (still linked to BCCI believe it or not) and the security should be trusted.

"Uniquely among mobile banking services, Monitise also enables people without a bank account to use its services, as well as providing traditional mobile banking to those with accounts."

This is a killer aspect as one of the things that always surpises me is how far many people work from their family. Western Union makes a fortune from sending money across the country and the product will allow people to electronically transfer cash from where they work to the family using the mobile as the security as well as for those with an account.

A few years ago I sat in line in a Senegal bank in the middle of nowhere for hours as people queued for their banking facilities. Most of the time seemed to involve people proving identity and as the waited, they all fiddled with their mobile phones. I remember thinking wuldn't it be great if they could do this by mobile. I also know there is quite a cottage industry in Ghana and Nigeria where people transfer phone credits and then go back and refund the credits as a way to transfer cash. Given how comfortable people with this (and how much they like using the mobile), this product has a strong future.

I really think this company could be there with the right product at the right time in the right market.

If they could get tie-ins with the mobile operators as well, so the features came as part of the package, this would be a big boost.

Monitise General Discussion

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StrollingMolby

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