GFG GROUP - NEWS ARCHIVES - 2007
Bankable - GFG Group is helping turn phones into wallets
15 March 2007 - reprinted with the kind permission of Unlimited Magazine
From a cup of coffee to a new plasma TV, Kiwis pretty much pay for everything by whacking it on their plastic etfpos or credit card. But for an estimated 80% of the world's population it's not so easy: they don't have a bank account and rely on cash.
It's a fact that hasn't escaped the GFG Group. A company of banking experts specialising in payment solutions, GFG is hitting the big time with its technology that essentially allows your cell phone to work like a bank card. And it's opening up opportunities for the world's 'unbanked' in the process.
The Kiwi company teamed up with Smart Communications, one of the Philippines' biggest mobile telecommunications companies, for example, to help deliver financial services to the telco's subscribers. That means customers can use their phone to do pretty much anything an eftpos or credit card can do. "In the Philippines I can transfer airtime, buy airtime, I can remit money internationally and domestically, I can buy goods and services - you name it," says GFG Group sales and marketing manager Marie Tamplin. In a country where more than half have access to a cell phone, but less than a third have a bank account, it's proved popular.
The company was started in 1989 by banking consultants Ralph Green, Lachlan Fleming and Peter Goldfinch (hence the GFG), who were all specialists in the area of payments - particularly cards. In late 1991 the trio was joined by Bill Crocker, another consultant who had previously overseen the design, build and implementation of a credit card management software product called UniCard (since rebranded Cadencie) for ASB Bank.
While the bank retained ownership of Cadencie, Crocker scored the ongoing R & D and support work for the software, which he brought with him when he joined GFG. (Crocker, Green and Goldfinch remain with the company today and are its main shareholders. Endeavour Capital and Direct Capital are also investors.)
ASB loved the software but was also aware it didn't want a white elephant - software that it, but nobody else, was using. So the bank sold the international right to market Cadencie to global IT giant Unisys Corporation, which subsequently sold it to more than 40 banks worldwide.
For the next ten years GFG essentially operated as an R & D shop, supporting the ongoing development and implementation of Cadencie around the globe. It sent its staff off to the wilds of Russia, Costa Rica, the Dominican Republic and, in turn picked up new staff in those countries and brought them back. (Quirky fact : today the company has more Spanish than English speakers on staff. "It makes for interesting Christmas parties," says Tamplin.)
After a decade, however, Unisys began to focus on other business areas, losing interest in Cadencie, and sales dropped off accordingly. In 2003, ASB transferred the software IP to GFG Group, where it remains the core product. That bought a sea change, says Tamplin.
"All of a sudden we were a company that pretty much had been an R & D 'coffee and pizza' shop, to being faced with the opportunity of going out and owning our own destiny in terms of selling this thing."
With a $173,000 New Zealand Trade and Enterprise grant, the company launched a project to get more commercial. "It not only galvanised for us - what we were selling and who we were selling to, but it also energised the organisation, because all of a sudden we had this commercial face."
In the meantime, the company had begun working with Smart Communications, which was eyeing mobile commerce as a way to grow its subscriber base. Using what was, essentially, GFG's Cadencie product, the telco created Smart Money, a product that gives subscribers access to pretty much any service you'd get with a debit or credit card through their cell phone. Tamplin claims Smart Communications is "the undisputed world leader of mobile commerce". And other carriers and banks now beat a path to Smart's door to study its success. For good reason: when GFG first met Smart Communications around 1999 it had two million subscribers; today it has more than 22 million. Smart Money has proven particularly popular among the Philippines' biggest export - its people - who can now use mobile technology to remit money home at a much cheaper rate.
Philippines-based Rec Babasa, Smart Communications' head of financial services, says GFG was able to share the telco's vision to have a wallet on a phone, and modify their card technology accordingly. "What we really noticed was their ability to really accommodate our innovative approach," Babasa says.
A couple of years ago GFG got a $338,000 grant from the Foundation for Research Science and Technology's Technology for Business Growth scheme to further develop its mobile payments technology. The resulting product, called Simfonie, has since been sold into Canada, where GFG mopped up more than 95% of that country's mobile phone top-up market in a single deal. The company has also done deals in the Middle East and India and is chasing a number of other international opportunities. But the possibilities for GFG's technology stretch well beyond telcos and banks. It could help make the world a better place.
Tamplin says there are big opportunities for using mobile phones to deliver micro financing - small loans offered by the likes of development agencies to help individuals break out of the poverty cycle. Access has traditionally been one of the stumbling blocks of micro financing, she says, but while a farmer in a paddy field in rural Thailand might not have a bank account, these days you'll find a mobile phone in even the most remote village.
The company doesn't pinpoint its annual turnover, only to say it's between $10 million and $20 million, but this year's revenue is up 52% on last year. This year the company expects the mobile payments revenue from its telco customers to catch up with that from its traditional card payments customers, the banks. Currently it has about 65 staff - primarily based in Auckland, but also scattered in offices in Wellington, Singapore, Manila, Toronto and Melbourne - and expects that to rise to 100 this year.
But global competition is hot - particularly in the mobile area. "Engaging internationally, we've got to make sure we're spending money, as Dean Barker would say, 'making the boat go faster', says Tamplin. While Kiwi IT talent is excellent, it can also be expensive and the company is looking to move day-to-day tasks like low-end development offshore while retaining "guru-level design-type people" here, she says. Underlying the company's success, says Tamplin, has been its banking nous. Telcos are not necessarily banking experts and so have been able to rely on GFG's extensive experience of the banking world to hold their hand on the journey into the brave new mobile-commerce world. It's a formula the company is hoping will take it far.
"Our vision is to be an established as an international brand in payments in mobile and cards," she says. "And we're very, very serious about achieving that."
Bank on it.
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