M1 Limited’s Next Growth Engine: Mobile Payment Terminals

Telecommunication services provider M1 Limited (SGX: B2F) may have just found a new avenue for growth beyond the slow-growing telco industry in Singapore with its recent launch of a mobile point of sales (mPOS) service.

The new service, which saw M1 partner with Malaysia-based bank CIMB and payment processing firms MasterCard and Wirecard, will allow merchants to easily accept most types of cards (credit, debit, and prepaid cards) from consumers for payments for a fee only of S$5.35 per month.

But, the merchant would need to be a subscriber of a M1 data-bundled mobile plan and would have to register for the mPOS solution online. The merchant would also need an Android smartphone or tablet to download the mobile mPOS app. The last step involves the connection of a physical card-reader (provided by M1) which can be attached to the smartphone or tablet, turning the device into a mobile POS system that can be used to accept payments.

As society progresses toward the use of lesser and lesser physical cash for transactions, the need for a card payment system by merchants should be even more obvious. According to Digital News Asia, mPOS system terminal adoptions worldwide is expected to be growing at 42.7% annually from 2011 to 2017. Given these trends, the opportunity for M1 seems promising.

Currently, there is another company listed in Singapore that focuses on providing card payment solutions for merchants and that’s none other than Nera Telecommunications Limited (SGX: N01).

A look at Neratel’s business might give us clues that we can use to estimate how the growth of M1’s mPOS business might look like if it is successful. Neratel has seen its payment solutions business segment grow its revenue from S$36.5 million in 2012 to S$39.9 million in 2014. Although that works out to a growth rate of only 4.5% per annum, it is still an indication that the sector is growing. Moreover, the payment solutions business provides a very stable and recurring form of revenue for the company.

Neratel’s experience with its payment solutions business paints a bright outlook for the growth in the point of sales solution trend. But, M1’s eventual success would still come down to its ability to execute.

Currently, M1 is offering its mPOS system only to subscribers of its mobile data plans. This means that merchants using only plans from other telcos like Starhub Ltd (SGX: CC3) or Singapore Telecommunications Limited (SGX: Z74) will not be able to use M1’s mPOS system. Given that M1 has the smallest mobile data customer base, this might limit the growth of the company’s mPOS solution.

Foolish Summary

The idea of M1’s mPOS solution is very interesting. Given that cashless payment methods are becoming more and more popular, the demand for such solutions will likely be on the rise.

But, turning a good idea into a successful business venture would have to depend on a company’s ability to execute. Investors might have to just wait and see if M1 has the chops.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own any companies mentioned above.