Visa Dials Back On Monitise

Startups today have found bank loans to help get them get off the ground have all but dried up. So many now turn to other investors, such as venture capitalists and “incubators” to secure their funding. Sales of company stock represent another option to pursue for more-mature, yet still relatively new, companies.

But such funding often represents a two-edged sword because, while it provides help in meeting a business’ financial needs, it’s not a permanent open spigot to tap into when needed. The influx of funds from investors can dry up or diminish over time, especially as companies show signs they can operate on their own financial means.

The initial shock when a funding source evaporates, or may be about to disappear, can be traumatic, and this appears to have been the case for Monitise. Shares of the Europe-based mobile-banking technology provider’s stock fell nearly a third when one of its chief investors, Visa Inc., said in a statement it was considering lowering its investment interest in the company “given the maturation of Monitise as a company.”

Stock price plummets

When Visa announced it had hired J.P.Morgan Securities to help it consider its investment options, Monitise on Thursday (Sept. 18) saw its stock value plummet by £250 million (US$408 million) on London’s Alternate Investment Market, according to a Reuters report. Visa holds a 5.5 percent interest in Monitise and is its fourth-biggest shareholder. Visa Europe also is an investor with about a 5.9 percent share.

Visa has been a long-time investor in Monitise, initially taking a 14.4 percent share in the company in 2009 “to provide capital support to a leader in the evolution of the mobile payments sector,” according to Visa’s statement.

At the time, the company’s annual revenue was about £3 million. Monitise generated £95.1 million in revenue during fiscal 2014 ended June 30, up 31 percent from a year earlier, according to the company’s preliminary financial results.

Support has been dropping

Visa’s investment provided initial capital to help Monitise support its business activities. Over time, though, Visa has reduced its stake in the company.

Visa said in its statement its “reduction in ownership and associated influence is consistent with Visa’s investment practice to seed emerging players and, over time, taper that influence as the partner company grows.” Monitise will continue to provide the card brand with mobile platform development services through 2016, Visa said.

“As both Visa and the payments industry evolve at a rapid pace, Visa intends to continue increasing its investment in its own in-house capabilities and, as a result, reducing its use of external resources,” the card brand noted in its statement.

Visa made no mention of its recent agreement to support Apple’s new Apple Pay initiative with its tokenization product, so it’s uncertain whether that, or Apple simply entering the payments market, influenced Visa’s decision to pursue a different relationship with Monitise and, perhaps, a new mobile strategy.

Visa’s benefited from Monitise

Visa has benefited substantially from its Monitise relationship, according to Bill Sheedy, Visa executive vice president of corporate strategy.

“Visa invested in Monitise as an early thought leader with a vision of making mobile banking mainstream and extending that functionality to mobile payments,” he said in a statement. “Over the past five years, Monitise has successfully demonstrated its leadership in the sector underscored by the company’s marquee clients, multiple network partnerships and recent agreement with IBM.”

In a separate statement, Monitise said it would continue working with Visa Inc. and said its guidance for the current fiscal year would go unchanged. The company expects revenue growth of at least 25 percent in fiscal 2015. It also expects to become EBITDA profitable by fiscal 2016.

Visa’s presence in Monitise is strong internally as well, as various former executives from both Visa Inc. and Visa Europe recently joined the company in various high-level roles.

In June, former Visa executive Elizabeth Buse joined Monitise as co-CEO, working alongside company founder Alastair Lukies. Former Visa Europe CEO Peter Ayliffe also recently was appointed non-executive chairman of the company’s board. Earlier this month, Mike Dreyer, former Visa head of technology, joined Monitise as president of Americas, while Adam Banks, former Visa Europe chief technology officer, joined the company to spearhead development of the its platform technology.