The theoretical arguments for investing in mobile payments company Monitise (LSE: MONI) have always been compelling.
Its a shame things have gone so badly wrong in practice.
The share price is down 80% in the past year but die-hard followers keep hanging on because the company has undoubtedly massive potential.
And new research shows just how big that opportunity is.
Moni Men (And Women)
Mobile payments look set to take the world by storm, according to a new report by Visa Europe.
Customer usage is expected to grow threefold in the next five years, with weekly spend topping 1.2bn by 2020 in the UK alone.
Visas report also showed that customers have mentally signed up to the idea, with more than half nowwilling to use their smartphone to make payments in a shop.
This isnt just a UK thing. In the US, mobile payment volumes look set to hit $808bn by 2019, up from just $37bn this year, according to the latest report by BI Intelligence.
Volumes would be higher today, but the big tech players Apple, Google and Samsung have been slow to bring their mobile wallets to market.
But when they do, BI reckons that 90% of smartphones will come pre-installed mobile wallets.
Then just watch mobile money go.
Boom And Bust
Mobile payments are set to boom market but as history shows, from the automotive to the dot.com industries, in every boom thousands of pioneers go bust.
The big worry for investors is that Monitise falters and falls just as the technology is ready to fly.
When mobile payments go mainstream, Monitise should well placed to help businesses make what will be a sudden leap into the digital retail maelstrom for many of them.
It has already shown that could it can attract big names, with SocGen the latest to sign up to its services, via its pan-African mobile banking tie-up with Monitise and IBM.
If only it was a bigger name itself.
While mobile payments looks set to be a massive market, Monitise doesnt have the deep pockets it may needto exploit this opportunity.
It will keep burning through cash this year, and investor hopes that operating profits will emerge in 2016 are now up in the air, asthe company switches to a subscription-based service.
Some investors have been hoping one of the big boys will swoop to take advantage of todays low share price, but so far no buyer has been found. Others dream that IBM will ride to the rescue. Or maybe a big bank will use Monitise to fast-track its mobile banking operation.
It is big maybe. Revolutions famously eat their children and investors who see Monitise as a great buying opportunity must understand that it may one day be toast.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.