Sunday, December 09, 2012

Are we seeing the start of a mobile payment bubble.

The definition of a stock-market bubble is a high activity of purchase of shares in stock that cannot support the prices being paid on the fundamentals of the business. Since the inception of stock-markets investors were warned not to invest during bubble times. In an article published in August Dan Freed alluded that one may be seeing the start of a bubble in mobile payment shares. (Read here).

In the article the following valuations/transactions are quoted as red flags:
  • The growth in eBay's value on the announcement of the deal between Discover and Paypal.
  • Square's implied valuation of $3.25B after recent fund-raising
  • Starbucks valuation on the back of mobile payment announcements.
Since the article, further investments in mobile payment companies have shown very high valuations (not supported by real revenue). Below are some examples:
  • iZettle raises $31.4M dollar Series B funding (Read here).
  • Paynearme (a start-up mobile payments company) raises $16M (Read here).
  • Braintree (a supplier of payment services - including mobile payments, to start-ups) recently raised $35M (Read here).
  • Paydiant (a start-up providing a white-label solution to banks) raised Series B funding of $12M (Read here)
  • Monitise confirming that they are in talks to raise £100M (Read here).
It does look as if we may be seeing some of a bubble forming. Question is; what does this mean?

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