Small cap stocks Net 1 UEPS Technologies (NASDAQ: UEPS), Moneygram International (NYSE: MGI) and Calpian Inc (OTC: CLPI) are hoping to cash in on the last frontier of financials services: The global unbanked in the world’s emerging markets. According to the World Bank, around three quarters of the world’s poor don’t have a bank account, often more to do with cost, travel distances and the paper work that is required to open an account. That could easily be 2.5 billion people around the world who still would have a need for some kind of financial services plus many of these people would already have a mobile phone or access to one. With that in mind, here is a quick look at three small cap stocks who have the world’s unbanked in their sights:
Net 1 UEPS Technologies (NASDAQ: UEPS) Is a Leader in South Africa
South Africa based Net 1 UEPS Technologies is a provider of payment solutions and transaction processing services across multiple industries and in a number of emerging markets. Net 1 UEPS Technologies has created and now markets a smart card-based alternative payment system for the unbanked or under-banked populations and for mobile transaction channels. However, Net 1 UEPS Technologies is down 50.2% over the past year and down 81.4% over the past five years namely due to allegations that the company violated the Foreign Corrupt Practices Act (along with other criminal and securities laws) over "corrupt payments" to South African government officials in order to win a contract with for the country’s Social Security Agency. At this point, the allegations are merely allegations (it sounds like a competitor may also be behind them), but it has lead the the rather odd situation where US government agencies are investigating a foreign business and whether that foreign business bribed foreign government officials. Irrespective of the allegations (which has made the stock much cheaper), the contract could help Net 1 UEPS Technologies solidify its leadership position in South Africa for having the largest share of the market for retailer and third party payment processing in that country.
Moneygram International (NYSE: MGI) Is Already a Global Player That’s Expanding Into Africa
Moneygram International allows consumers who are not fully served by traditional financial institutions to meet their financial needs by offering them money transfer services worldwide along with bill payment services in the United States and Canada through a global network of more than 293,000 agent locations in 197 countries and territories around the world. Investors should be aware that Moneygram International is down 25.1% over the past year and down 66.4% over the past five years as the company took a big hit some years ago when it was accused of turning a blind eye to scam artists and money launderers and then failing to take action against agents involved with fraud schemes. Moneygram International has been trying to put those problems behind it through a $100 million victim’s fund. A bigger problem for the future though could be that regulatory pressure from the Dodd-Frank Act is bringing about more competition and lower prices – something that Moneygram International will need to deal with in its US business. Otherwise and in early January, Moneygram International announced that it had officially crossed the 20,000 agent location milestone in Africa and the company pointed out that the World Bank has estimates around $39 billion in remittances flowed into Africa in 2010.
Calpian Inc (OTC: CLPI) Has Gotten Into the Indian Market
Calpian is a small cap intermediary between large processors and merchants to facilitate payment for goods and services at the retail point-of-sale while its Indian subsidiary offers Money-on-Mobile as a pre-paid mobile payment solution to more than 110,000 Indian retail locations. In fact, Calpian’s Money-on-Mobile is actually India's largest mobile payment platform which acts as an m-wallet or mobile wallet for users who can now carry all of their credit/debit cards and bank accounts on their mobile device in order to make payments for everything from travel services to the sending and receiving of remittances much easier. The CEO of Calpian has said in the past that the payments industry in India is like the USA circa 1950 as its an all cash environment while there are only about 300 million bank accounts in a country where the population is at least 1.2 billion people. However, there are at least 650 million cell phones and its one of the fastest growing mobile markets in the world. However, Calpian is down 38.46% over the past year but its really only been actively trading over the past few months – meaning its still too early to pass judgment on the stock just yet.
The Bottom Line. Small caps Net 1 UEPS Technologies and Moneygram International could be in value territory from have been beaten down by corporate governance type of allegations while Calpian Inc could at the very least be worth watching.