In recent months, Amdocs Ltd. (Nasdaq: DOX) has been working under the radar on the development of a new sphere of business, which it regards as a potential growth engine: the electronic wallet, or payment by cellphone. Amdocs recently acquired a Singapore company named Utiba in this segment for a few million dollars. Today, Amdocs is officially launching its product on the market and announcing its selection, in association with Triotech’s solution, to enable State Bank of India (SBI) and communications provider Bharat Sanchar Nigam Limited (BSNL) to offer .people without any bank account financial services by telephone.
The value of the contract was not disclosed, and Amdocs is stating no financial targets for the new market. The share of Amdocs, a provider of IT solutions for communications companies, is traded at a $7.2 billion market cap. The company has been growing by leaps and bounds in recent years.
About the size of the market, Amdocs director of product marketing for mobile financial services Jonathan Kaftzan says, "The market will reach $721 billion by 2017, and some say $1 trillion by 2020. There are 2.5 billion people in the world with no bank account, 1.7 billion of whom have a cellphone, so there's a lot of potential."
Amdocs is obviously not the first to realize the potential in this market. For example, Apple recently launched its own payment application, called Apple Pay. "The potential is enormous, and we're only at the beginning of a market that's starting to gather steam," Kaftzan explains his company's entry into the segment. He says that the factors driving this market include the availability of cellphones, the easing of regulation, and the participation of young people in the employment cycle in the developing world, and their need for a financial solution.
"When people talk about the subject, they tend to think only about cellular payments, and no further. That's one area, and another is monetary transfers between people, organizations, and governments, such welfare payments. A third area is cellular financing: loans, credit, and savings," Kaftzan declares.
"Apple is already in the picture"
Amdocs is planning to operate in both developed and developing countries. "Operations are starting only now in the Western world, but it has been going on for several years in the developing world," Kaftzan says. "You have to distinguish between need and convenience. In the Western world, people have bank accounts, so the question is whether it is more convenient to whip out a credit card or a cellphone for a payment. Now that Apple is in the picture, I believe it will succeed, but as an additional means, not as a replacement for credit cards. On the other hand, in the developing world, people need to be part of the financial world, and this is the solution."
Amdocs's customers are communications providers, which Kaftzan says have an advantage in the market, because they know the customer and whether he is reliable very well (actually, as a kind of replacement for a customer credit rating).
This is not Amdocs's first attempt to penetrate the financial market. In the past, the company sought to make a growth engine out of this segment, but did not succeed. "We have a unit that provides services to banks in the developed world as a supplementary solution for customers with bank accounts. This, however, is a different direction: to help banks enter a segment they don't serve - customers without a bank account. This is a big investment for a bank, and we’re bringing it an easy and flexible solution," Kaftzan says.
Published by Globes [online], Israel business news - www.globes-online.com - on December 16, 2014
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