The Bloor Perspective: Easy mobile minutes, corporate compliance and Google's IPO

The Royal Bank of Scotland, which includes Nat West bank, has launched a service that allows customers with debit cards to top up their pre-pay mobile phone accounts directly from any of 4,650 cash machines.

The process is simple - just put your card in an ATM machine and top up appears as an on-screen menu option. You select your mobile network, enter a mobile number and choose an amount from £10 to £50.

The top-up minutes share many of the attributes of a form of currency - and have many of the same challenges. Handling money is more complex than handling other commodities as there are public policies governing financial management. In addition to the sales channel processes there are regulatory requirements to prevent fraud, laundering and so on.

The value for consumers is obvious - convenient access to a large number of top-up locations, which are open 24 hours per day, 7 days every week, and a process that's as trustworthy as the banks.

However, for operators, the cost of using the bank channels rather than retail channels is radically different. There are fewer contracts to negotiate, more customer supply points, no scratch cards to manage and probably much lower cost margins. With an intermediate form of card, with a transferable value like cash, there are extra costs and complexities.

Removing the cards, the process is simpler, with one proviso - ubiquity.

The Royal Bank of Scotland/Nat West announcement is a good move. However, the more significant announcement happened almost 18 months ago, when the LINK Interchange Network Ltd chose software from online transaction specialist, ACI Worldwide, to run the core processing for the mobile phone top-up transactions via cash machines.

LINK Interchange manages the LINK ATM network in the UK. This is the world's busiest ATM network, with 40,000 cash machines and over 86 million potential cards in circulation to access them.

To make this service ubiquitous for these sorts of numbers, you need reliable end-to-end transaction performance. Consumers notice quickly when things go wrong with even small amounts of their money. Only when made available under a broad brand identity do you get a service that consumers will pay money for - which shows just what good software is really worth.

Comply - or else

The mantras for this year are governance and compliance. Companies are being forced to look at the way their businesses are run in light of corporate accounting scandals that have exposed dubious practices.

This particular issue has led the US to pass its Sarbanes-Oxley law, forcing companies to improve their internal standards of governance and their accountability for the information they publish. At first, this affected just public companies listed in the US, but the EU is now looking at passing its own version of Sarbanes-Oxley, which may be even more far-reaching than the US version.

And Sarbanes-Oxley is not the only law with which companies must comply. The provisions of the EU's Basel II capital adequacy directive, including CAD3, are keeping company executives awake at night, especially in the financial sector.

Now that governance and compliance are the major issues du jour for companies, some vendors are reporting that buy-in for technology decisions comes from the board, not the IT department. Corporate officers such as compliance or money-laundering executives are being brought into decisions. And technology is being purchased to help companies manage risk, not just to improve the efficiency of their organisations.

Technology vendors at the InfoSecurity conference in London last week supported the notion that the board now controls technology buying decisions, saying that there were more executives at the show than in previous years. Vendors have long complained that they find it hard to reach executive-level decision makers - but the drive for improved corporate governance is changing all that!

'Google groupies' complicate IPO

One of the most unusual elements of the proposed Google IPO is the use of the public auction system via the internet. In other words, individuals (and institutions) must have an account with Google to be able to bid for stock in the auction. This allows individuals to participate on an equal basis with the financial institutions.

It's an unusual issue of stock. After proving account eligibility, prospective subscribers will have to consent to receiving the prospectus in electronic form. This method of valuation lacks precedent and in fact appears to state that Google's rapid stage of growth is over. The rate of revenue growth will slow and profit margins will become narrower, as Google faces more competition and competes in other areas of service provision currently occupied by other organisations.

Launching the issue as Google plans has a number of very significant risks:

• There is likely to be substantial irrational interest and bidding for the stock by individuals who are 'Google groupies.' They will want stock at any price.

• Speculative bids will destabilise the stock price, probably sending it soaring in the short term to come down to a realistic price in the medium term.

• Short-term volatility will harm the quality of the stock and could endanger the objectives of the founders to focus on long-term growth and value.

• Setting a realistic and stable price to ensure lack of short-term volatility will be an exacting art for the investment banks handling the issue.

• If the issue is very successful, the stock will be widely held. Initially, secondary market transactions are likely to be small in size - and the price will reflect that. For institutions to achieve a sizeable holding will not only take time but will be a costly market operation.