If you follow mobile payments you must have heard this week that Visa spent $110m to purchase Fundamo. Fundamo is a company that has a mobile payments technology platform it licenses to mobile payments service providers. To the best of my knowledge most of their clients are Mobile Network Operators who are offering mobile payments services. Here are my initial thoughts on this deal:
- Visa (and MasterCard, Google et al) are signalling the end of physical cards – the future of payments is mobile (please note “mobile” does not mean a phone but a mobile device).
- Visa understands that while mobile payments and specifically the agent network is a local game, the company can play a unique role in effecting transactions between scheme operators leveraging its payment processing networks. Indeed I believe this is the reason for buying Fundamo – vs. buying the Fundamo platform to continue selling it as Fundamo was (which they probably would but I find it hard to see that as the core reason for the deal – that was arguably not a strong business at best).
- This is could be the beginning of a spending spree…Visa will continue to spread its wings on expanding to mobility as the company tries to find a winning formula. This deal suggests Visa has realized their investment in Monitise does not cover the emerging markets. In time they will also realize that there will not be a one size fit all strategy for the emerging markets. Regional players will arise in a manner similar to the Mobile Networks. Visa can and will have a role to play.
So…was this a good deal?
- Fundamo – Net net this was a great deal for the Fundamo team – at $110m it must have been at least 10x multiple to (what I believe) was a slowing top-line growth. Given many mobile payment providers are choosing to build vs buy (as we did at Paga), and there are several others trying to license their platforms (at least 5 approached us) the future options were not as strong for Fundamo. As such I think Fundamo got a good deal.
- Visa – For Visa the jury is out…lets see how they execute. Coming from Cisco Acquisitions team, I saw too many great strategies not pan out post acquisition…and that was in a place where acquiring to expand was finely tuned.
- Scheme Operators – For all mobile payments service providers around the world I say keep your head down, focus on your market, build traction…partner with others and build a viable sustainable business in your region (p.s. I highly recommend build vs buy!)
The future is mobile!