Not many Australian technology companies could be said to be leaders in an emerging global field, but eServGlobal Limited (ESV) qualifies. eServGlobal specialises in ‘mobile money’ solutions, which is a huge and growing market in emerging countries – where mobile telephone technology can solve some of the massive problems caused by poor infrastructure.
eServGlobal’s mobile payment technology, HomeSend, is an international remittance system that enables people to transfer money via their mobile phones. eServGlobal also offers a range of revenue-generating ‘value-added’ services – for example, voice and video mail, voice response solutions, messaging services and promotions and loyalty program – that mobile providers can use to engage subscribers, to increase revenue, gain and retain customers.
HomeSend is now used by more than 95 mobile providers, in more than 65 countries, covering 1.2 billion subscribers – or one in five mobile subscribers. The customer base has grown by 25% in the past year.
The huge potential of ‘mobile money’ in the developing world lies in the fact that hundreds of millions of people don’t have access to the banking system, meaning cash has many disadvantages as a payment medium. The use of electronically stored and transferred funds – and the mobile phone as the exchange channel – is a huge trend in the emerging markets. According to specialist wireless communications research firm Juniper Research, the scale of global mobile payment transactions is expected to rise nearly fourfold to 2017, to more than $1.3 trillion.
eServGlobal is well-positioned to tap into this trend, with a solution encompassing a complete mobile money platform, that can handle customer balances and enable services such as mobile banking, ‘mobile wallet,’ online payments, point-of-sale payment, insurance, savings and loans, salary disbursements, person-to-person money transfer, bill payment and recharge, all completely accessible from a mobile device.
eServGlobal’s expertise in developing billing software for mobile phone companies and software for recharging of mobile credit gives it a formidable network that taps into the expansion in pre-paid mobile phone usage, which represents about 75% of total mobile phone users.
In particular, the remittance market, where HomeSend is building a truly global footprint in what is forecast to become a hugely lucrative market in the coming years, is a potential goldmine for the company.
Based on eServGlobal technology and offered by BICS, the company’s strategic business partner, the HomeSend hub is currently deployed in 32 markets in Europe, the Middle East, Africa, and Asia. It now covers the majority of mobile subscribers in Africa. By the end of 2013, eServGlobal expects to have HomeSend deployed in 50 markets.
The company is focusing on expanding the number of live “corridors” and on working closely with hub members as they promote the service in their local markets. The priority is to connect major markets such as the Gulf-Asia and the Europe-Africa migration corridors, but also on connecting regional corridors such as neighbouring African nations.
An example of a corridor that has high market potential and value for HomeSend is between Qatar and the Philippines. HomeSend is connected to Qtel in Qatar, where migrants make up more than 90% of the country’s workforce, mainly working in the service and construction sectors. Many of these workers arrive in the country on short-term working contracts attached to temporary visas, making it very difficult for them to open accounts with banks to access financial services.
Filipino workers in Qatar use HomeSend as a cost-effective and instant way to transfer funds back home. But the service also works at the receiving end: the people receiving the funds back in the Philippines can immediately use the transferred funds to pay their school fees, utility bills and for everyday spending, again over mobile networks.
International payment remittance is a very significant form of money transfer in developing nations and has grown strongly over the past decade. According to the World Bank, officially recorded remittance flows to developing countries were estimated at $406 billion in 2012, a growth of 6.5% over 2011, and these flows are expected to rise 8% in 2013 and 10% in 2014, to reach $534 billion in 2015. The ‘hub’ model of HomeSend is positioned at the sweet spot of the international mobile remittance market.
Now all that eServGlobal has to do is make money. For the year to 31 October 2012, eServGlobal generated sales revenue of $28.1 million, with a net loss of $15.7 million. The operating cash flow for the year was a net outflow of $21.2 million. Total cash flow for the year was a net outflow of $6.3 million. Cash at 31 October 2012 was $3.8 million.
Subsequently, for the half-year to 30 April 2013, revenue lifted by 24% to $13.6 million, with a backlog of more than $15 million due to significant new deals and partnerships, that was unable to be booked. At EBITDA (earnings before interest, tax, depreciation and amortisation) level, the half-year loss was $300,000, a significant improvement on the $8.1 million EBITDA loss in the April half of 2012. The net loss for the half was $2.54 million, likewise a big improvement on the $11.28 million loss the year before. The company’s cash at 30 April 2013 stood at $5.09 million.
The HomeSend hub has demonstrated that it can fundamentally change the way people send money around the world. But soon the Australian and London-listed – but Paris-headquartered – eServGlobal has to turn its potential into profit. Investors have backed the stock strongly this year – from 36 cents to 60 cents, for a market value of $148 million – but potential, however high, will only take a stock so far.
