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Why Royal Bank of Scotland Group plc’s Payment Issues Could Be Good News For Monitise Plc

Royal Bank of Scotland Group’s (LSE: RBS) country-wide system failure during 2012, followed by a glitch that affected as many as 600,000 payments across the network last week, has made it clear that RBS’s computer system is in severe need of an update. 

However, it’s not just RBS that is suffering.

Several years ago Santander had a reputation for constantly changing its computer systems, which affected customer accounts and payments. While the majority of the UK’s building societies are also struggling to build a sustainable IT infrastructure.

Even the Prudential Regulation Authority has weighed in on the issue. The regulator has come out recently and said that it has uncovered a “number of deficiencies” in the IT systems of UK banks with many struggling to improve “antiquated” IT systems.

And this is where Monitise (LSE: MONI) comes in. 

International experience 

Monitise has been working hard to build a strong relationship with big banks and other non-financial institutions since it was founded. As a result, the group has several big deals with these financial institutions and in some cases, the group has become a key partner. 

So, as banks look to create new payment processing networks and renew their IT infrastructure, they could call on Monitise to assist them. 

In addition, Monitise has a valuable partnership with global tech giant IBM. 

Tech giant 

The combination of IBM and Monitise could be too hard for some banks to pass up.

Indeed, the duo provides a number of key services that the financial services industry is increasingly seeking to implement as part of its quest to modernise, reduce costs and learn more about customers. 

IBM is known for its big-data capabilities, something that’s becoming increasingly important to the banking industry.

By using big data, financial institutions are able to gain access to data analytics to offer customers targeted services such as in-store engagement and location-based offerings.

Moreover, by working with Monitise, banks and other financial institutions will be able to deploy new digital and mobile money solutions while reducing costs and driving new revenue streams.  

The value of mobile payments to and from banks is set to increase from $249bn worldwide in 2012 to $460 billion in 2022.

So, banks really have no choice but to upgrade their systems to deal with this increase. 

Taking off

Despite the company’s troubles, Monitise’s business is already taking off this year.

Year to date, the company has signed deals with an unnamed top-ten US financial institution, an unnamed European financial firm, Santander, Türk Ekonomi Bankası and has partnered with IBM to deliver mobile banking solutions for Société Générale

Rebuilding trust 

Still, despite all of the above deals Monitise’s shares have recently slipped to a five-year low. And one of the key reasons why Monitise’s shares have fallen to new lows is the lack of trust between the company and its shareholders.

With a trail of disappointments behind it, Monitise has to prove to investors that it can be trusted once again and meet its own lofty growth targets. Monitise is targeting 200m active users by 2018.

Only time will tell if it can meet this target.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.