Monitise’s Tough Road Forward

To say it has been a bad year for British payments tech player Monitise is something of an understatement. The question now is whether there is any chance it can be turned around.

Last week the firm announced its CEO, Elizabeth Buse, was leaving her role at the firm after only a six-month tenure. The official reason given was “personal reasons.” That news was accompanied by the revelation of a pre-tax loss of £227 million (~$350 million) for the year to June 30 — a near tripling of last year’s losses.

Among experts, the given reason for Monitise’s recent woes is an attempt to radically shift its business model. In its original instantiation, Monitise offered various services for individual banks and FIs, giving it obvious appeal to firms looking to get up to speed rapidly on mobile banking.

However, Monitise is not focused on bespoke services anymore. In recent months, the firm has been pushing its cloud platform, which is accessed by subscription, as opposed to individually licensed products. That transition has been less than smooth.

“[The] transformation of the business, while absolutely necessary, has been slower and more challenging than expected and has significantly impacted our financial performance,” noted Chairman Peter Ayliffe, according to Financial Times.

But bringing large lenders along for the ride has not been easy.

“Monitise clearly offers a bank-grade solution, but it’s about persuading banks that that’s a good long-term solution,” said Milan Radia, an analyst at Jefferies.

Slow adoption has only been part of the problem. Major shareholder Visa Europe has begun selling off its stake in the company, following a similar move by Visa Inc. last year.

However, Monitise has also shored up some new partnerships with Spanish bank Santander, telecoms group Telefónica and MasterCard, which have all taken large shares in the firm.

“Visa’s response was, as I interpret it, ‘we’ve put a lot of our know-how and resources into this relationship, you are our guys, you shouldn’t be working with MasterCard.’ The implication is that that development, integration and revenue came down more sharply than had been anticipated,” Radia said, according to the FT.

The firm is also working in concert with IBM to build and implement its mobile platform and moving forward with a series of cost-cutting measures.

Revenue will not increase in 2016, according to internal sources, but cost reductions (and no further disasters) are predicted to put the company back on track to profitability by the end of the next fiscal year.

“You are still talking about a business expecting £90 million in revenues in the current year,” said Philip Carse, principal analyst at Megabuyte. “It is not like a startup where revenues just aren’t coming.”

“The issue with Monitise is that they spent money like it’s going out of fashion, building geographic presence and trying to be all things to all people. I suspect the move to profitability doesn’t require bringing on board a lot more revenues. In the short term, it requires cutting back in a lot of these costs built up over time.”

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