Obopay Update - 3Q10

5 Oct 2010

For those that don’t read this blog often, I’m an Obopay cynic. A company that is the very definition of a hype machine (and I came from Oracle). The company has many awards, and very few customers (<20k see site anlaytics below). 

Why am I so cynical? They are focusing on emerging markets, and the rural poor.. a group than can ill afford to buy into vapor. Press release above shows them targeting US banks now. Good to see them change strategies. Three years ago they wanted to build a direct to consumer brand, as they have money transfer licenses in all US states and investment from Mastercard.

Given their poor performance to date, MA is starting to step away from them as primary MoneySend platform (example is recent RIM announcement). Obopay now seems to have a split focus: US and emerging markets. With respect to US, there has been a raft of press releases out of Obopay recently on transaction network, with Obopay integrated to both NYCE and STAR allowing PINless debit (using PIN mechanism, but without requiring a PIN). This following in the footsteps of PayPal, and is not a bad strategy at all (if you are stuck to a card based money transfer paradigm).  Cards have many advantages in P2P use, top among them are the facilities for authorization and “instant” transfer. The downside is cost, and a sender pays model.

Last week’s press release was also very specific on “customer branding”, which is key if you are selling to banks. The problem for Obopay now, is that they have set themselves up for competition with Cashedge Popmoney. Cashedge is a 15 year old bank service provider with over 100 banks (including Citi, Wachovia, BB&T and Bank of America). Chase’s QuickPay is another example of a bank let P2P initiative based upon the DDA. As I told one of the major banks last week, the Obopay business case for P2P may look better (because of interchange), but the price is steep (consumer adoption, behavior change and limited use). In other words, there is no proof point for a card based P2P model, as demonstrated by Obopay’s adoption over the last 3 years.

Emerging Markets

Over the last 2 years, Obopay has been active in attempting to penetrate emerging markets (particularly India – See previous Blog on Obopay’s failure). India is a very tough business for any payment players. RBI is well known as one of the toughest regulators on the planet, Obopay (and local MNOs) have been hamstrung in pursuing any model that is NOT bank led. Their YES bank pilot shows the challenges of rolling out a solution that is bank led in a card model… all best described in this Nokia presentation. It would seem that Nokia is taking the lead from Obopay on India, as it is key to retaining their 60% handset market share. The Nokia team is stellar, and their leadership of India efforts will put them in a much better position to execute against complex alliance and regulatory issues.