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Net Element International (NETE) Rides Successful Acquisitions toward Mobile Commerce Dominance

It’s hard to realize that in most emerging countries the phrase “electronic payments” means something appreciably different than it does in the U.S. and other fully developed nations. In those emerging and rapidly developing economies, electronic commerce is largely based on mobile SMS or smartphone-technology, and banking transactions quite disparate from the plastic-centric, online payment platforms common in the Western world. Notably, SMS-based financial transactions are reported as being largely responsible for the triple-digit growth of cashless transactions around the world.

In Russia, where Net Element International subsidiary TOT Money is a leader in providing Premium SMS and Mobile Commerce solutions for major enterprises like VimpelCom — the nation’s second-largest telecom — and smaller businesses, E-Wallet sales are expected to near $35 billion rubles by the end of 2014. Revenue anticipated from SMS-enabled purchase and banking transactions is anticipated to reach $1.5 billion.

Tot Money is a component of NETE’s Tot Group, Inc., which also includes companies such as Unified Payments, a U.S. based $10-billion payment and money-management enabler named 2012’s “fastest-growing private company” by Inc. Magazine in recognition of its 23,646-percent three-year growth record.

In Russia and countries with similar economic cultures, TOT leverages the fact that the mobile telephone is by far the instrument of choice for online-purchasing, bill-paying and banking transactions. In many corners of the world, the actual preference for payment via smartphone SIM Cards can be literally staggering. In fact, more than three-to-one in Russia, where the over 227 million active SIM-card accounts are capable of handling cashless transactions dwarfs the 73.8 million internet accounts able to perform similar money-management chores.

“In 2011 the amount of carrier payments was 6.6 billion rubles and, by 2012, this jumped 44% to 9.5 billion rubles,” J’son & Partners Consulting reported. “This growth trajectory continues unabated … (we predict) that by 2017 the market of mobile operator payments in Russia will exceed 40 billion rubles. All of this bodes well for TOT, given their growing market share in a region that is enjoying tremendous growth with a population that has wholeheartedly embraced SMS services.”

According to NETE CEO Oleg Firer, “We are in the right place, at the right time, with the right solution, and that is why we are providing payment-processing services to the over 60 million subscribers of VimpelCom in Russia.”

Noting that TOT Money became VimpelCom’s top SMS contributor within six months of entering the market, Firer said, “We expected to become a leading value-added services provider for the $1.5-billion Russian SMS-payments market and the $475-million Russian mobile-commerce market, and that is exactly what we have accomplished.”

TOT Money, however, is far from being Net Element’s only subsidiary, and Russia and the Commonwealth of Independent States (CIS) created by former Soviet Union satellites are a long way from being its only markets. In fact, Firer and his associates have displayed an uncanny ability to find and fill needs for high-tech, out-of-the-box, mobile money-management solutions worldwide. Even in countries like the U.S. with its 90-plus percent internet penetration.

This extraordinary knack for finding opportunities competitors may have overlooked is a key reason why the company increased its gross profit by more than 900 percent between 2012 and 2013 and seems poised to deliver major returns to its shareholders in the very short term.

Adding to its U.S. holdings, NETE, via the TOT Group, has announced the acquisition of QuickPay, a Florida-based firm serving the needs of what the U.S. Federal Deposit Insurance Corp. defines as unbanked or under-banked consumers in the U.S. and eight other countries.

Within its potential market of several hundred million users — 28 million U.S. households alone, according to the FDIC — Quickpay enables users to order products and pay home-utility bills, cell-phone bills, and make cash transfers through conveniently located machines that operate a lot like ATMs and look a lot like Red Box DVD-vending machines.

In a 2013 expansion move, NETE acquired Aptito, a multinational, Miami-based provider of the mPOS all-in-one cloud-based information, ordering, reservation, and payment solution for the hospitality industry. Powered by a tablet computer, mPOS “combines traditional POS functionality with mobile ordering, payments, social media, intelligent offers, mobile applications, loyalty, and transactional data all in one solution with Aptito’s cloud-based payments platform at the center of it all,” as stated by the company. Using the system, food and beverage servers can place orders directly from their mobile phones and accept payments right at table-side to facilitate faster service, quicker table turnarounds, and less waiting time for customers.

Aptito also offers a mobile app for empowering a Self-Ordering Apple® iPad®-based kiosk to allow restaurant owners to offer customers a fast, convenient alternative to waiting for a server to reach their table and take an order. “Aptito is an ideal solution for our hospitality merchants who are anxious to increase revenue per table and grow their customer base,” Firer said. “Restaurants world-wide are facing similar challenges to acquire new customers, maximize the spend per visit and improve customer service while reducing staff costs. This acquisition will be a strategic addition to TOT Group and one that delivers a compelling solution and a competitive edge.”

In another significant 2014 transaction, NETE successfully negotiated a $10-million credit facility from RBL Capital Group LLC. Approximately $3 million will be used to pay NETE’s outstanding debt to MBF Merchant Capital in full, thereby significantly reducing Net Element’s total outstanding debt. The balance will be utilized, Firer said, to “enhance our ability to capture market opportunities and create shareholder value.”

“We are pleased to be supporting Net Element’s growth efforts,” said RBL Capital spokesman William W. Williams. “Merchants and consumers will continue to shift to a cashless environment and we see Net Element as an emerging leader in mobile payments, value-added services and technologies.”

With, according to analysts at McKinsey & Company, “more than a billion people in emerging and developing markets having cell phones but no bank accounts” and, in Ernst & Young’s words, “the universe of mobile payments services expanding rapidly as boundaries blur between payments, marketing, and shopping services delivered via mobile,” Net Element International is in the highly enviable position of being a major player in a virtually no-limits industry.

Are more “fastest-growing” accolades in the offing? We’ll just have to wait and see.

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