From a MergerMarket story, March 20, 2012
M&A in the mobile payment space could heat up this year for buyers seeking to gain a first-mover advantage in a technology sometimes referred to as the ewallet, said two bankers.
But with many targets small and the space fragmented, two executives and a venture capitalist speculated it may be another year or two before there is a serious consolidation wave.
All agree mobile payments is poised for M&A, with acquirers buying exceptional technology or struggling startups this year and increasing deal-making as winners among companies and technologies become clear over time.
Mobile payment technology enables a mobile device to be used like cash, replacing a credit card. It also allows users to make instant mobile web transactions.
Payments have experienced more innovation in the last couple of years than the sector has in the last 50, said Jason Diaz, CEO of TaxiPass. “We had Visa and MasterCard. But the Internet and wired world gives us an unprecedented opportunity.”
“If I’m Apple, Samsung or a wireless carrier, why wouldn’t I step in now to capitalize on a disruptive technology, instead of giving all the reward to Visa or PayPal?” asked Peter Ognibene, a managing director at Berkery Noyes. “Buy now before someone else does.”
A second banker agreed that first movers may make plays this year, but noted that the mobile payments space is still “nascent,” and even though the sector is hot, winners and losers have not emerged, as they have, for instance, in the prepaid market, represented by companies like Green Dot.
A year ago, Swedish handset maker Ericsson launched a mobile banking system it dubbed Ericsson Money Services. Google launched a mobile wallet last spring. AT&T, Verizon and T-Mobile have made a reported USD 100m investment in Isis, a mobile payment startup expected to roll out a service this year. Vodafone announced its intention to introduce a mobile payment service a few weeks ago at the 2012 Mobile World Congress.
Buyers of mobile payment services and related technology, such as fraud protection, include handset and telecom carriers, credit card companies and banks, said Ognibene. Yahoo could buy mobile payment companies to better compete with Google, noted an industry executive. Yahoo could look at consumer-facing payments, “a PayPal type thing.” With USD 2.8bn in cash, Yahoo has “a big wallet,” the executive said.
Buyers in the mobile payments space are less likely to be banks and credit card companies who are happy with the status quo, said Christopher Boone, CEO of Cimbal. Issuer processors such as Fiserv, Jack Henry, First Data and Total System Services, who benefit most from taking business from credit card companies, are the most likely buyers, Boone said.
Cimbal is attractive because its service is software-based and can be used on any device rather than running over a near field communication (NFC) network, said Boone. NFC is hardware dependent and limited to Google, Sprint, Citibank and Mastercard at present.
M&A has already begun in the mobile payments space, Boone noted. Fiserv acquired CashEdge last year for USD 465m at a rumored multiple between 12x and 16x 12-month trailing revenue. Visa acquired Fundamo for USD 110m, and Gemalto has also made acquisitions in the space.
Although buyers have approached Cimbal, Boone wants to see the market gain more recognition before agreeing to a deal.
A banker estimated Cimbal’s value at more than USD 50m and pre-revenue startups at about USD 50m. Boone declined to give a valuation estimate.
TaxiPass is another company named by the banker as an attractive M&A candidate in the mobile payment space. TaxiPass offers a national network allowing cashless payments for cabs. The network also offers advertising and dispatching. “Taxis are the largest all cash market left in the US, followed by vending machines and laundromats,” said Diaz. “We’re addressing an underserved market.”
TaxiPass has a network of 15,000 cabs in 30 markets and would like to expand by 10 times or 20 times within three years, said Diaz. “I have a suspicion buyers are more likely to pounce after TaxiPass has done the heavy lifting. Big guys optimize an asset but we roll up our sleeves and build it.”
The companies most likely to sell this year, speculated Diaz, are those startups that have found themselves short of resources and opportunity.
Other mobile payments companies mentioned in reports as potential M&A candidates are Square, rumored to have a USD 1.6bn valuation after a USD 100m fundraising last spring, and Dwolla, which raised USD 5m from Union Square Ventures, Village Ventures, Thrive Capital and others in February. Square is backed by Kleiner Perkins Caufield and Byers, Sequoia Capital, Khosla Ventures, Sir Richard Branson and angel investors.
by Sarah Cohen and Marlene Star
Tags: Mobile Payment M&A
Cimbal was included in a January 7, 2011 Chicago Tribune article, “
I just learned from our engineering team that Cimbal – the mobile payment network that allows you to pay with your phone is available on Android. It’s not even announced yet but I want to share the news with you right away. As Cimbal blog readers you are the first to get access and try Cimbal on your Android phone.