Monitise PLC (MONIF)

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dmcas • 4 hours ago
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btig
Update on Monitise From BTIG
SEP 4, 2014 | 1:40 PM EDT
Stock quotes in this article: MONI.L, MONIF
Here is the latest from the firm.
Below is a potentially important update on Monitise (MONI.L/MONIF) from BTIG (just out and published with the firm's permission):

Monitise: Patent That MONIF Received in 2011 Fits Description of Visa's New Token Service at Core of Reported Partnership with Apple on Mobile Payments

Much has been made in recent days about news reports that BTIG Buy-rated Apple (AAPL) has established a partnership with Visa (V – Not Rated), MasterCard (MC – Not Rated), and American Express (AXP – Not Rated) aimed at creating a platform through which iPhone users could make mobile payments at retail stores. These reports also indicated that the iPhone 6 that is expected to be launched on September 9 will include a near field communication (NFC) chip that would facilitate mobile payments, and that AAPL is likely to announce the new feature on that day.

We believe September 9 could also be a big day for Buy-rated Monitise (AIM: MONI; OTC: MONIF), as we think it's quite possible that its mobile payments technology may be helping to support the platform that would be created by the AAPL-V-MC-AXP tie-up.

We believe one of the keys to making such a partnership work from a logistical standpoint is Visa's new token technology. The service replaces the 16-digit number on plastic credit cards with a randomly generated numeric substitute so that the customer's digits remain within the walls of the card company's servers. Retailers only receive the numeric substitute such that transactions can be facilitated without sensitive information being shared.

At a time when consumers have been chilled by reports of data breaches at retailers like Target and Home Depot, technology focused on securing transactions could be the difference between mobile payments gaining rapid adoption and a less welcoming reception. And it's not a given that NFC-driven mobile payment platforms will gain traction, as even Google Wallet has struggled to gain widespread acceptance, so addressing security concerns is even more critical to the success of a new platform.

While MONIF has not been directly named as a contributor to the development of the AAPL-V-MC-AXP platform, it has a partnership with both Visa and Visa Europe, which own 5.52% and 5.95% of the company, to develop mobile payments technology. And Visa's DNA has rapidly spread throughout MONIF this year, as former Visa senior executive Elizabeth Buse, became the company's co-CEO in June and Mike Dreyer, former head of Global Technology at Visa, last week became MONIF's President, Americas.

That close relationship between MONIF and Visa, which NFC was first forged in 2009, is one of the reasons why we suspect that MONIF may have played a part in the development of Visa's token technology and may play an even larger role going forward. We note that NFC World reported in September 2011 that MONIF had received a patent that allowed "virtual card details to be generated on a mobile phone."

"The virtual card acts like a prepaid digital voucher and can be created for a fixed amount or for a specified period of validity," NFC World reported. "Consumers can then make purchases in stores or on the internet without having to divulge data from their credit or debit cards such as personal account numbers, card expiry dates and security codes."

We believe this description is a pretty close match to descriptions of Visa's new token technology. While MONIF told us in an e-mail that it could not share details of its interactions with a specific customer without that customer's approval, it also wrote that "you are right we do have a patent that relates to a particular way to transmit data representing card details without disclosing personal information."

Even if MONIF's patented technology did not contribute to the development of Visa's tokens, we believe AAPL's reported plunge into mobile payments using NFC technology underlines the global growth opportunity that MONIF faces as mobile payments proliferate. According to Frost & Sullivan, global mobile transactions are expected to grow to $1tn by 2017. And according to Visa Europe, 50% of Visa transactions in Europe will be on a mobile device by 2020.

We would also note that AAPL and IBM (IBM – Not Rated), with whom MONIF announced a game-changing tie-up last week, on July 15 announced a deal in which they would collaborate to develop enterprise applications. So while MONIF and AAPL may not yet have a direct link, their indirect ties have, in our view, become significant.

Position: Long MONI.L and MONIF