What’s the one thing in life you value the most?
Food and water?
All are crucial, of course.
But very few things are possible without money.
We know it, too. The issue is front and center of our lives every day.
Take the 60% of smartphone users in the developed world, for example. Over half of them have mobile money management apps on the front page of their phones. And, on average, they use them 30 times a month. That’s every single day.
This isn’t surprising when you consider the incredible growth of mobile commerce (m-commerce)…
- By 2017, one-quarter of online retail purchases will happen on mobile devices, according to eMarketer – double the number from 2012.
- By 2017, m-commerce will also account for $113.5 billion in total U.S. retail sales – up 172% from $41.6 billion in 2013.
So given the incredible growth of m-commerce, today’s C.H.A.O.S. article breaks down a little-known global leader in the field.
In fact, if it weren’t for this company, you’d never download your mobile banking apps to begin with…
A Leader in the Massive Mobile Banking Trend
That company is Monitise plc (MONIF), a London-based m-commerce outfit, which trades over the counter in the United States and under the symbol MONI.L in London.
Founded in 2003, Monitise is at the heart of the mobile banking and m-commerce trends. Its technology makes it possible for financial institutions, retailers, payment providers and telecom carriers in the United Kingdom, United States and Asia to offer mobile banking and mobile payment services. In turn, it offers monetary freedom to consumers.
But will the stock deliver money to you?
C.H.A.O.S. has the answer…
Because Monitise is a British company, I’ve converted its numbers from pounds to dollars.
The first number isn’t a good one: The five-year net income trend shows that Monitise has sunk from a loss of $22 million to a loss of $78 million.
Now, at first glance, that’s a pretty abysmal statistic. But there’s a reason…
Given that Monitise is at the forefront of an ultra-growth trend, it’s laying the groundwork to become the standard platform for mobile transactions. And it’s doing that by acquiring several other firms.
So while Monitise isn’t profitable – and most likely won’t be until 2015 or 2016 – the company is investing in its future growth today.
Moreover, its top-line revenue growth is incredibly high, having just notched year-over-year revenue growth of 67%. This validates the company’s technology – and demand for it.
And since this is the “Cash” section, Monitise has $112.4 million in the bank, with a very manageable $1.7-million worth of debt.
Monitise is investing now, in hopes of reaping big rewards later from an area with very high growth potential.
C.H.A.O.S. Meter: 15/20
We have a landmark event here – a perfect score!
It’s the first time that any company has bagged a maximum from any section since I started my C.H.A.O.S. articles.
So suffice it to say, Monitise’s technology has exactly the kind of high impact that I look for when evaluating tech companies.
The reason is simple: When smartphones began to proliferate, Monitise CEO, Alastair Lukies, saw infinitely greater potential than simply enhanced communication devices.
He wanted to give people greater convenience and power over their financial management – anywhere, anytime from their mobile devices.
Lukies created the “missing link” between banks and mobile operators, turning a disruptive thought into the world’s first mobile banking, payment and e-commerce ecosystem. One that gives 350 financial institutions, household-name companies and consumers unprecedented financial freedom.
How? Through three products…
Bank Anywhere: As the name suggests, this advanced mobile banking service allows consumers to monitor their finances by accessing their bank accounts anywhere.
It gives financial institutions the ability to launch new features and services faster… synchronize mobile banking apps… engage with customers and deliver content. Part of this includes getting notifications whenever suspicious account activity occurs. It also allows banks to offer bill-paying services and Mobile Remote Deposit Capture, so customers can deposit money from their phones without needing to visit the bank.
Pay Anyone: This gives customers the freedom to make card payments to anyone from anywhere – be it bills, a tuition payment, rent check, money to family/friends, or sending money internationally. And, naturally, it allows recipients to receive payments securely.
Buy Anything: The retail world is shifting from brick-and-mortar stores to cyberspace. And “Buy Anything” is an m-commerce platform that allows consumers to… well, buy anything! It’s essentially secure mobile shopping. Aside from the convenience, banks and merchants can engage more with their customers by offering targeted products, based on consumers’ preferences and locations.
All this wasn’t easy.
After all, one of the biggest roadblocks with new technology can be consumer adoption. Is society ready for these services? Are we able to trust our most important information to mobile devices and app providers?
Monitise has shown that the answer is a resounding, “Yes.”
And not only has Monitise’s technology affected social change, it’s also influenced government policy – which is just as difficult when it comes to providing secure financial transactions.
That’s why Monitise has spent over a decade developing government-approved, “banking-grade” technology platforms required for linking and accessing banking networks. And because of its innovative technology and secure digital infrastructure, it’s overcome policy roadblocks.
Add it up, and that’s why Monitise notches a perfect score here.
C.H.A.O.S. Meter: 20/20
Monitise flies under the radar – especially in the United States.
So right off the bat, any increase in coverage or notoriety will spur momentum. Particularly, as mobile banking grows stronger.
In fact, recognition is starting to funnel in, with Forbes ranking Monitise third on its list of the “World’s Most Innovative Growth Companies.” And at the Future Payments and Digital Banking Awards last month, Monitise won the “Best Merger or Acquisition” award for its pickup of Pozitron.
The company also recently hired Visa’s (V) Elizabeth Buse as co-CEO. Monitise’s success is in Visa’s best interests, too, since Visa EU owns a 6.6% stake in Monitise and Visa, Inc. owns 5.8%.
To drive long-term growth, Monitise has shifted its revenue model from upfront licensing agreements to a subscription-based model. This gets rid of high upfront charges, thus lessening the burden for customers and accelerating consumer adoption.
For example, Monitise just revealed that it’s won a five-year contract to supply mobile banking, payments and shopping services to “a major U.K. bank and financial services company.”
This new path should translate into a dependable revenue stream that will accelerate company shares.
A note of caution, though: Instead of leveraging the company’s future by adding more debt, management is diluting existing shares. For example, it financed the shift in its business model by placing 160 million shares (valued at $183 million) on the market.
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I’m never a fan of this approach, but it’s better than piling on debt.
C.H.A.O.S. Meter: 14/20
In helping these companies get their mobile offerings to customers quicker and cheaper, Monitise charges them a licensing fee and also gets revenue from development, hosting, maintenance and support costs.
And it’s extending its business to the commerce side, with mega clients like Visa and MasterCard (MA).
By doing business with Monitise, companies can tap into its secure hub, which operates as a mobile payment and e-commerce gateway.
And it’s translating to more orders.
Five years ago, revenue was a mere $4.5 million. But in 2013, that vaulted to $122.5 million. And its user base has swelled to 28 million.
The rollout of its new subscription model, with cheaper prices and lesser upfront costs, is a major driver for increased revenue from here. Some analysts foresee profitability by next year.
C.H.A.O.S. Meter: 18/20
There are a number of big areas that could drive Monitise’s future growth. For example…
Big Data: By linking banks and customers through mobile devices, Monitise has created new opportunities for its clients by giving them better insights into people’s everyday activities. Information like where they like to eat and shop, how much they typically spend in a given week, etc.
Mobile banking customers benefit, too, as they get better insights into their own spending and saving habits.
And as Big Data analytics becomes more powerful, so will the benefits of being a Monitise customer.
Near-Field Communication (NFC): This technology allows machines in close proximity to “talk” to each other. For example, NFC is in point-of-sale systems in stores. NFC chips in smartphones allow customers to pay for goods by simply waving their phone near the card reader at the till.
Apple’s (AAPL) iBeacons takes this technology to a new level. These sensors will exist all over shopping malls and businesses everywhere, with one purpose in mind: targeted mobile advertising.
Say you’re a Starbucks (SBUX) Gold Card member with enough points to earn a free drink, and you walk past a Starbucks with a beacon outside. It can spring a message on your phone to alert you to that free coffee.
Or if you pass a J. Crew store, the beacon will recognize your phone from the last time you shopped there and push a special offer directly to your phone, based on your past purchasing history.
NFC is still in its infancy. But once it takes off, it should ignite Monitise’s growth.
As Monitise lowers its upfront costs, it should be able to attract other institutions.
The company is also opening its application programming interfaces (APIs) to its entire ecosystem. This means retailers, discount firms like Groupon (GRPN) and rewards companies can interact with each other through their apps.
So if you pass a Best Buy (BBY), your Bank of America (BAC) app can alert you to any sales, or what gadgets you can buy with your loyalty points. And you’ll be able to purchase directly through your banking app.
Monitise already has a strong grip on its industry. But given the expected growth of the mobile banking and m-commerce trends, there’s still a ton of business to capture. For instance…
- The number of people using mobile banking is expected to reach one billion globally by 2017.
- In 2017, 50% of all U.S. transactions are expected to take place on a mobile device.
What’s more, Visa projects that half of all its European card holders will make transactions on mobile devices by 2020. Since Monitise already has a long-lasting relationship with Visa, this will help scale its revenue without changing much of what it’s already doing.
This is a glimpse into the future of mobile money. A future that Monitise is pioneering – with hardly any competition.
C.H.A.O.S. Meter: 19/20
Final Verdict: As an 86-pointer on the C.H.A.O.S. scale, Monitise offers an extremely compelling way to cash in on the huge growth of mobile banking and m-commerce. It’s in the best position to benefit from the evolution of these mega trends – period.
So drop what you’re doing, and buy some shares. Heck, for the fun of it, place the trade from your mobile device!
Keep in mind that Monitise trades for around $1.15, so make sure you have a stop loss, since shares can be a little more volatile.
Your eyes in the Pipeline,