GFG GROUP - NEWS ARCHIVES - 2006
GFG Banking On Mobile Technology
5 August 2006 - Reprinted by kind permission of Dominion Post, by Andrew James
Imagine being able to buy lunch, withdraw money at McDonald's or repay a debt to a friend just by using your mobile phone. Rather than some fanciful vision of mobile commerce in the next decade, these services are already available to cell phone users in the Philippines, using technology designed by New Zealand company GFG Group.
Philippines mobile telecommunications company Smart Communications has in effect become a bank, offering its customers a range of financial services. Other telecommunications companies are beating a path to its door to see how it is done. And that is good news for GFG Group, which is looking to line up similar deals throughout Asia.
"The interest we have been getting in the last six months has been extremely high," says GFG's Southeast Asia general manager, Peter Goldfinch. "I would imagine you would eventually see these types of systems throughout the developing world. One of the reasons is that there is a large unbanked population."
In New Zealand, GFG supplies Vodafone with the technology behind its hot-link mobile top-up service, which allows prepaid subscribers to top up airtime via their phones.
GFG was founded in the late 1990s by a group of consultants working in the banking payments sector. Its three main shareholders are Mr Goldfinch, Ralph Green and Bill Crocker. Endeavour Capital and Direct Capital also have stakes in the company.
Smart Communications became interested in GFG's technology in 2000, when it saw a mobile payment solution that GFG was designing for one of Smart's sister companies. The system, for an exclusive real estate development, would allow residents to pay their utility bills via their mobile phones, Smart senior manager of e-services Rec Babasa says. "Smart looked at the technology and decided it had potential."
Now about 18 million of Smart's 22 million subscribers use GFG technology to electronically top up their airtime. They can do this at any of 1.2 million retailers belonging to Smart's network. The businesses range from fast-food outlets and convenience stores to street vendors. All the retailer needs is a mobile phone and a special menu downloaded from Smart. About 3.2 million subscribers have Smart Money accounts, which let them pay for goods and services at any of the Smart-linked retailers using just their phone or a credit card supplied by Smart. They can also withdraw or deposit money at any of these retailers or transfer money to friends who have Smart Money accounts.
The Philippines economy is heavily dependent on money sent home by the millions of Filipinos working overseas. A maid in Los Angeles, for example, can visit a local Smart agent, hand over US$200 and have it transferred to her family's Smart Money account within two minutes. The recipient will get a text message when the money arrives.
These financial services have taken off because more than half the people in the Philippines have mobile phones but only about 30 per cent have bank accounts. This type of scenario is common across much of the developing world, Mr Goldfinch says. Mr Babasa says the system was so advanced that it did not attract many people when it was first launched. But it has taken off in the past couple of years. On an average day, Smart Money account holders spend about NZ$5 million and send about NZ$700,000 using the system.
Smart does not charge for the services but uses them to drive more airtime and gain subscribers. About six months after Smart introduced its system its main competitor, Globe Telecommunications, followed suit with a similar system designed by Australian company Utiva - one of GFG's main rivals. It is also attracting considerable overseas interest. "Virtually every week now we have a visitor from overseas looking at the mobile payment system," Mr Babasa says. He sometimes gets surprised reactions when he tells people the technology has come from New Zealand.
Mr Goldfinch talks wistfully about selling the technology to a country such as India, where there are 120 million mobile phone subscribers. "That number could easily go up to 350 million over the next few years."
GFG owns the intellectual property behind the mobile commerce services. Though it negotiated a licensing deal with Smart, its preferred sales method is a click model in which it takes a small cut for each transaction.
"When I look at the sheer volume of transactions that Smart is doing revenue could potentially be very high."
GFG recently sold its electronic top-up technology to a consortium of three companies in Canada and is one of two companies competing for a deal to supply the mobile payment technology to Etisalat -- the largest mobile carrier in the United Arab Emirates.
"We're also getting a lot of interest from Indonesia, Vietnam and India," Mr Goldfinch says. "We firmly believe we have a real chance to establish this technology as a global brand in mobile. If we even half pull that off we could easily double or treble the size of the business in the next two to three years. We are very lucky to find ourselves in a market that's growing at this speed."
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