Is BlackBerry’s Payment System a Game Changer?

Even if BlackBerry can get only a small piece of the payment systems pie, it will mean a lot to investors, considering the company's small market cap footprint.

Jun 17, 2014 at 2:00PM

Last Thursday, BlackBerry (NASDAQ:BBRY)  announced a three-year agreement with EnStream LP, a mobile payments joint venture owned by Canadian wireless carriers Bell, Rogers, and Telus, to provide a secure platform that supports transaction services between leading banks and consumers.

Under the agreement, EnStream will leverage BlackBerry's infrastructure to enable financial institutions, including Royal Bank of Canada, TD Bank Group, CIBC, and Desjardins, and mobile operators to securely provision sensitive payment credentials into any smartphone capable of near field communication.

According to Gartner, the total value of transactions using mobile technology is expected to grow from $35 billion in 2012 to $173 billion in 2017, at a compounded annual growth rate of 31%. This projection includes merchandise purchases, ticketing, and bill payments, but excludes person-to-person payments and airtime top-ups. For this reason, mobile device giants like Google and Apple (NASDAQ:AAPL) have also been making strides to enter the space.

This is a very important deal for BlackBerry
Canada is probably ahead of any country in the world when it comes to NFC payment systems, or near field communications. Rogers launched the suretap wallet for BlackBerry and Google Android devices, with suretap being pre-installed on all BlackBerry devices.

Bell is also in the final stages of offering a mobile wallet product, and TD Canada Trust also rolled out mobile credit card payments for NFC-enabled Android and BlackBerry devices.

EnStream is a mobile payments joint venture between Bell, Rogers, and Telus, Canada's three biggest mobile carriers. EnStream will be used by Canada's biggest banks. BlackBerry's role will be to provide the security infrastructure to transfer data in a secure manner. In other words, irrespective of the payment system, bank, or mobile carrier, BlackBerry will provide security for the entire network.

BlackBerry has experimented with payment systems before
About two years ago, BlackBerry rolled out BBM Money in Indonesia, which allows users to create a mobile money account attached to their BBM identities and use that to transfer money to other BBM contacts, as well as purchase airtime credit or move money to bank accounts. 

The service became so popular that BlackBerry has been considering introducing BBM Money in other markets. In a recent interview on, David Proulx, Senior Director of BBM business development, said, "Because we are, by nature, private and secure and reliable and regulatory-compliant, we are ideally suited to bring value in mobile money and financial services." A BBM person-to-person money transfer service has been in trials in Indonesia, but Proulx said to expect BlackBerry to expand to more countries and offer even more services year.

Coupled with the fact that BBM is now cross-platform, you must also assume that BlackBerry is probably working on a plan to offer BBM Money not just in other markets, but also on Android and iOS devices. BlackBerry could generate substantial revenue by providing international money transfers between devices in emerging markets.

Do NFC payment systems have a future in the U.S.?
The answer is yes, and probably sooner than you think. The main reason NFC payment systems have not been widely used in the U.S. is because Apple's iPhone does not support NFC. Since Apple has 41% of the U.S. smartphone market, NFC-related systems and services would be moot until the iPhone becomes NFC-capable.

The good news is that the new iPhone 6 will probably include NFC, and many believe that NFC is ready to take off for mobile payment systems in the U.S..

Bottom line
Many companies have developed payment systems worldwide, but BlackBerry is one of the few companies that has developed the infrastructure to support next-generation systems such as NFC transactions, from the store to the bank in a secure environment.

Additionally, the company's agreement with EnStream provides confidence to BlackBerry's enterprise customers, demonstrating that BlackBerry's solutions are more than capable of facilitating secure transactions at the highest level.

The fact that Apple is interested in payment systems indicates that there is good money to be made in the space. Even if BlackBerry can get only a small piece of the pie, it will mean a lot to investors, considering BlackBerry's small market cap footprint.

Hopefully, the upcoming conference call will provide more clarity with respect to BlackBerry's intentions regarding payment systems, but the important thing for investors now is that BlackBerry is in the middle a developing space. As the saying goes, early bird gets the worm.

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George Kesarios has no position in any stocks mentioned. The Motley Fool recommends Apple, Google (A shares), Google (C shares), and Rogers Communications (USA). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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