Qualcomm has announced plans to buy Firethorn, a company developing a mobile banking solution in the US, for $210 million in cash. Qualcomm said the acquisition "is intended to help financial institutions accelerate consumer adoption of mobile banking services", including account balance information and money transfer, while also driving the development of mobile payments and mobile marketing.
At first sight this seems a lot of money for a mobile banking start-up. The commercial availability of the services enabled by Firethorn is still fairly recent - although the launch by AT&T Wireless its services a few days ago and the recent strategic partnership signed by Verizon Wireless gives a lot of credit to the company's capabilities.
Yet the consumer demand for accessing bank accounts remotely from their mobile is still largely unproven, without even mentioning consumers' willingness to pay for these services. In markets like the US, with a large penetration of fixed Internet access, mobile is likely to be only a complement to PC-based Internet banking in order to perform remote banking operations such as checking account, bill payment or money transfers between accounts.
In addition, Firethorn's coverage of the US banks is still limited. AT&T's service is only available to the customers of a few banks: Wachovia, SunTrust Bank, BancorpSouth, Synovus and First Bank. The largest US banks are missing from this list, though we'd assume the company is working hard to connect to the big financial institutions of the country.
So why is Qualcomm buying Firethorn‾ We believe this is a strategic acquisition for Qualcomm not just in mobile banking, but in the broader space of mobile payment and financial transactions. It is an early investment that enables Qualcomm to secure some key assets that are strategic for developing in mobile payments and mobile contactless (NFC) - an area that will see a lot of developments in the years to come, but may only begin to become big from 2011.
Firethorn will give Qualcomm the capability to connect mobile phones directly with customers' bank accounts. Few players will be able to be in this position, mostly due to the complexity of establishing direct connectivity into the banks' financial networks.
Firethorn has some competitors in the US that are trying to do the same, including Monitise, a UK-based company which already enables mobile banking services in the UK. But first, a "plumbing" system for mobile banking needs to be implemented and it needs to be multi-bank and multi-carrier (US operators' willingness to get exclusivity for the application or carrier-bank relationship preferences may be of threat here). Once this is in place there will be many more opportunities to enhance the current Firethorn mobile banking application.
We have suggested a few examples below of services that could be developed in the future:
- products or services for purchase on the go, such as movie or transport tickets
- top-ups for contactless transport cards (NFC-based) that are stored in the phone
- top-ups of stored-value accounts, e.g. a prepaid payment card
- international remittances for immigrants leaving in the US and wishing to send money to relatives living in foreign countries
- distribution of coupons or discounts by merchants
There is still a long way to go for these opportunities to turn into reality, so we see this acquisition as a mid-to-long term investment.
This acquisition reinforces the independent player's case in the mobile payment space, which sits in-between operators and banks. Previous attempts by banks or operators to develop their own services failed, particularly due to the fact that these services were restricted to the customers of a specific operator or a specific bank.
Independent players taking the middle-man role are becoming important enablers in the value chain for interoperable mobile payments - provided they are capable of supporting multiple carriers, multiple banks and multiple handset platforms.
Vincent Poulbere is a principal analyst in Ovum's global Consumer Practice.