I was talking to someone about Finnovate 2007 and they looked down the list of comnpanies presenting and had this to say:
Mobile banking vendors - cashflow is still king
The recent demise of ex-mobile banking leaders Meridea (out of Finland and previously using the now-vacant URL - www.meridea.com) brings to light some interesting considerations for those making technology decisions about their mobile banking and payment platforms.
Let's look at a couple facts... European sweethearts Monetise lost c$15m last year, and God knows how big the losses were for mFoundry, Firethorn and Clairmail all of whom have been raising tens of millions of dollars from investors (NOT CUSTOMERS!). On the other hand, existing online banking vendors (such as Yodlee) are funding developments from their existing cashflows as are smaller and more nimble players like mShift and M-Com.
And if these heavily-backed guys are losing money so heavily, where is it going to come from in the future? The answer is obvious - they will have to recover it from their existing customers through heavier fees in the future or they will have to get plenty more customers on board in the short term. This kind of scenario is symptomatic of the pressures brought about by the Venture Capital industry, rather than specific to the mobile commerce industry. Venture capitalists are impatient and explicitly interested in 10 times the return on their investment - fiscal prudence and sustainability does not align with their model. Their message to these niche mobile banking players they have invested in is simple; scale fast and charge lots or go bust!
The moral of the story is that big banks and mobile carriers making a technology investment should be very wary venture-backed mobile commerce providers. Who knows what financial pressures they are under and how long they will be around....
See http://africa.reuters.com/instrument/gan.php?i=25204675 for more details of Meridea's fall from grace.
Sunday, September 30, 2007
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3 comments:
Meridea failed because it systemically over promised and underperformed all along in their mobile initiatives.
They newer deserved the merits Meridea numerous top management used to decorate them selfs from their ownership structure to get sales or partners to work with them.
Their Slides, and Mobile showpieces industry by industry where good looking but when came to due diligent deliverances their code base came worms of legacies from last century, unable to do even simplest things promised in their glamorous front ends.
I agree with your point that cash-flow is king and think that it applies to every industry; the Mobile Banking industry is no different. I do, however, disagree with your comparison of the failures that Meridea experienced to a stable and growing player in the mobile space like ClairMail.
It is true that ClairMail has received funding from VCs – as well as a number of notable industry experts like Bill Powar (Former SVP, Emerging Markets & Technologies VISA International), Patrice Peyret (Founder & VP Corporate Strategy, Mobile 365) and Robb Wilmot (Former CEO, ICL PLC) among many others – and that money is being used to grow and tune our products to meet the end customer’s needs.
ClairMail’s venture backers (NVP, Outlook and JAFCO) have deep industry knowledge and relationships that has been essential to charting a successful strategy. We have also received significant revenue from our customers (some of the largest banks in the US) and our partners (VeriSign and Telus) that will help us get to a positive cash flow by next year. ClairMail is a very nimble and above all capable player that has great venture capital partners that understand our need for funding comes from the demand for our products and the growth in the industry. If your warning is to carefully vett vendors’ financial stability, then I think it’s a fair one. On that scorecard, ClairMail’s strong customer base, adept fiscal management by its experienced and proven management team and great VC partners should be favorably acknowledged.
David Thompson, VP Marketing, ClairMail, Inc. (www.clairmail.com)
I have noticed that you still carry a link to Meridea on the blog, which is sadly not operational anymore. Profitability in Mobile banking is critical especially because of the very stiff competition. This will be one of the factors that will influence who will win in the long run.
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