Visa signs $13 million deal and takes minority stake in Monitise

30 June 2009 | 9138 views | 1 mobile keypad

Visa is to take a 14.4% stake in Monitise after signing a $13 million partnership deal with the UK mobile banking outfit.

Under the agreement, AIM-listed Monitise will be a strategic development partner to Visa. The five year deal has a contract value of $13 million in addition to ongoing licence, service and development fees.

In addition, Monitise has entered into agreements with Visa International and existing shareholders UBS Global Asset Management and Capital Group to subscribe for an aggregate of 73.2 million new ordinary shares at a price of 7p, representing a premium of 33% to the closing price of 5.25p on 29 June 2009.

Following the subscriptions - which are expected to raise £5.1 million before expenses - Visa International will own 14.4% of the enlarged issued share capital of Monitise, UBS Global Asset Management will own 12.9% and Capital Group will own 5.8%.

Upon completion, Tim Attinger, head of global product innovation at Visa will take a seat on the Monitise board.

"With the ever expanding growth in handsets coupled with increasing sophistication of mobile networks, mobile payments and services present significant opportunity for Visa," he says. "In aligning with Monitise, we expect to expand the delivery of Visa mobile services to consumers around the globe, enabling them to seamlessly use their mobile phones to purchase goods and services, make payments, receive valuable information and offers, and transfer money between accounts, in a safe and secure manner."

News of the deal comes as the UK firm released an underwhelming set of financial results in a trading update for the year ending 30 June. Revenues are expected to be in the region of £2.7 million, an 80% increase year-on-year, but some way below market expectations. The firm says it has trimmed the cost base to compensate and that operating losses will be "slightly better" than market forecasts.

The group reported a pre-tax loss of £14 million last year on revenues of £1.5 million.

In the UK, the company says it is in discussions with joint venture partner VocaLink about increasing its stake in Monilink, "although no agreement has been reached in this respect".

Comments: (1)

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James Van Dyke - Javelin Strategy and Research - Pleasanton | 01 July, 2009, 18:15

Prediction of how this will generate ROI for the payments industry: 1) mobile banking (i.e. "viewing") will lead to...2) mobile account controls (alerts and UDLAPs, or userdefined limits and prohibitions) which in turn will lead to...3) mobile payments. This is the chronology of what we call the customer driven architecture. It's nothing less than an overthrow of today's paternalistic model of banking custodial account services relationships, and represents the new model for acquisition, cross-sell, safety and loyalty. Prepare for a revolution.

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