The local e-payment market is underdeveloped compared with countries in Western Europe with the electronic recharge of pre-paid cards representing the biggest chunk of transactions for services. The local market will begin to count and rise in value when the POS and ATM networks expand nationally and the main utility providers start cashing invoices electronically and not through their offices.
Market players estimated the value of pre-paid electronic recharge for 2006 at around EUR 400 million, but this will quickly change with the introduction of an electronic billing and payment system. The increase of the penetration rate of mobile telephony expected for the coming years will also drive the increase of the market value, as more than half the number of mobile telephony clients use pre-paid users. Previous estimates by market representatives indicated that the value of the mobile telephony pre-paid market was about EUR 1.2 billion in 2006.
Currently the most important players on the local market are Euronet, which recently acquired Brodos Romania, Alphyra Romania and RTC through Pay Store from Mobishop. The situation is about to change in the coming weeks, as Mobishop has been up for sale since last year and its sale announcement will be made soon.
“The leader of the market will be established when the opportunity to become an exclusive electronic bill payment provider for one of the utility suppliers appears. The company that gets the account for one of the CaTV operators like UPC and RCS&RDS or collecting the TV tax for the national television channel will become the leader of the market,” said Octavian Radu, president of RTC Holding.
He expects the value of the electronic payment market to double once bill payment is introduced and the service providers adopt it. Currently, in the case of the CaTV operators, the customer has to leave home, walk a few bus or metro stations to get to the office of his or her provider and queue up in order to pay the bill. That waste of time would disappear with the introduction of the electronic bill payment system.
“Romania has turned out to be a market with a very fast development rhythm, so we will have the possibility of benefiting from great opportunities from now on,” Jacob Caflin, managing director of Euronet Services Romania, said.
2007 should be the boom year for e-payment as all the providers on the market have announced their intention of launching the service. Expanding the POS network is also a priority for them.
The potential of the local market was spotted by large international players like Euronet, who bought the local electronic prepaid mobile airtime processor Brodos at the beginning of the year. Established in 2001, Brodos Romania specializes in processing electronic purchases of prepaid mobile phone airtime primarily on POS terminals. It also offers electronic recharge or top-up services for mobile airtime through ATMs, PC and electronic cash register systems. The company currently supports top-up purchases at more than 14,000 POS terminals in Romania. Brodos Romania has multi-year processing agreements with Orange and Vodafone, the two largest mobile operators on the market. Additionally, it has direct relationships with the country's leading distributors of prepaid mobile airtime, as well as major retailers and petrol station chains.
“We positioned ourselves in this area as we were looking for resources for the organic development of our company's products and it became clear that we needed Brodos' experience on the local market,” Miro Bergman, operational manager and vice-president of the prepaid division of Euronet Worldwide, said.
Immediately after the acquisition announcement, company representatives announced their intentions to invest up to $1 million this year in a network of about 200 ATMs in the country where payments could by made for monthly facilities.
“We plan to leverage Brodos' POS network to launch a wide range of prepaid products, such as prepaid debit cards, bill payment and money transfer in addition to prepaid mobile airtime, to our clients in Romania,” Caflin said.
Euronet Romania outsources the management of third party ATM and POS networks and the provision of retail banking software. The firm has consolidated Brodos Romania's processing platform including all customer connections and POS terminals into Transact, the company's German prepaid business. In markets like Romania, recharge growth comes from an increase in prepaid users, from the mobile operators' shift from scratch-off cards to electronic distribution and from the addition of new retailers and POS devices. The increase in mobile phone subscribers in the market continues to fuel prepaid user growth.
Euronet Services is the Romanian subsidiary of Euronet Worldwide and is providing third party ATM, POS and card management services and front office software services to banks on the Romanian market.
Representatives of both the companies, Brodos and Euronet, said that the value of the transaction was several million euros, but did not disclose a specific figure.
Meanwhile, the RTC president said that Mobishop will be sold for around EUR 20 million, but did not disclose the name of the buyer.
“We are currently in a very advanced phase of the negotiations that we started around October last year,” said Radu. Mobishop was courted by an investment fund, a company already present on the local market and an international player that wants to
make its entrance on the Romanian market.
Radu believes that this business has great development potential in Romania, but that he has to sell it as RTC does not have the necessary expertise to cope with the international companies that have entered or are preparing to enter the market. “The development rhythm that we have with Mobishop is too slow and we risk losing the leading position that we are currently occupying on the market to the newcomers,” said Radu. “This is the best moment to sell as RTC can get a good price for Mobishop considering the assets and performance as well as the market potential. If we had not decided to sell, more money would have had to go into the technical platform for transactions, in bill payment and money transfer introduction.”
Pay Store of Mobishop has about 4,000 POS locations throughout the country. Last year, the value of the electronic recharge services, which was launched in July, was about EUR 25 million, company representatives previously said.
For 2007, the estimated turnover of Mobishop is about EUR 60 million, Radu said, without disclosing the percentage that the electronic payment will have.
Another actor on the local market is Alphyra Romania, which deals exclusively with electronic recharge services for mobile telephony. The company had a turnover of about EUR 14 million in 2006. A subsidiary of Alphyra UK, the company entered the local market in 2005 and operates a POS network of about 4,500 units under the Payzone brand. For 2007 company representatives estimate that the turnover of the company will reach more than EUR 34 million due to the expansion of their network of about 9,500-10,000 units around the country. On the local market, the company has distribution contracts with Vodafone, Orange, Cosmote and Romtelecom.
Alphyra is also preparing the launch of other services on the market, like bill payment and the transfer of electronic funds.