Nokia takes significant stake in mobile payments firm

by Caroline Gabriel

Mobile payments are expected to be a major driver of cellphone usage in the next few years, and the US is one of the biggest markets. With its eyes on both areas, Nokia has acquired a minority stake in US-based mobile money service provider Obopay, which is also expanding its platform into emerging economies.

“This investment reflects our belief in the global potential for mobile payments,” said Teppo Paavola, head of corporate business development at Nokia, in a statement. Nokia did not disclose the price but an SEC filing from Obopay showed the smaller firm made a $70 million equity offering. Paavola has now joined its board of directors. Previously, Obopay had raised $69 million in venture capital plus $7 million from Qualcomm, which also has a strategic interest in mobile banking, and acquired the Firethorn platform in 2007. Nokia’s money is coming from its corporate funds, not its venture arm.

Nick Holland, an analyst at Aite Group, stated: “Obopay is aggressively moving into developing markets and this funding will be necessary to develop the brand awareness, trust and payment infrastructure for future growth.”

Nokia’s willingness to spend a hefty sum in this area reflects its ongoing dilemma, though new mobile activities like payments boost uptake of advanced handsets, the device maker can be otherwise excluded from the value chain. Nokia aims to stake out a strong position in the web-based platforms that will support the new breed of mobile behaviour, especially in web services targeted at developing nations. It already has major mobile payments initiatives geared around the inclusion of NFC swipe technology in handsets.

Obopay’s system relies on SMS and available in India and the US. The payment funds can come from bank accounts, credit cards or prepaid funds in an Obopay account (for those with no bank). The company is interested in the potential of the ‘unbanked population’, saying there are four billion cellphones in the world, but only one billion bank accounts. Although Obopay is the only system geared entirely to the mobile phone, it faces major competition from eBay’s PayPal, which has a mobile variant. Vodafone has been targeting emerging economies through a partnership with Western Union.
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