Fintech: destiny’s child eaten by its own revolution

Fintech: destiny’s child eaten by its own revolution

It is a well proven mantra: a revolution consumes it owns; even in the digital world of Financial Technology.


Successful child?

Monitise (MONI), despite some notable successes during its 11 years of existence, may well be laid-low by not heeding business basics suggested by practitioners. Management through its actions has now put the company at risk and now needs to act: the only viable route left to them might be a sale of the business to an incumbent or service provider. Raktas has advised companies over the years. Any assessment is dependent upon one`s perspective, expectations and timing. This case study provides a synthetic assessment of the company and lessons learned for current and future participants.

Monitise, the AIM listed, early child of the FinTech revolution, offers consumers mobile banking, payments and commerce services. Monitise’s success was based on spotting a gaping hole in banking services; and then developing a reliable service, utilising in-house as well as external expertise. As of 2014 it had revenues of UK£ 116 million with over 350 partner banks, 24 million users, and US$ 50 billion of payments with a worldwide staff of 750 FTEs. While revenues have increased, so have losses (to UK£ -59mn and negative cash flow to UK£ -36mn) with a massive capital expenditure programme that has not delivered a margin-enhancing set of offerings. The departure of industry investors last year, such as Visa, marked a signalling event for the company and its prospects.


Rise and Fall

Timing is all in success. A casual reader would think an IPO price in 2007 of UK£ 5p compared to today’s UK£ 25p is not bad for an early innovator. At its peak the market capitalisation was over UK£ 2 billion; it is now UK£ 530 million. Yet this simple timeline hides a much more dramatic series of milestones and developments. Monitise was founded in 2003 by two individuals: Alisdair Lukies, a professional rugby player with start-up experience and; Steve Atkinson, a technologist from Vodafone .They were one of the first teams to realise the importance of mobile telephony for customer services in banking (in a pre-smart phone, 2G era). They sought to provide mobile banking services, in partnership with incumbent banks. The partnership with Link ATM was critical. It allowed Monitise to arrange for a working relationship and initial merger with Morse, the technology company, in 2003. Morse provided the initial UK£ 4mn in investments and incubated Monitise. It allowed Monitise to develop a business. The major breakthrough was a contract with UK’s First Direct in 2006. In 2007, Monitise reorganised it ownership and listed on AIM at UK£ 5p a share. The Debt and Sovereign crisis of 2008 slowed down the momentum: as its partner banks’, service partners’ and customers’ appetite for change was much reduced. Regardless, Monitise persevered: from 2009 revenues have grown 17-fold to today’s UK£ 116 million.

The share price dipped as low as UK£ 2.25p in 2009 (from a UK£ 25p peak in 2008) and reached new heights at UK£ 80p in April 2014. As of February 2015 it is hovering around the UK£ 20p level.


Clear successes

Monitise has been successful on various fronts. It must be seen in the context of the hugely complex and competitive world of retail banking as well as the rapidly emerging digital world in banking.

It has been an innovative and pioneering enterprise. The two founders spotted an opportunity early an acted upon it. In addition, the founders were skilful in shaping and arranging both productive financing and operational partnerships. The company managed to build a service offering that worked. From this base they gave substance to the vision and secured partnership from the likes of Visa, IBM and others (e.g.  Vodafone, Virgin Money, Telefonica, Santander, RBS and MasterCard). Despite the losses it has been spectacularly successful at fund-raising, over UK£ 304mn in several rounds since 2007. Lukies insists Monitise is building infrastructure for the future and short-term profits are a distraction. That dynamic in itself begs several questions. Regardless, these successes brought credibility as well as demand. Time and “Digital Darwinism” (as McKinsey likes to term it) has seen the rise of many competitors: apart from giants PayPal, the likes of iZettle, Square and FIS.

Monitise has continued with first-mover zeal to expand internationally, acquire competitors (such as Clairmail in 2012 to access the US market and Grapple in 2013 to provide in-house technical development) as well as broaden its product scope their scope. Monitise has also entered into white-label supply. While its mPOS offering was shelved (at great cost) the eventual launch of Santander’s “SmartBank” (in September 2014) is a white-label service from Monitise – highly regarded and successful, with 50,000 active users. The management team has been filled with industry experts. All credible and positive actions, but within them were the seeds of destruction.


Seeds of own destruction

What has not worked for Monitise its failure to attend to fundamental aspects of economic viability. Monitise remains more vision than business.

While it has developed a distinctive user proposition that appeals to banks, payment institutions and their customers Monitise has not created a Unique Selling Proposition. The company has not created any barriers to entry in a market full of enormous incumbent players and me-too new entrants. It has not managed it partners- who were able to place the costs and risks of developments on the company rather than having them shared appropriately. For them Monitise was classic outcome of “buy vs build” strategy (common, but often ignored in the technology space): defraying risk at reduced cost. They lacked the innovative capacity and Monitise was a cheap, low risk venture. This dynamic has become most apparent with the Visa relationship. While an essential element in the story and credibility of Monitise, Visa was not required to invest capital and has made a very sizable return from its share investment in Monitise. This behaviour is another classic strategic tactic found in many ‘bricks&mortar’ industries. In fact Visa’s decision to dispose of its holdings in Monitise in September 2014 (and indication that it may no longer use Monitise) was the harbinger of its share collapse. The recent decision to outsource 75 staff to IBM’s Professional Services is another sign of disaffection and loss of control.

Monitise has diversified into new areas that are capital and costs burns rather than margin generators. Even in the case of Santander’s SmartBank, Monitise has not reaped the requisite margins from the cooperation. Monitise has not built a brand equity that allows it to command independence with consumers nor pricing power in the market or negotiating power with its partners. Finally, Monitise has not been able to develop a compelling pull through brand; not even a variation on “Intel inside”. Monitise does not have that critical brand equity; the “the future of money is frictionless” moniker and trademark aren’t sufficient. While Monitise has UK£ 85mn in “cash” on its books; this has become a magnet of weakness, as it has not built credibility with shareholders and partners that it knows how to manage capital investment programmes. Its new London office is a red flag.

Monitise has become a target through its fundamental weakness.

Were these outcomes intended? No, but they were clearly signposted and ignored. The ultimate weakness is perhaps a management team and corporate governance that became subjective and never shook off the entrepreneur’s fervent belief in his/her own views and abilities.


Balance would have had a positive impact

Our Monitise journey has been a fantastic one. In the spirit of constructive commentary we would draw the following conclusions (directed at attending to the weaknesses, rather than extolling the successes – which are acknowledged). More balance might have seen Monitise in a stronger, independent position than its current weakened and threatened state

  • First-mover is not always appropriate strategy (especially if one is a small, underfinanced player in a dynamic and rapidly changing market).
  • Build true brand equity; not just a personality based, Cinderella story.
  • Founders need to remain objective. Management needs to be held to account.
  • Understand the phase one is in: don’t confuse start-up with being dynamic.
  • Focus is critical. Do one thing really well first, then expand.
  • Performance does matter. Net free cash flow needs to be delivered within the medium term (aka 3 years) by balancing revenue growth, managing costs and productive capex.
  • The enterprise cannot be the sole source of investment capital.
  • Partnerships, especially with industry incumbents are twin-edged swords and can easily become asymmetric.
  • Responsible decisions are as much about expanding horizons as ensuring critical boundaries are not crossed.
  • Today and Yesterday do mater even in a sector focused on Tomorrow.

Well done Monitise, sad that you strayed from the path.


About Raktas

Raktas provides solutions for growth and restructuring. There is always a solution, even in complex and resource constrained situations. We work with decision-makers and their teams to realize their goals using IQ, EQ and PI.

We offer the capability and support to make positive, value–adding changes for professionals and enterprises. Be it as a: consultant, interim manager, senior advisor or angel investor.  Expertise is combined with analytics, creativity, teamwork and energy. Our experience is derived from years of successful implementation across the full spectrum of industries in over 60 countries world-wide, as well as an excellent employment record and academic pedigree.

Solutions start with asking the right question – call us.


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Justin Jenk is the Managing Partner of Raktas – we offer solutions where decision-makers face complex issues with regard to captruing value from growth and restructruing opportunities. Justin is a business professional with a successful career as a manager, advisor, investor and board member. He is a graduate of Oxford and Harvard. Justin can be found at or

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