Enstream: A Mobile Moneris or Dexit Revisited?

Yesterday, Telus (T), Bell, and Rogers (RCI) launched mobile payment solution branded Zoompass, which is developed and operated by Enstream, a new mobile payment solution platform, which also just happens to be a three-way joint venture among them. This post will attempt to contextualize Enstream (where the intellectual property resides) within the mobile ecosystem. Will it dominate? Will it survive? As with most things, its future is probably somewhere in the middle and it could morph into something entirely different.

I have attempted to sign up for the beta service. The sign up process appears to be fairly straightforward from the web, although the system hangs once I have logged into my new account from my Blackberry 8700. I still have not got to the point where I can use it.

Mobile Payments Will Have a Major Worldwide Economic Impact
An earlier blog post analyses the importance of billing systems in a race to become top dog for mobile applications. Mobile payment systems are a genus closely related to billing systems within the mobile ecosystem, although with probably more far-reaching economic implications, especially for emerging economic blocks such as BRIC and MENA. Mobile payments have the ability to accelerate the flow of funds, improve liquidity, and improve economic access for hundreds of millions, closing in on billions, of people worldwide (more on that later). Mobile payments systems are operating in countries as varied as Kenya, Korea, the Phillipines, and Britain, which has have helped to provide a glimpse into a potentially massive worldwide opportunity.

Is Enstream Relevant?
Leadership at Enstream appears to understands the global potential, and is already positioning itself within an inferred world market opportunity. The question is; can it get there from here? Possibly. But there is a lot of work to do and the JV is nowhere near to being a first mover in the industry. Even in Canada. The inter-relationships and possible connectedness among participants is extremely complex with carriers, software vendors, device manufacturers, distribution channels, retailers, banks, and payment networks all vying for bits of transaction value. Many of those bits are still to be defined, and Enstream has to stake out its claim quickly.

Consumer Feedback Is Negative
For now, the Zoompass solution offers some additional convenience for Canadian consumers, although many appear to be choking on the high fees currently advertised at $0.50 per transaction. Consumer feedback via the blogsphere and twitter has been decidely negative related to fees and the potential for competitive concentration. CEOs that have been in the market for a while have all commented that the fee structure, as it stands, is a likely impediment to adoption.

Commentary From the Ecosystem Itself is More Positive
Notwithstanding the fee structure, most of the commentary offered by CEOs already operating in the ecosystem has been balanced and considers what Enstream means to their companies, to Canadian consumers, and to the world.

Universally, CEOs believe that it is a positive development that Canadian carriers are getting serious about mobile payments. Most of the vendors in the Canadian market are under-capitalized start-ups that have struggled to convince carriers of the market potential in Canada. As one CEO put it, carriers are finally showing that they "get it". Some believe that Enstream could behave as a universal gateway to the major carriers for independent mobile payment applications, which may kickstart another wave of development in the vertical.

Zoompass connects mobile transactions to a co-branded prepaid, reloadable Mastercard - not subscriber accounts. Presumably, this hybrid card system offers users maximum flexibility for consumers to withdraw funds via ABMs, pay via POS, and to transact via SMS or NFC from a mobile handset. There are already several prepaid Mastercard programs deployed, with many others in the works, which all appear to operate within a similar framework. Many CEOs believe that the Enstream platform may be an opportunity to better connect current prepaid programs to mobile devices both electronically, and at the POS.

Others believe that this move by the carriers may spur on more aggressive competition from banks and payment networks, which could deliver competitive gateway infrastructures, and ultimately better choice and lower costs to consumers. Several financial institutions are currently at early stages of developing applications to connect mobile devices directly and securely to consumer bank accounts for mobile payments. However, unless projects are sped up, consumers may have to wait several quarters until serious choice becomes available.

Some Global Comparatives
Device manufacturers such as Nokia (NOK), RIM (RIMM), and Apple (APPL) have a broader world view on mobile payments. In March 2009, Nokia made a substantial strategic investment in Silicon Valley-based Obopay. Obopay operates with a similar model to Enstream, but with deployments in both the United States and India. The price point is $0.25 to send up to $1000 and nothing to receive funds. In the meantime, RIM is actively testing ideas and pursuing multiple opportunities in the space, and has recently announced a partnership with payment giant PayPal (EBAY) to deliver billing and payment solutions for its AppWorld venture. PayPal Mobile is considered by many to be competitive to the new Enstream venture.

Euronet (EEFT) is a significant electronic transaction processor with 421,000 prepaid wireless, long-distance, and gift card endpoints worldwide. In 2007, it acquired RIA, the third largest money transfer agent in the world, and then last year attempted but failed to buy MoneyGram, the second largest money transfer agent in the world behind Western Union. Euronet, through its electronic network, is beginning to deliver a mobile payment and remittance infrastructure that can be cash-based. And here is why.

Between 80% and 85% of all mobile subscribers in emerging economies do not have bank accounts (not to mention credit), nor do they have easy access to local banking infrastructure. Most emerging economies operate as cash-based societies. This is a main driver behind the proliferation of prepaid subscriptions in BRIC, MENA and Latin America. Euronet and others like it are attempting to deploy ways to digitize cash via local merchants without banking infrastructure. By comparison, the Enstream solution appears to need banking infrastucture.

Bottom Line: Ecosystem
The Enstream launch is seen as positive by participants in the ecosystem as long as it evolves to a platform for multiple mobile payment applications tha can be offered to Canadian consumers. Enstream states that it is looking for development partners. The question is how economic will it be for independent developers to participate. Without participation by third-parties, the concept may struggle.

Bottom Line: Consumers
Consumers appear mistrustful of the enterprise, which implies that there is a branding deficit shared by the three founding partners that could impede progress. Pricing has been described by consumers and others in the ecosystem as the most immediate concern and potential barrier to adoption. Objections and barriers have been erected quickly by consumers, which may require time, capital, and effort to overcome before traction can be gained.

Bottom Line: Market Share
As for worldwide expansion, by comparison to other more advanced solutions worldwide, Enstream is late to the game and its business model may not be easily translatable to other regions of the world. As a result, Enstream should be viewed as regional play limited to the Canadian marketplace, with potential to buy its way into other markets in the future.

Bottom Line: Investors
Investors should expect that the JV will contribute little to the performance of RCI, T, or BCE over the next few years, unless the business model is revamped to go viral, which is quite possible. From a cost perspective, Enstream could contribute to the accelerated extinction of "hard cards" on display in many convenience stores, saving millions of dollars in the channels.

In the end, we may see Enstream positioned as a Moneris-type of mobile payment infrastructure that would likely compete directly with Moneris itself, or some other bank-based mobile payments system in Canada. As for other threats, handset manufacturers could provide substitution through some as-of-yet developed applications. Notwithstanding, to be successful Enstream would need to become a neutral Canadian platform for competing applications from local providers to multinationals.

Bottom Line: Joint Venture

However, there is no guarantee the the founding partners can resist meddling, or poking each other in the eye, long enough to give the venture an opportunity to feel its way towards success. For every successful JV among Canadian institutions - whether banks or telcos - there have been dozens that have failed.

I do not own shares of any of the Companies mentioned in this post. As well, I have chosen to generalize the commentary as opposed to attribute direct quotes.


  1. Hi Ron,

    My name is Kerri and I'm part of the Thornley Fallis Communications team helping EnStream to launch Zoompass.

    Thanks for the thoughtful post. Please let us know if you have any further questions and we'd be happy to engage.

    Also, as for your service issues, please contact support@zoompass.com or call 1-888-ZOOM 2 GO (1-888-966-6246) or 416-646-6300 between 11am and 8pm - they should be able to help you out.

    -Kerri, TFC Zoompass Team

  2. I signed up for and have had no problem using the Zoompass service, initially funding the account with my credit card.

    People will pay for convenience; an ATM withdrawal fee is $1.50 which consumers pay for every day because its easier than finding their own bank's ATM. The $0.50 to send money is fine, I believe the real barrier is the $0.50 they charge to move the money from your Zoompass account to your bank account to you can use it. When you use the prepaid MC the costs go way up.

    Zoompass fails to address the key barriers to viral growth:
    1. Consumers do not want to set up and manage another account.
    2. Recipients don't want to have to register with Zoompass to receive the money.

    Whether it will entice the Canadian banks to move up the priority of their mobile initiatives remains to be seen.

    The research says that consumers trust the banks with their money, however until there is an alternative... Zoompass will remain the only competitor to PayPal Mobile. Interestingly using exactly the same model!