GFG GROUP - NEWS ARCHIVES - 2007
Local firm pursues mobile payment business
23 April 2007 - reprinted with the kind permission of The Business
New Zealand company GFG wants us all to throw away our wallets and take our cellphones shopping, writes Yoke Har Lee
Grant Halverson, the new chief executive of niche software company GFG is keen to fast-track the development of solutions for mobile phone operators to bring us to the cashless universe.
In the Philippines, GFG is helping maids working abroad text money home to their families. But this is just the tip of the iceberg, Halverson believes. About 2.5 billion mobile handsets are in use around the world, a number set to reach about four billion in the next five years. Half a billion are being used for some kind of mobile transactions but, of those, only 60-90 million handsets are being used for "real" payments such as phone banking. The rest are mainly top-up transactions. GFG is positioning itself to be a "very early mover in the mobile [payments] space," Halverson says.
He considers the company already a success in a mobile payments world littered with failures. "We have three successful sites," he says, the third being in Canada. Two others are in the offing.
GFG has two flagship products - Simfonie and Cadencie - that help operate the complex exchange of information that happens when electronic transactions take place. Its other products - Finsim, Gateway and PinSelect -are tools that help manage information that flows through the electronic systems. PinSelect, for instance, is an interactive voice response system enabling a customer to change PIN over the phone.
GFG can claim its technology is in use by 30 million consumers in 28 countries. It earns 90 per cent of its revenue from outside New Zealand. Of its non-New Zealand revenue, about 60 per cent is from Asia and the rest from Latin America, Europe and Canada. Halverson expects "strong double-digit" growth in the 2007-08 year, on top of 52 per cent growth in 2005-06 and 34 per cent in 2006-07.
The ex-Citibanker, who has spent most of his career outside the country, is back in New Zealand to help GFG blaze new trails. He has a solid background in electronic payments consulting, banking, and experience in the card industry. He joins GFG from McLean Roche, a multi-million dollar payment solutions specialist.
Halverson is fully aware of GFG's challenges. The electronics commerce systems market is dominated by a group of leading US and European players including the likes of First Data, Electronic Data System, Sema, Certegy and Total Systems. But consolidation is taking place in the industry, leaving growing room, Halverson says, for "flexible, innovative companies" such as GFG.
GFG was formed in 1989 by payment system specialists Ralph Green, Lachlan Fleming and Peter Goldfinch (hence the GFG). The company, Halverson says, has been through various phases of development. "It is poised to move into the next phase.
"We have two to three successful arms, in mobile and cards. We now have to ask where we want to take the business next."Halverson says this also means evaluating whether the company needs to broaden its business and how much capital it will need.
Greg Devlin, who is card division chief manager for Australia's Bendigo Bank, says Halverson joins GFG at an ideal time. The company needs to switch some of its strong technology focus to the business, something which Halverson can add value to, Devlin says.
Bendigo Bank picked GFG's card processing system over major suppliers. Devlin says GFG offered a scaleable solution which was comparable with other global competitors at a competitive cost.
"Besides, GFG also had the supporting infrastructure at hand with people based in Melbourne."
Mark Dossor, managing partner of venture capital company Endeavour Capital, which in 2005 co-invested with TMT Ventures in GFG says, the biggest ongoing challenge for GFG is to build strong sales channels in offshore markets. He says Endeavour intends to continue supporting GFG as the company has performed well, met all its objectives and overcome major challenges to deliver its mobile payments solutions over the past few years.
The electronic payments world is one of two halves. On one side are financial institutions wanting to change but are deterred by the high infrastructure replacement cost. On the other half are developing and emerging economies that have compressed the developmental cycle of their electronic payment systems from stone age to space age in one generation. In comes GFG with its Java-based software solution that enables legacy systems to be replaced quickly and cost-effectively, says Halverson. Legacy systems take 18-24 months to develop and replace while Java-based solutions can cut that down to two to three months with a less punitive cost structure.
In view of the technology available, financial institutions and telcos have to decide whether to be an early mover or a competitive follower in adapting new technologies, Halverson adds. There are many opportunities to tap. Only 1.8 billion credit cards are in circulation after 50 years of existence. In this market; GFG will concentrate on systems aimed at consumers at the early and middle stage of credit card ownership.
In the banking arena there is opportunity to tap into prime second-tier banks' card payment systems, he says. About 34,000 banks around the world issue some form of card.
Between 10 and 15 per cent of them are waiting to change their systems, at the cost of about US$600 million ($809 million) a year. Compliance and regulatory requirements might push the cost up past US$1 billion a year, Halverson reckons. Being in a technology company has its advantages, Halverson says.
"The beauty of technology is, if you have a well-executed product, you can be very successful, no matter where you are." New Zealand companies, he says, have come of age. There is more awareness of the need to perform and people are a lot more focused on what they do. "Our can-do attitude has come back," he says, noting the 1987 stockmarket crash had taken a lot out of New Zealand.
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