By: William Cain
VRL provides independent incisive analysis and insight for the global cards and payments community.
Mint Technologies, a provider of prepaid payroll services, has announced a string of contract wins in the UAE and issued a bullish trading statement on its outlook for 2012.
The Canada-based, Middle-East focused business has met its revenue target for the entire of its 2011/12 fiscal year after only six months, according to the company's Chairman Chris Hogg, quoted in a regulatory statement at the end of March. The announcement highlights the potential of the UAE prepaid card market, although it remains unclear quite how profitable prepaid services in the region will be.
The UAE's favorable regulatory environment has been colored by the Wages Protection System, which is designed to ensure the phasing out of cash payments to contractors of government departments and all corporates operating in the country. This, in conjunction with the potential for further substitution of cash for card spending has led commentators to earmark the region as a key growth market in prepaid.
For Mint, so far, that potential has translated into revenue growth but not profitability in the last two years, as it transitions from its former business model as an open loop prepaid issuer in North America into Middle East and North Africa-focused prepaid and payroll solutions. While revenues are growing—CAD3.7 million (USD3.75 million) in 2011 compared to CAD2.4 million (USD2.42 million) in 2010—the company sustained losses of CAD6 million (USD6 million) and CAD4.7 million (USD4.75 million) in those years respectively, according to its most recent annual report, published in December 2011. So how does the business plan to convert the opportunities in the Middle East into a profitable future?
Mint highlights a number of opportunities in the region in the coming years:
- A strong pipeline of large scale construction and infrastructure projects in the Middle East which will require the employment of more contractors, often foreign migrants who will be in need of prepaid payroll cards and other services;
- The potential to offer its prepaid card products as part of visa renewal processes in certain Middle Eastern and North African countries;
- Opportunities in less established prepaid markets like Saudi Arabia, Qatar, Jordan and Iraq; and,
- The development of new products including microcredit and microlending, money remittance and mobile top-up.
One specific geography in which Mint has seen significant progress in the early part of 2012 and late 2011 is Egypt and North Africa, where it opened its first office earlier this year. In December, Mint signed a memorandum of understanding (MOU) with Egypt's Principal Bank for Development and Agricultural Credit (PBDAC). The MOU is based on Mint providing a prepaid-debit program which is able to disburse government benefits, aid and loan payments to farmers.
The first stage of the MOU involves a trial with 500,000 participants in two regions of Egypt. There is the potential to expand the program to 5.8 million of PBDAC's customers across the country.
In January, in an extension of that deal, Mint signed a separate MOU with the country's Central Agricultural Cooperatives Union (CACU). The card for CACU will also act as an identity card, using biometric chip technology, for farmers in the country.
"By contracting with CACU, we will service the whole farming population of the country with the basic identity and registration card which will also act as a payment card to manage the PBDAC loan portfolio as well as provide point of sale and ATM functionality for those farmers with loans from the bank," said chairman Hogg.
"Mint will build, deliver and own the technology platform and manage the cards and ATM and POS network under complementary 20-year agreements with both PBDAC and CACU."
As part of the deal, Mint will establish and fund a training college for young farmers in the country. Mint also said it was currently in the process of sourcing a supplier for the biometric element of its cards.
It has been a busy start to 2012 for Mint, which also made an agreement in January with Carta Worldwide, a transaction processing provider also based in Canada. Carta now owns around 12 percent of Mint. Hogg said the partnership would be an important factor in the establishment of a third-party transaction processing service in the Middle East and North Africa. He expects the service, Mint Global Processing, to be operational by the end of April.
"Our relationship with Carta has continued to strengthen over time and now with the partnership to form Mint Global Processing, we look forward to beginning our third-party transaction processing activities early in the New Year through the Middle East and North Africa," he said.