Mobile-Payments Pioneer Obopay Puts Itself on the Block As Wallet Trend Heats up

Obopay Inc., a pioneer in mobile payments whose profile fell as mobile wallets gained momentum, has put itself up for sale, according to sources familiar with the matter. Details about the sale remain sketchy, including possible valuations and the identity of bidders, but sources say the 7-year-old company and its not inconsiderable assets are on the block. “It’s in play,” says one close observer, who asked not to be identified.

Among the most valuable of these assets, observers say, are Obopay’s money-transfer licenses, which it holds in the 40-plus states that require a license for online money movement. These licenses, which can be expensive and time-consuming to obtain and must be taken out state-by-state, are required of entities that are not financial institutions but are involved in facilitating funds movement. San Mateo, Calif.-based Obopay also maintains links to four debit networks, including NYCE, Pulse, Star, and Visa Inc.’s Interlink. These connections form the underpinnings of a near-real-time funds-movement service the company white-labels to banks and could prove increasingly valuable as networks seek out ways to speed up funds transfers, observers say.

Contacted by Digital Transactions News, Deepak Chandnani, Obopay’s chief executive since January 2011, refused to comment on the sale, citing a policy against commenting on speculation.

Obopay, which maintains offices in India as well as the U.S., generated revenue of $8 million last year on a head count of 120, up from $5.7 million in 2010, according to a three-page company summary prepared by Boston-based AGC Partners, an investment-banking firm Obopay engaged to investigate  so-called strategic alternatives for the company. Revenue is expected to dip substantially this year, however, owing to a decision by handset maker and Obopay investor Nokia to pull out of a payments venture in India for which Obopay was providing processing. Some 21% of revenue came from the Americas in 2011, half the proportion in 2010, according to the AGC document.

The sale of Obopay comes as the person-to-person wave of mobile-payments activity that the company helped trigger gives way to a reliance on digital wallets supported either on smart phones or in cloud configurations. Major tech firms and mobile carriers have moved to wallet technology, both with and without near-field communication (NFC), for linkages to store terminals and for person-to-person payments. Prominent among these players are Google Inc., PayPal Inc. and Isis, a joint venture of AT&T Mobility, T-Mobile USA, and Verizon Wireless. These ventures have overshadowed Obopay in recent years.

Still, through its debit-network links Obopay offers potential coverage of an estimated 97% of the U.S. demand-deposit account base. These links allow near-instant funding of a wide array of accounts and payment instruments, including bank accounts, debit cards, and prepaid cards, a key advantage in the minds of some payments experts. The market for faster payments is heating up in the U.S. Major processors like Fidelity National Information Services Inc. (FIS) and Fiserv Inc., as well as startups like Dwolla Inc., have announced technology recently to facilitate real-time or near-real-time transaction settlement.

Another reason for Obopay’s lower profile in recent years is its decision to concentrate on markets overseas, particularly in Africa and India, which were perceived to be riper for mobile payments. Some observers say this decision may have led the company to miss out on the U.S. wallet revolution, which broke out in earnest in 2011 with the announcement of the Google Wallet service. “They went and built an incredible infrastructure but they missed the Google revolution,” notes one observer.

But Obopay has been active in the U.S. market nonetheless, announcing in 2010 its Mobile Money for Banks white-label service and its concurrent forging of debit-network links. Currently, it is working on a connection to Visa’s original credit transaction (OCT) program, which allows Visa cardholders to push payments to another person’s Visa card.