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Monitise may lose Visa

Visa's evaluation of its stake in Monitise could prompt other partners to follow suit
September 23, 2014

Days after reporting its full-year results, Monitise (MONI) announced that Visa was exploring options for its 5.5 per cent stake in the mobile payments specialist. Fear of a sale, together with the prospect of international branch Visa Europe following suit with its 6 per cent stake, sent Monitise's shares tumbling by 35 per cent.

IC TIP: Buy at 32p

Visa and Visa Europe are long-standing, key allies for Monitise - analysts estimate they account for about 15 per cent of its revenues each. Visa's possible withdrawal, in favour of developing its own mobile banking services, may prompt Monitise's other partners to do the same.

Visa claims the move is consistent with its strategy of seeding emerging players then tapering its influence as the company sprouts. And its alliance with Monitise, which the pair struck in 2009, won’t be affected. Moreover, Monitise still counts Mastercard among its partners. And investors can take heart from its recent resourcing alliance with IBM, which combines Big Blue’s global sales and distribution resources with Monitise’s mobile solutions and service delivery.

The timing is particularly unfortunate, as Monitise's ongoing transition to a subscription-based model meant its operating loss widened by 28 per cent last year. Nevertheless, the group expects to turn a cash profit in 2016 and to have 200m registered users by 2018.