With Eye on U.S. Mobile Pay Market, Monitise to Merge with Clairmail

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Seeing a major opportunity in the U.S. market, Monitise and Clairmail this morning announced a merger deal in which they will cross-polinate and cross-sell each other's technology in their respective markets.

Monitise is a large mobile payment technology provider in the U.K. with partnerships with Visa and FIS. Clairmail is the biggest provider of mobile banking software to large U.S. banks.

Assuming the deal goes through, the two companies will have 33% of the top 50 U.S. banks as customers and a total of 300 bank customers. The two companies would have pro-forma combined revenues of $56 million at the end of 2011.

Both companies' executives stressed their philosophy of keeping banks at the heart of mobile payment and mobile commerce transactions.

"Banks will continue to play a major role in the way consumers interact with financial services on their mobile phone," said Alastair Lukies, Monitise Group Chief Executive, in a call this morning. "We've seen an increasing level of interest in the inevitability of mobile payments, whether that be paying someone remotely from a mobile phone, sending money to someone in the same country or overseas, or making a payment at a point of sale terminal as near-field communications becomes more prevalent over time. Then ultimately mobile commerce — the ability to use a mobile phone for a highly enhanced shopping experience, make a mobile purchase from an advert, a billboard, magazine, or a TV spot. Or getting a real time offer from someone while in their store, being able to make that purchase using special offers, digital receipts, loyalty coupons and vouchers. Each one of these marketplaces is a substantial marketplace, however, it's our firm believe and the firm belief of our shareholders, our board and entire team that with the bank at the center, you need a bank-grade, interoperable platform to make this marketplace really work."

Lukies says the U.S. market is set to become "one of, if not the, largest mobile money marketplaces."

Pete Daffern, CEO of Clairmail, will continue to run the U.S. mobile banking software company. "The world of mobile banking is evolving very quickly to mobile payments, and mobile payments will evolve very quickly to mobile commerce," he said in an interview this morning. "If I have a relationship with a bank, I'll probably want to pay for stuff using my mobile phone based on that relationship with the bank. When I've got all that, it then makes sense that when I'm walking into a store, the store can start making offers to me and I can start paying for them using my phone and I can be much cleverer about how I track and incent those customers to spend money."

Visa handles 65% of all global payment transactions, Daffern points out, so Monitise's relationship with Visa should propel it in the fledgling U.S. mobile payment market. "Monitise's technology is absolutely right for the U.S. market — it's blessed by Visa," he says. "The standards Visa imposes on an organization are second to none."

A joint product roadmap has yet to be determined. The deal is still subject to regulatory approval.

Analysts are bullish on the merger plans. "It's a sign of the increasing maturity of the mobile payments landscape and indicative of just how hot the space is right now," says Nick Holland, senior analyst at Yankee Group. "Both Clairmail and Monitise have been around for several years and the acquisition seems like a sensible blending of strengths."

David Albertazzi, senior analyst at Aite Group saw the two companies as a good fit. "The international success and presence of Monitise in terms of capability in mobile payments and commerce they'll be able to leverage in the U.S.," he says. "At the same time, Clairmail's banking experience and success among large U.S. banks will also be leveraged. The scale for both franchises will be interesting to see, the two product lines are fairly complementary."

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