1Mby1M Deal Radar 2011: mopay, Palo Alto, California

According to Mashable, the global combined market for all types of mobile payments is expected to double from its current value to reach more than $600 billion by 2013. The mobile payment market for goods and services, excluding contactless near field communication (NFC) transactions and money transfers, is expected to exceed $300 billion globally by 2013. This is good news for companies such as mopay, which develops payment solutions that allow consumers to buy goods online via their mobile or landline phones. Online retailers can also use mopay instead of relying exclusively on credit card merchants. The aim is to offer consumers a better way to pay for online goods and merchants a safe and reliable option.

CEO Ingo Lippert founded MindMatics AG in 2000 together with Christian Hinrichs. Prior to this, he was project manager at management consulting firm Roland Berger & Partner, where he gained experience in planning and executing e- and m-commerce strategies for leading players in the telecommunications and retail sectors. It was this experience that led him to the idea to use the mobile phone as a hub for modern commerce, which was not something that had been done at that time. Colleagues at the time, Lippert and Hinrichs had the idea of using mobile devices in new ways, especially as a means of payment. However, it wasn’t until Armin Barbalata, the current CFO of mopay, joined the startup that the full scope of the possibility of innovation via technology came full circle.

The mobile payment market basically equals the mobile device market. That is to say, every SMS-enabled mobile phone can run a mopay transaction. According to the International Telecommunication Union, in 2010 there were about 5.3 billion mobile subscribers, which is 77% of the world’s population. Top target segments for mopay on B2B level are online merchants that offer virtual or physical goods online. As mobile payments still require higher transaction fees than credit cards, they are able to be bundled into high-margin offers and goods with minimum or no incremental cost.

On the consumer level, the top target group for mopay are consumers who prefer fast and easy means of payment for online purchases and those without – or limited access to – bank accounts and credit cards. The average mopay user ranges from 12 to 18 in age, and the service is available in more than 80 countries.

The majority of mopay users spend roughly $3 to $7 per transaction, and the average transactions per user per month ranges between $3 and $5. mopay conversion is usually higher among adults, as minors (those 17 and younger) show conversion rates of around 30 percent. For adults (18 and up), conversion rates can be as high as 80 percent.

mopay’s family of products includes mopay Web, a global payment option for online stores; mopay2go, for mobile phones; mopay for Android, an in-app payment platform; mopay call; where customers can pay anonymously with a phone call; mopay SMS and PSMS for merchants to send text messages to customers; and mopay cockpit, which has analysis tools (SMS and MMS reports, transaction analysis, sales evaluation).

Mobile payments and mobile banking have rightly been promoted as solutions for those without access to credit, especially in developing countries. Companies such as mChek and Obopay, both featured in Entrepreneur Journeys, have made significant strides in this area. However, the increasing sophistication of mobile devices and constant push to find new ways to use them means that mobile payment technology is also being explored by a variety of companies and for various market segments. To give one example, Google, Citibank, and MasterCard are working on technology for mobile payments at the checkout counter. mopay faces competition from Zong, which has expanded its payment platforms to TVs, gaming platforms, tablets, and other devices; and Boku, which is less established than Zong and mopay but like them has attracted significant funding and quickly set up features such as an in-app billing library for Android.

Mopay’s last round of funding took place in 2004 when mopay raised $20 million of VC funding from T-Venture Mobile, Tempo Capital, and Holtzbrinck Ventures. Revenues are over $1 million, and more than  $150 million in transactions have been processed.

Because mopay already in all major markets, the company says there is limited potential as far as geographic growth goes. That being said, mopay is working to expand its presence in various sectors where mobile payments are just getting off the ground.

Additionally, the company will continue to focus on turning the mobile phone into “the new wallet” in more ways. One major approach is mobile applications. Over the next few years, mopay plans to expand its portfolio of in-app billing solutions to fully address this booming market segment.

As for what’s next, Lippert says, “We have absolutely no exit plans as the whole mobile payment market is still in its infancy and mopay has – and will continue to be – a key player with significant market leverage, enabling us to take part in shaping the future of mobile payments. Nevertheless, we are a VC-financed company, so it is inevitable that there will be changes in the ownership structure in the future. When and how that will play out, we do not know right now.”

Recommended Readings
Building Indian Mobile Banking: mChek CEO Sanjay Swamy
The Technology Behind Making Mobile Payments a Reality (from the New York Times’ Bits blog)

This segment is a part in the series : 1Mby1M Deal Radar 2011