Visa Furthers Mobile Banking Push by Acquiring Fundamo
Visa Inc. (NYSE:V) recently announced that it has agreed to acquire Fundamo, which is a leading provider of mobile services for financial institutions and mobile network providers in developing countries. According to Visa, the acquisition will help it provide the next generation of of mobile payments options. Visa also announced a long-term commercial agreement with UK’s Monitise Plc., a leading provider of mobile financial services for institutions in developed countries. [1] Visa is the largest provider of payment card network in the world and competes with MasterCard (NYSE:MA), American Express (NYSE:AXP), Discover (NYSE:DFS) and Capital One (NYSE:COF).
We have a price estimate of $86 on Visa’s stock, which is about 15% above the current market price.
Fundamo at a Glance
Fundamo’s mobile financial services platform enables the delivery of mobile financial services to unbanked and under-banked consumers around the world, including person-to-person payment, airtime top-up, bill payment and branchless banking services. [1]
Visa can leverage Fundamo’s platform to offer enhanced functionality and new services to existing mobile financial services subscribers across Africa, Asia and Latin America and has the potential to rapidly expand its subscriber base as well as increase the number of transactions. According to Visa, Fundamo’s deployments currently have a user base of more than five million registered subscribers and the potential to reach more than 180 million consumers with mobile financial services. The acquisition will cost Visa approximately $110 million in cash.
Monitise Agreement
Monitise has expertise in customizing mobile applications for a broad range of phone models and operating systems which will help Visa to expand its presence in the mobile financial services. Visa and Monitise also plan to introduce new mobile services for existing Visa account holders outside the US that will enable electronic payments including mobile top-up, utility bills payments and transit ticketing.
The mobile payment market is growing rapidly and Visa is expected to play a dominant role because of its recent strategic acquisitions that will enhance its core payment processing capabilities.
The acquisition of Fundamo along with CyberSource and PlaySpan will help Visa to boost its number of processed transactions from just under 48 billion in 2010 to about 90 billion by the end of our forecast period. Transaction fees account for nearly 30% of our price estimate while cross border fees account for just under 20%.
In the chart above you can drag the trend line to see how this forecast impact’s Visa’s price estimate.
Notes:- Visa Acquires Fundamo, Signs New Agreement with Monitise, Press Release [↩] [↩]