LONDON – Monitise plc (LSE: MONI)(“Monitise”, the “Company” or the “Group”), a global leader in Mobile Money solutions,announces its unaudited interim results for the six months ended 31 December 2013.
- H1 FY 2014 revenue £46.5m, up 67% on H1 FY 2013.
- Gross margin increased to 73% from 72% in H1 FY 2013, with user generated margin particularly strong, owing to a number of product licence deals following recent customer wins and renewals.
- EBITDA (1)loss of £10.2m (H1 FY 2013 loss: £14.7m).
- Adjusted loss after tax (2)of £16.4m (H1 FY 2013 loss: £21.0m) and adjusted loss per share of 1.0p (H1 FY 2013 loss: 1.8p). Statutory loss after tax of £22.0m (H1 FY 2013 loss: £30.3m) with loss per share of 1.4p (H1 FY 2013 loss: 2.6p).
- Group net cash of £66.2m as at 31 December 2013. Free cash outflow (3)of £20.3m compared to £21.6m in H1 FY 2013.
(1) EBITDA is defined as operating profit/loss before exceptional items, depreciation, amortisation, impairments and share-based payment charges.
(2)Adjustments comprise share-based payments, exceptional items, impairments and acquisition-related amortisation.
(3)Free cash flow comprises cash used in operating and investing activities including capital expenditure and JV funding. It excludes exceptional items and net cash acquired on acquisitions.
- We continue to see increasing demand for our services and positive momentum across the Group and therefore see the need for continued investment as we look to maximise the growth opportunities for Monitise. We reiterate our full-year guidance.
- Expected revenue growth of approximately 50% in FY 2014.
- FY 2014 gross margin to be maintained above 70%.
- The Group sees multiple opportunities in all geographies both from direct sales channels and our growing partner network.
- A move to the London Stock Exchange’s main market in calendar 2014 continues to be considered.
- Rising demand for Monitise-enabled Mobile Money services
- Processed payments and transfers now worth $71bn on an annualised basis, compared with $31bn a year ago.
- Further growth in live transactions, with more than 3.4bn transactions on an annualised basis, compared with 2bn a year ago.
- Registered end-user customers at 28m, compared with 20m a year ago.
- Global footprint strengthened
- IBM publicly announced working with Monitise in September 2013, calling out the development of new solutions to extend the adoption of Mobile Money services across the two businesses’ client and partner networks.
- Monitise recognised with a 2014 IBM Choice Award for High Performing New Business Partner at IBM’s PartnerWorld Leadership conference in Las Vegas on 11 February 2014.
- Following Monitise’s appointment as the preferred mobile payments and commerce technology partner for Telefónica Digital in FY 2013, preparation is underway for a series of service roll-outs in geographies around the world.
- Industry recognition with CEB Tower Group and Javelin Research and Strategy “best in class” vendor awards.
Growing global network of brands focused on new Monitise-developed solutions
- More than 30 Visa Europe member banks are now signed up to person-to-person payment solutions developed by Monitise that allow Visa cardholders to send money to each other using their mobile phones.
- Monitise entered into a Mobile Money partnership with a leading UK bank and financial services company.
- A major mobile banking and payments contract was renewed with a leading bank for a new minimum five-year term.
- Grapple Mobile Ltd (“Grapple”) was acquired by Monitise in September 2013 and integrated into Monitise Create. The businesshas a broad pipeline of new commercial opportunities across financial services and other sectors such as sport, travel and entertainment in the UK, Europe and internationally. Monitise Create is working with FIFA and Samsung and has won its first contract with a leading US bank.
- Mobile banking services for Clydesdale Bank and Yorkshire Bank launched, generating strong customer adoption rates across iPhone, Android and BlackBerry devices.
- Vantage 5.1, the hybrid version of Monitise’s technology platform in the Americas, was released with positive customer feedback.
- U.S. Bank began a pilot programme with Monitise to directly connect consumers’ offline and online shopping experiences via smartphones and tablets.
- Monitise-developed NFC mobile payment capabilities launched by Desjardins Group, Canada’s leading cooperative financial group.
- With Visa Inc., Monitise is working on a number of initiatives to support its mobile strategies, including enhancements to the Visa DPS mobile platform, Visa PayWave for contactless payments and a new mPOS platform.
- Partnership began with credit union CSCU that sees the Group’s technology being offered to more than 2,600 credit unions across North America.
- Movida, which is Monitise’s 50/50 Joint Venture (JV) with Visa in India contracted ICICI, India’s largest private bank, to make the Movida mobile payments functionalities available to its customers. This follows Movida’s previously announced partnership with HDFC Bank, India- second-largest private bank.
- Monitise secured full control of Monitise Asia Pacific Ltd, its former 50:50 JV with First Eastern Mobile Investments Ltd.
- Monitise’s first Chinese language Mobile Money solution was launched with the rollout of ‘Easy TopUp’ for Bank of China (Hong Kong). Using technology developed by Monitise, Bank of China became the first bank in Hong Kong to provide such a service to its customers in cooperation with Joint Electronic Teller Service Limited (JETCO), the ATM network provider in Hong Kong.
- Board appointments – New Chairman and Non-Executive Director
- Appointment of Peter Ayliffe as Non-Executive Chairman.
- Steve Chambers and Victor Dahir appointed Non-Executive Directors.
Post period-end highlights
- Acquisition of Pozitron Yazilim A.Ş., (“Pozitron”) in February 2014 to accelerate Monitise’s Mobile Money capabilities in Turkey and the Middle East.
- Further to entering a three-year deal for multi-language mobile Point of Sale services with OP-Pohjola Group, Finland’s leading banking group, for its business customers, new mPOS customer deals are under negotiation. Further announcements expected in coming months regarding business wins in the UK and Europe, including Germany, Italy, and internationally.
Monitise CEO Alastair Lukies said:
“Mobile Money is growing and evolving as fast as ever and we have made solid progress in the first half of 2014. The world has gone mobile and industries are moving to catch up with consumer demand. As a trusted and non-threatening enabler, we are very pleased to be playing our role in helping to reconnect brands to their customers and bringing together an ecosystem of industries for the benefit of all.
During the half, we entered new relationships and deepened existing collaborations with leading players across financial services, payment processing, mobile network operators, technology businesses and retail. This helped to lift our revenue 67% to £46.5m and saw the value of payments and transfers running across our platforms hit $71bn, more than double what they were a year ago. But there is a lot further to travel. Large deals signed in 2013 are still in build phase, and our work with channel partners are also yet to materially impact our top line.
This is now a very dynamic market and fast evolving industry and we have positioned ourselves extremely well to cement a long-term and sustainable role in the way that society banks, pays and buys for generations to come.”
Monitise Chairman Peter Ayliffe commented:
“In my first statement as Chairman, I am pleased to report that Monitise has delivered another impressive performance in the first half of 2014.Banking, payments and commerce are being transformed by digital and mobile technology. While the sectors that Monitise operates in are large and some relatively complex, it is essentially about partnerships, robust infrastructure and collaborations that create compelling benefits for all participants in the ecosystem. This is an exciting time for the Group as it evolves to the next level in executing against its Mobile Money growth strategy.
The Board continues to assess scope for further investment to capitalise on the significant opportunity in our space and deliver value to our partners, clients and shareholders. Monitise has made a positive start to the second half and we look to the future with confidence.”
TCI: A time of critical importance
By Fabrice Desnos, head of Northern Europe Region, Euler Hermes, the world’s leading trade credit insurer, outlines the importance of less publicised measures for the journey ahead.
After months of lockdown, Europe is shifting towards rebuilding economies and resuming trade. Amongst the multibillion-euro stimulus packages provided by governments to businesses to help them resume their engines of growth, the cooperation between the state and private sector trade credit insurance underwriters has perhaps missed the headlines. However, this cooperation will be vital when navigating the uncertain road ahead.
Covid-19 has created a global economic crisis of unprecedented scale and speed. Consequently, we’re experiencing unprecedented levels of support from national governments. Far-reaching fiscal intervention, job retention and business interruption loan schemes are providing a lifeline for businesses that have suffered reductions in turnovers to support national lockdowns.
However, it’s becoming clear the worst is still to come. The unintended consequence of government support measures is delaying the inevitable fallout in trade and commerce. Euler Hermes is already seeing increase in claims for late payments and expects this trend to accelerate as government support measures are progressively removed.
The Covid-19 crisis will have long lasting and sometimes irreversible effects on a number of sectors. It has accelerated transformations that were already underway and had radically changed the landscape for a number of businesses. This means we are seeing a growing number of “zombie” companies, currently under life support, but whose business models are no longer adapted for the post-crisis world. All factors which add up to what is best described as a corporate insolvency “time bomb”.
The effects of the crisis are already visible. In the second quarter of 2020, 147 large companies (those with a turnover above €50 million) failed; up from 77 in the first quarter, and compared to 163 for the whole of the first half of 2019. Retail, services, energy and automotive were the most impacted sectors this year, with the hotspots in retail and services in Western Europe and North America, energy in North America, and automotive in Western Europe
We expect this trend to accelerate and predict a +35% rise in corporate insolvencies globally by the end of 2021. European economies will be among the hardest hit. For example, Spain (+41%) and Italy (+27%) will see the most significant increases – alongside the UK (+43%), which will also feel the impact of Brexit – compared to France (+25%) or Germany (+12%).
Companies are restarting trade, often providing open credit to their clients. However, there can be no credit if there is no confidence. It is increasingly difficult for companies to identify which of their clients will emerge from the crisis from those that won’t, and whether or when they will be paid. In the immediate post-lockdown period, without visibility and confidence, the risk was that inter-company credit could evaporate, placing an additional liquidity strain on the companies that depend on it. This, in turn, would significantly put at risk the speed and extent of the economic recovery.
In recent months, Euler Hermes has co-operated with government agencies, trade associations and private sector trade credit insurance underwriters to create state support for intercompany trade, notably in France, Germany, Belgium, Denmark, the Netherlands and the UK. All with the same goal: to allow companies to trade with each other in confidence.
By providing additional reinsurance capacity to the trade credit insurers, governments help them continue to provide cover to their clients at pre-crisis levels.
The beneficiaries are the thousands of businesses – clients of credit insurers and their buyers – that depend upon intercompany trade as a source of financing. Over 70% of Euler Hermes policyholders are SMEs, which are the lifeblood of our economies and major providers of jobs. These agreements are not without costs or constraints for the insurers, but the industry has chosen to place the interests of its clients and of the economy ahead of other considerations, mindful of the important role credit insurance and inter-company trade will play in the recovery.
Taking the UK as an example, trade credit insurers provide cover for more than £171billion of intercompany transactions, covering 13,000 suppliers and 650,000 buyers. The government has put in place a temporary scheme of £10billion to enable trade credit insurers, including Euler Hermes, to continue supporting businesses at risk due to the impact of coronavirus. This landmark agreement represents an important alliance between the public and private sectors to support trade and prevent the domino effect that payment defaults can create within critical supply chains.
But, as with all of the other government support measures, these schemes will not exist in the long term. It is already time for credit insurers and their clients to plan ahead, and prepare for a new normal in which the level and cost of credit risk will be heightened and where identifying the right counterparts, diversifying and insuring credit risk will be of paramount importance for businesses.
Trade credit insurance plays an understated role in the economy but is critical to its health. In normal circumstances, it tends to go unnoticed because it is doing its job. Government support schemes helped maintain confidence between companies and their customers in the immediate aftermath of the crisis.
However, as government support measures are progressively removed, this crisis will have a lasting impact. Accelerating transformations, leading to an increasing number of company restructurings and, in all likelihood, increasing the level of credit risk. To succeed in the post-crisis environment, bbusinesses have to move fast from resilience to adaptation. They have to adopt bold measures to protect their businesses against future crises (or another wave of this pandemic), minimize risk, and drive future growth. By maintaining trust to trade, with or without government support, credit insurance will have an increasing role to play in this.
What Does the FinCEN File Leak Tell Us?
By Ted Sausen, Subject Matter Expert, NICE Actimize
On September 20, 2020, just four days after the Financial Crimes Enforcement Network (FinCEN) issued a much-anticipated Advance Notice of Proposed Rulemaking, the financial industry was shaken and their stock prices saw significant declines when the markets opened on Monday. So what caused this? Buzzfeed News in cooperation with the International Consortium of Investigative Journalists (ICIJ) released what is now being tagged the FinCEN files. These files and summarized reports describe over 200,000 transactions with a total over $2 trillion USD that has been reported to FinCEN as being suspicious in nature from the time periods 1999 to 2017. Buzzfeed obtained over 2,100 Suspicious Activity Reports (SARs) and over 2,600 confidential documents financial institutions had filed with FinCEN over that span of time.
Similar such leaks have occurred previously, such as the Panama Papers in 2016 where over 11 million documents containing personal financial information on over 200,000 entities that belonged to a Panamanian law firm. This was followed up a year and a half later by the Paradise Papers in 2017. This leak contained even more documents and contained the names of more than 120,000 persons and entities. There are three factors that make the FinCEN Files leak significantly different than those mentioned. First, they are highly confidential documents leaked from a government agency. Secondly, they weren’t leaked from a single source. The leaked documents came from nearly 90 financial institutions facilitating financial transactions in more than 150 countries. Lastly, some high-profile names were released in this leak; however, the focus of this leak centered more around the transactions themselves and the financial institutions involved, not necessarily the names of individuals involved.
FinCEN Files and the Impact
What does this mean for the financial institutions? As mentioned above, many experienced a negative impact to their stocks. The next biggest impact is their reputation. Leaders of the highlighted institutions do not enjoy having potential shortcomings in their operations be exposed, nor do customers of those institutions appreciate seeing the institution managing their funds being published adversely in the media.
Where did the financial institutions go wrong? Based on the information, it is actually hard to say where they went wrong, or even ‘if’ they went wrong. Financial institutions are obligated to monitor transactional activity, both inbound and outbound, for suspicious or unusual behavior, especially those that could appear to be illicit activities related to money laundering. If such behavior is identified, the financial institution is required to complete a Suspicious Activity Report, or a SAR, and file it with FinCEN. The SAR contains all relevant information such as the parties involved, transaction(s), account(s), and details describing why the activity is deemed to be suspicious. In some cases, financial institutions will file a SAR if there is no direct suspicion; however, there also was not a logical explanation found either.
So what deems certain activities to be suspicious and how do financial institutions detect them? Most financial institutions have sophisticated solutions in place that monitor transactions over a period of time, and determine typical behavioral patterns for that client, and that client compared to their peers. If any activity falls disproportionately beyond those norms, the financial institution is notified, and an investigation is conducted. Because of the nature of this detection, incorporating multiple transactions, and comparing it to historical “norms”, it is very difficult to stop a transaction related to money laundering real-time. It is not uncommon for a transaction or series of transactions to occur and later be identified as suspicious, and a SAR is filed after the transaction has been completed.
FinCEN Files: Who’s at Fault?
Going back to my original question, was there any wrong doing? In this case, they were doing exactly what they were required to do. When suspicion was identified, SARs were filed. There are two things that are important to note. Suspicion does not equate to guilt, and individual financial institutions have a very limited view as to the overall flow of funds. They have visibility of where funds are coming from, or where they are going to; however, they don’t have an overall picture of the original source, or the final destination. The area where financial institutions may have fault is if multiple suspicions or probable guilt is found, but they fail to take appropriate action. According to Buzzfeed News, instances of transactions to or from sanctioned parties occurred, and known suspicious activity was allowed to continue after it was discovered.
How do we do better? First and foremost, FinCEN needs to identify the source of the leak and fix it immediately. This is very sensitive data. Even within a financial institution, this information is only exposed to individuals with a high-level clearance on a need-to-know basis. This leak may result in relationship strains with some of the banks’ customers. Some people already have a fear of being watched or tracked, and releasing publicly that all these reports are being filed from financial institutions to the federal government won’t make that any better – especially if their financial institution was highlighted as one of those filing the most reports. Next, there has been more discussion around real-time AML. Many experts are still working on defining what that truly means, especially when some activities deal with multiple transactions over a period of time; however, there is definitely a place for certain money laundering transactions to be held in real time.
Lastly, the ability to share information between financial institutions more easily will go a long way in fighting financial crime overall. For those of you who are AML professionals, you may be thinking we already have such a mechanism in place with 314b. However, the feedback I have received is that it does not do an adequate job. It’s voluntary and getting responses to requests can be a challenge. Financial institutions need a consortium to effectively communicate with each other, while being able to exchange critical data needed for financial institutions to see the complete picture of financial transactions and all associated activities. That, combined with some type of feedback loop from law enforcement indicating which SARs are “useful” versus which are either “inadequate” or “unnecessary” will allow institutions to focus on those where criminal activity is really occurring.
We will continue to post updates as we learn more.
How can financial services firms keep pace with escalating requirements?
By Tim FitzGerald, UK Banking & Financial Services Sales Manager, InterSystems
Financial services firms are currently coming up against a number of critical challenges, ranging from market volatility, most recently influenced by COVID-19, to the introduction of regulations, such as the Payment Services Directive (PSD2) and Fundamental Review of the Trading Book (FRTB). However, these issues are being compounded as many financial institutions find it increasingly difficult to get a handle on the vast volumes of data that they have at their disposal. This is no surprise given that IDC has projected that by 2025, the global “datasphere” will have grown to a staggering 175 zettabytes of data – more than five times the amount of data generated in 2018. As an industry that has typically only invested in new technology when regulations deem it necessary, many traditional banks are now operating using legacy systems and applications that haven’t been designed or built to interoperate. Consequently, banks are struggling to leverage data to achieve business goals and to gain a clear picture of their organisation and processes in order to comply with regulatory requirements. These challenges have been more prevalent during the pandemic as financial services firms were forced to adapt their operations to radical changes in customer behaviour and increased demand for digital services – all while working largely remotely themselves.
As more stringent regulations come in to play and financial services firms look to keep pace with escalating requirements from regulators, consumer demand for more online services, and the ever-evolving nature of the industry and world at large, it’s vital they do two things. Firstly, they must begin to invest in the technology and processes that will allow them to more easily manage the data that traditional banks have been collecting and storing for upwards of 50 years. Secondly, they must innovate. For many, the COVID-19 pandemic will have been a catalyst for both actions. However, the hard work has only just begun.
Traditionally, due to tight budgets and no overarching regulatory imperative to change, financial institutions haven’t done enough to address their overreliance on disconnected legacy systems. Even when faced with the new wave of regulation that was implemented in the wake of the 2008 banking crash, financial services organisations generally only had to invest in different applications on an ad hoc basis to meet each individual regulation. However, as new regulations require the analysis of larger data sets within smaller processing windows, breaking down any and all data siloes is essential and this will require financial institutions that are still reliant on legacy systems to implement new technologies to meet the regulatory stipulations.
With this in mind, solutions which offer high-quality data analytics and enhanced integration will be key to the success of financial institutions and crucial to eliminate data silos. This will enable organisations to achieve a faster and more accurate analysis of real-time and historical data no matter where they are accessing the data from within smaller processing windows to keep pace with regulatory requirements, while also benefiting from low infrastructure costs.
This technology will also play a huge part in helping financial institutions scale their online operations to meet demand from customers for digital services. According to PNC Bank, during the pandemic, it saw online sales jump from 25% to 75%. Therefore, having data platforms that are able to handle surges in online activity is becoming increasingly important.
Real-time analysis of data
While the precise solution financial services institutions need will differ based on the organisation, broadly speaking, the more data they are storing on legacy solutions, the more they are going to require an updated data platform that can handle real-time analytics. Even organisations that have fewer legacy systems are still likely to require solutions that deliver enhanced interoperability to help provide a real-time view across the business and enable them to meet the pressing regulatory requirements they face. Let’s also not lose sight of the fact that moving transactional data to a data warehouse, data lake, or any other silo will never deliver real-time analytics, therefore, businesses making risk decisions based on this and thinking it is real-time is completely inappropriate.
As such, financial services firms require a data platform that can ingest real-time transactional data, as well as from a variety of other sources of historical and reference data, normalise it, and make sense of it. The ability to process transactions at scale in real-time and simultaneously run analytics using transactional real-time data and large sets of non-real-time data, such as reference data, is a crucial capability for various business requirements. For example, powering mission-critical trading platforms that cannot slow down or drop trades, even as volumes spike.
Not only will having access to real-time data enable financial institutions to meet evolving regulatory requirements, but it will also allow them to make faster and more accurate decisions for their organisation andcustomers. With many financial services firms operating on a global basis, this is vital to help them keep up not only with evolving regulations but also changing circumstances in different markets in light of the pandemic. This data can also help them understand how to become more agile, help their employees become productive while working remotely, and how to build up operational resilience. These insights will also be vital as financial institutions need to consider the likelihood of subsequent waves of the virus, allowing them to gain a better understanding of what has and hasn’t worked for their business so far.
The financial services sector is fast-paced and ever-changing. With the launch of more digital-only banks, traditional institutions need to innovate to avoid being left behind, with COVID-19 only highlighting this further. With more than a third (35%) of customers increasing their use of online banking during this period, it is those banks and financial services firms with a solid online offering that have been best placed to answer this demand. As financial institutions cater to changing customer requirements, both now and in the future, implementing new technology that provides access to data in real-time will help them to uncover the fresh insights needed to develop new and transformative products and services for their customers. In turn, this will enable them to realise new revenue streams and potentially capture a bigger slice of the market. For instance, access to data will help banks better understand the needs of their customers during periods of upheaval, as well as under normal circumstance, which will allow them to target them with the specific services they may need during each of these periods to not only help their customers through difficult times but also to ensure the growth of their business. As financial institutions not only look to keep pace with but also gain an advantage over their competitors, using data to fuel excellent customer experiences will be essential to success.
With the current economic uncertainty and market volatility, it’s critical that financial services are able to meet the changing requirements coming from all angles. With COVID-19 likely to be the biggest catalyst for financial institutions to digitally transform, they will be better able to cater to rapidly evolving landscapes and prepare for continued periods of remote working. As they look to achieve this, replacing legacy systems with innovative and agile technology solutions will be crucial to ensure they can gain the accurate and complete view of their enterprise data they need to comply with new and changing regulations, and better meet the needs of consumers in an increasingly digital landscape, whether they are located in an office or working remotely.
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