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724 Solutions
Thu, Jul. 6, 2000 07:28
By Paul Chodirker, Canada-iNvest.com
Toronto-based, 724 Solutions Inc. (SVN), announced on July 5 that it had secured an agreement with Mexico’s largest financial institution, BBVA Bancomer, to provide it with software for mobile banking.
With this initiative, BBVA Bancomer becomes the first major financial institution in Mexico to offer English and Spanish in its wireless financial services.
The 724 Solutions Financial Services Platform will allow over 9 million BBVA Bancomer customers the ability to gain access to their real-time financial information through Internet-enabled devices like mobile phones, pagers and personal digital assistants (PDAs).
“This is another global financial firm…it’s precisely the market that 724 is targeting,” said David Wright, a technology analyst with BMO Nesbitt Burns Inc. “So, I think it’s very significant from that stand-point. I think its part of a process. They are winning on a global scale.”
The company provides Internet infrastructure solutions to financial institutions that enable them to offer online banking, e-commerce and brokerage services to their customers via consumer electronic and Internet-enabled wireless devices.
Market penetration of cellular subscribers in Mexico is expected to reach 51% by 2005, with about 10 million mobile e-commerce users.
“If you think about Mexico overall, it would be the second-largest Internet market in Latin America today,” said Karen Basian, chief financial officer of 724 Solutions.
This deal also pushes the company into new geographical territories and gives it access to potential international customers.
“We will be rolling this out, not only in North America, but adding Latin America to our continents where we are rolling things out,” said Basian. “BBVA Bancomer has that unique position of not only being able to access the Mexican market, but parts of the Spanish speaking U.S.”
The company is stretching itself into other parts of the world because of BBVA Bancomer’s global network. It has more than 2,400 branches and 4,000 ATMs located throughout Mexico, as well as branches in London and agencies in New York and Los Angeles. It also maintains relationships with more than 1,000 correspondent banks throughout the world.
“The fact that it’s global in nature is not necessarily just an English play, but truly a cross-border, cross-language play which is consistent with our full story", said Basian.
Other 724 Solutions customers include Citigroup, Bank of America and Bank of Montreal.
“I think that the valuation on 724 is already reflecting the fact that they will be a significant player in the wireless e-commerce banking world,” said Wright.
Despite having partnerships with some of the world’s leading financial institutions, the company said that it must continue to expand and look for other opportunities throughout the world.
Right now, the company’s biggest challenge is to compete with the banks “in-house” systems. These banks tend to have very powerful internal IT departments that a company like 724 must constantly keep pace with.
Still, the size of the e-commerce platform industry is well into the trillions of dollars. “These are very large markets…we are trying to capture some share of it,” said Basian.
“I think fundamentally, what we continue to be focused on is executing our plans, delivering against the milestones that we have committed to and building a robust operating business that drives shareholder value…good old fashioned execution.”
The company will need to execute to ensure strong investor sentiment after the stock fell from about $250.00 in March to about $50.00 in May. However, the stock had begun to rebound and was $67.15 on July 5. Despite signing the agreement with BBVA Bancomer, the stock drifted on Wednesday, down $0.85.
“It’s a very exciting opportunity and people see the crystallization of those things in the marketplace and more and more evidence if it. We’re pretty excited. It’s a fun time,” said Basian.
Ray Sharma, vice-president of equity research for Credit Suisse First Boston (Canada) Inc. said that investors should expect more international deals. “We expect to see additional Spanish and Asia-based financial institutions announced in the future.”
Sharma doesn’t have a price target on the stock, but continues to have a strong buy rating on the company. |
