January 07, 2013 08:30 ET

Calpian (OTCQB: CLPI) Discusses Its Formula of Stable Cash Flow in U.S. Payment Processing and Explosive Growth of Mobile Payments in India

"Predictions About Strong Growth in Mobile Transactions in India Seem Right on Target to Me"- Harold Montgomery, Chairman and CEO

POINT ROBERTS, WA--(Marketwire - Jan 7, 2013) -, a leader in sector research for independent investors issues an exclusive Q&A interview with Mr. Harold Montgomery, Chairman and CEO of Calpian, Inc. (OTCQB: CLPI). Mr. Montgomery discusses the future of its payment processing business and their emerging market mobile payment operations in India. 

Harold, can you first give investors a quick overview of the company's U.S. payment processing business model and what kind of success you are realizing?

A: Harold Montgomery, Chairman and CEO
Sure. We provide credit and debit card processing services to small mom and pop type retail merchants in the United States. That means we make sure they get paid on each credit and debit transaction that occurs at the retail point of sale. We grow our business by acquiring retail customers form other independent sales agents in the U.S. There are about 10,000 independent dealers of payment processing services in the U.S. Each time we acquire a block of merchants from a dealer, we bring those merchants to Calpian and increase our cash flow. Since our overhead is more than covered, each acquisition we do is highly accretive to our cash flow.

Your company has entered into a very exciting space with its subsidiary, Money-on-Mobile, based in Mumbai, India. What does Money on Mobile do?

A: Harold Montgomery, Chairman and CEO
Money on Mobile, we call it MoM, is a way for consumers to accomplish simple financial transactions using their cell phone. For example, let's say you want to buy some prepaid mobile phone time -- there are 650 million unique cell phones in India and almost all of them are prepaid -- a process known as 'topping up' your cell phone account is something that people do frequently.

Money on Mobile has 113,000 participating retail locations where consumers can pay cash and receive credit for a prepaid virtual currency associated with their cell phone number. Using that credit value, they can instruct Money on Mobile to pay for more cell time from any of the 15 phone companies in India. It's faster and easier compared to other existing methods, and each or our participating retailers is a "salesman" for MoM and makes money on each transaction.

We have a wide variety of transactions that consumers can do with MoM, but the main ones are cell phone top up, prepaid TV top up, and other payments like utility bills. We are just now introducing what's known as domestic remittance -- that's sending money across the country from husband to wife for example. While we're excited about the potential for this product, it's too soon to tell what it could mean for us financially.

Can you give investors a brief history of your acquisition of Money on Mobile?

A: Harold Montgomery, Chairman and CEO
Yes, it is an exciting deal -- in fact, the most exciting company I have seen in my 25 years in the payments business anywhere in the world. I was speaking at a payments industry convention in London in 2011, and an Indian businessman introduced me to Money on Mobile. When I had a chance to look at what the company was doing, I was really excited about it, and felt that a tie up with Calpian made sense for both parties. We made a deal with Money on Mobile that calls for us to invest $9.7 million and issue 6.2 million CLPI shares over 18 months. As of the end of 2012, we're halfway through the investment cycle, and are really pleased with the results we're seeing. Since we first invested in MoM in March 2012, the company has more than doubled in size.

Can you give insight to investors that aren't familiar with the fundamentals of the payments industry in India; how most users may not have a bank account but do have a mobile phone? 

A: Harold Montgomery, Chairman and CEO
The payments industry in India is like the U.S. circa 1950 -- it's basically an all cash environment for consumers. There are only about 300 million bank accounts for a country with a total population of 1.2 billion people -- not nearly enough. So people don't have debit cards and check books or credit cards like we do in the U.S. Most transactions are done in cash, which is inconvenient. And when it comes to sending cash across the country from husband to wife for example, it's expensive, slow and prone to loss. Money on Mobile solves all these problems -- it's a way for consumers to accomplish simple financial transactions using their cell phone. No need for a credit or debit card or even a bank account. Anyone can use it anywhere in the country 24x7.

There's only 300 million banks accounts, but 650 million cell phones. So the window of opportunity for a cell phone based payment system is wide open, and we're running with that opportunity as fast as we can!

I read in a December report that "the mobile payments (m-payments) industry in India is estimated to grow from $86 million in 2011 to $1.15 billion in 2016, with a compound annual growth rate (CAGR) of 68%. Can you tell us what kind of growth rate your company's subsidiary is experiencing? 

A: Harold Montgomery, Chairman and CEO
It's been fantastic -- for example, since April 1, 2012, we have gone from 3.2 million unique cell phone number users of MoM to over 28 million cumulatively through November 2012. During that same period, we grew from 48,000 retail store outlets to over 113,000 stores participating in the system. Likewise, processed transaction volume grew from 255 million Rupees to 558 million Rupees -- more than doubling. So you can see from those actual numbers that the predictions about strong growth in mobile transactions in India seem right on target to me.

Can you discuss your competition in the India mobile payments market and what sets Money on Mobile apart from them?

A: Harold Montgomery, Chairman and CEO
There's not a lot of players in the space. It's hard to finance this kind of business unless you have the payments history and expertise that Calpian brings and that the Money on Mobile team have. Other competitors in India are much smaller and underfinanced. In addition, at least one of the cell providers India has launched a similar system, but it's not yet interoperable with the other phone companies, and so that really limits its utility. We're out in front and aim to stay there.

In closing can you give us a brief summary of the obstacles and the opportunities in the India mobile payment industry?

A: Harold Montgomery, Chairman and CEO
For a company that's well financed with a strong brand name and a large retail distribution network, we believe the opportunity in India is virtually limitless. For comparison, we like to look at MPESA, a similar mobile payments system in Kenya. After 5 years in business, MPESA is processing $18 billion in annual volume -- that's an astonishing number that is equal to 25% of the entire GDP of the country. We're not close that that volume today, but given that India is 30 times larger than Kenya in most important respects, we expect great things out of Money on Mobile in the coming years.

Harold Montgomery is the Chairman and Chief Executive Officer of Calpian, Inc. (CLPI.) He has been in the payment processing business since 1987. Before leading the formation of Calpian, he was the CEO of A.R.T. Holdings, Inc. (DBA: Calpian, from 2002 to 2009,) a company that underwrote and acquired hundreds of merchant portfolios totaling approximately 35,000 merchants. He brings the same leadership team from A.R.T. to Calpian.

Montgomery has 25 years experience in the payments business including in the ISO, merchant payment processing and mobile payments vertical markets and in sourcing capital. He's a widely known industry authority, a speaker at regional and national trade shows and writes a regular monthly column for Transaction World Magazine. He has been a resource for the Card Payment Center at the Federal Reserve Bank of Philadelphia, and has served the U.S. Congress as an expert witness on credit card legislation.

About Calpian (OTCQB: CLPI)
Calpian, Inc. (CLPI) is a publicly traded company with corporate offices in Dallas, Texas and mobile payments emerging-market operations through its subsidiary in India. Calpian's U.S. business focuses on the 10,000 Independent Sales Organizations (ISOs) that serve approximately 2 million small merchants across all industries in the U.S. who pay an estimated $1 billion in annual residuals. Calpian's Indian subsidiary offers Money on Mobile, a pre-paid mobile payment solution, to over 28 million Indian consumers at more than 113,000 Indian retail locations. Calpian's management team has over 70 years in combined experience in the payments business. Calpian's CEO, Harold Montgomery, is a recognized industry leader who has provided expert testimony to the U.S. Congress and Federal Reserve Bank on payments-related issues and regularly appears in numerous industry publications, such as Transaction World Magazine Visit and for more information.

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