Bank of America Corp.'s decision to make an equity investment in the software provider mFoundry Inc. is a sign the banking company anticipates some strategic benefit from its technology, other than a financial return, observers said.
Many banking companies, including Bank of America, operate investment groups that fund promising companies, generally with profit as the goal.
The B of A subsidiary that has invested in mFoundry has an extra mission, though. The Charlotte company's Web site says Banc of America Strategic Investments Corp. focuses on projects "that are a strategic priority for Bank of America."
It also manages stock and other equity assets received in restructurings and corporate workouts, and its "focus spans the Bank of America enterprise."
Observers said the investment could indicate that Bank of America has a long-term goal of promoting the use of mobile phones as multifunction payment tools, a goal that mFoundry and other mobile banking companies are pursuing.
mFoundry, a Sausalito, Calif., vendor, announced the investment Monday but did not disclose its amount.
Even this much disclosure is a departure from Strategic Investments' normal practice. A spokesman at B of A said the company generally does not discuss the unit's activities because they involve proprietary investment activities and are customarily bound by nondisclosure agreements.
Red Gillen, a senior banking analyst at Celent LLC in Boston, the financial research arm of Marsh & McLennan Cos. Inc.'s Oliver Wyman consulting unit, said the investment in a mobile software application is something of a departure for B of A, which already offers customers mobile banking services through phones' browsers and has said that mobile Web services may be the most ubiquitous way to offer access to banks.
mFoundry's software gives financial companies more flexibility to customize their offerings, Mr. Gillen said. "Maybe it's an endorsement of the more open 'ecosystem' model."
He also said that mFoundry's long-term plan is to turn the phone into a versatile payments tool and that B of A might have plans to offer a variety of mobile payments capabilities one day. "A mobile wallet is going to be important for that," he said. "An application may be the most secure and seamless way to do that."
Bank of America has two other units within its Private Equity Investments division, both of which have their own Web pages that give detailed descriptions of their management teams and holdings. Strategic Investments provides none of these details.
Bank of America's 2007 annual report said the unit had invested several billion dollars in foreign financial companies, including $16.4 billion in China Construction Bank, $2.6 billion in Grupo Financiero Santander SA, and $2.6 billion in Banco Itau.
In a few cases, public companies have acknowledged an investment by Banc of America Strategic Investments Corp., according to filings with the Securities and Exchange Commission.
For example, two New York companies, ACA Capital Holdings Inc. and MarketAxess Holdings Inc., were required to disclose in 2006 that the B of A unit owned more than 5% of their shares.
ACA provides financial guaranty insurance products to participants in the global credit derivative markets. MarketAxess operates an online portal linking institutional investors to bond dealers.
In the case of mFoundry, B of A's motivation to allow the disclosure was less clear.
mFoundry, a venture-backed start-up, has a roster of strategic investors including Motorola Inc., eBay' Inc.'s PayPal Inc., and NCR Corp., as well as several venture capital companies.
For its part, B of A has already attracted a million customers to mobile banking in the year that its service has been available, but the mFoundry investment appears to signal that B of A also sees potential in having a dedicated software application on the phone itself for banking and payments.
A spokeswoman for the mobile banking group said that executives were not available Monday, and she would not say whether B of A plans to use mFoundry's technology.
mFoundry supplies the underlying technology in Citigroup's mobile banking application, and it has deals with PayPal and vendors such as Fidelity National Information Services Inc. and the credit union service organization PSCU Financial Services Inc. to provide mobile banking and payment services to their customers' users.
The deal also sharpens the competition among mobile banking vendors including the Firethorn Holdings unit of Qualcomm Inc., which has focused on deals with wireless carriers, and Metavante Corp.'s Monitise Americas joint venture, which plugs into Metavante's NYCE debit network to help smaller banks go mobile.
Drew Sievers, mFoundry's chief executive and co-founder, said he could not comment on B of A's plans, but said the competition would benefit the industry.
"There will be multiple players in this space," he said. "This will help ensure that there is no one company that can put itself in a position where it is the gatekeeper for everything."
