No Credit Card? Estonia's Fortumo lets you pay directly through your mobile operator!


Rain Rannu, CEO of Fortumo, has been involved in the mobile payments industry for 13 years, being one of the early pioneers while co-founding Fortumo's parent company Mobi Solutions back in 2000. As a founder of Fortumo, Rain deals with strategy, new products and key partnerships. Rain holds an MBA in Technology Management. He is one of the founders of Garage48 Foundation, non-profit focused on motivating young people to start their own companies. Rain shares his time between San Francisco and Estonia.

Fortumo recently announced their launch in India, partnering with all the big mobile operators - Airtel, Idea and Vodafone.

YourStory spoke to Rain about his company, his vision and everything in between. Here are the edited excerpts.

YS: How did the idea for Fortumo originate and evolve?Rain: All three co-founders of Fortumo (me, Martin Koppel and Veljo Otsason) are from Estonia, a small country with just 1.3 million people in Northern Europe. I studied public administration in University of Tartu but quickly realized that the nature of the public sector is not suitable for me. Instead we decided to launch a mobile development company called Mobi Solutions in 2000 together with a few acquaintances from university.

While founding Fortumo, launching a startup in the mobile industry was a pretty obvious choice for us due to our previous background. In 2007, having spent most of our working lives in the mobile industry, we noticed a simple truth: in every country and every region of the world, at least three times more people have mobile phones than credit cards. The more emerging the market is, the bigger the difference in favour of mobile phones over credit cards. We also realized that in addition to text messages being used to communicate information, it can be used for making payments as well. That became the basic idea of Fortumo.

Most of our challenges dealt with finding out whether our idea has a product-market fit. Before Fortumo came around, as a merchant, when you wanted to start accepting mobile payments, you needed to have face-to-face negotiations with your payments provider, pay setup and monthly fees and meet minimum monthly volumes to be supported. We changed that model completely by allowing anyone to sign up at Fortumo's website and start accepting mobile payments in 15 minutes.

When we launched Fortumo in 2007, it was just a few people and one office in Estonia. We have grown a lot since then – team size of about 70 people, payments coverage in 80 countries, over 90,000 registered merchants and offices in Estonia (Tartu), US (San Francisco), China (Beijing) and India (Delhi)

. Fortumo has offices in Tartu, San Francisco, Beijing and Delhi. Key functions are engineering and software development, mobile operator relations, sales and business development, support and operations.

YS: Tell us about a little more about Fortumo - what is the solution and what segment of people/industry will benefit from it?

Rain: The biggest problem in the payments industry is collecting payments from unbanked users. Globally, there are about 1.5 billion credit card and bank account owners, which may sound like a big number, until you realize that over 5.5 billion do not have a banking relationship and lack any way of paying for goods and services online. But a lot of those people have mobile phones. In fact, there are over 5 billion mobile phones worldwide. We at Fortumo are enabling users to charge payments directly to their mobile operator bill (or prepaid account), so you don't need to have a bank account or credit card. This has huge impact for extending the reach of payments coverage, especially in the emerging markets.

Over the next few years, carrier billing will break into multiple new areas, including for physical goods, and Fortumo has a number of interesting projects in the pipeline. The biggest segment for Fortumo is merchants of all kinds of digital goods, such as apps, games, music, video, books, magazine subscriptions, etc. This market is huge, as worldwide gross transaction volume for mobile payments for digital goods is expected to more than double by 2015 to $268 billion.

YS: What stage is the company presently at?

Rain: Our growth comes from signing up new merchants, expanding our geographic coverage, helping existing customers expand to new territories, as well as expanding to additional platforms and areas of business such as the aforementioned physical goods. Fortumo has had significant growth in every single year since our founding, and we've been profitable since 2009.

Fortumo has almost 100, 000 merchants signed up. Out of any carrier billing provider, we have by far the biggest number of completed integrations and live customers, ranging from small one-man startups to big global companies such as Facebook, Electronic Arts and Barnes & Noble. As with any startup, convincing the first customers to start using your services is difficult because the business case has not yet proven itself. For us, the big break came when the first big-brand-name customers signed up for Fortumo and started using us for payments. After that, everyone else followed suit.

We launched Fortumo with a seed investment from our parent company Mobi Solutions and then became profitable in 2009. In the beginning of 2013, we took in a growth investment from Intel and Greycroft.

YS: Can you tell us a little more about the competition in this space?

Rain: There are several other mobile payment companies out there, but where Fortumo stands out is our geographic coverage (more than 80 countries).

Several of our competitors are based in the UK or US, and naturally, know best their home market and the markets that are similar to that - that is, rich western markets. But we realized early on that these are not the countries where most users from carrier billing come from. Most users of carrier billing come from emerging markets in Asia, Latin America, Eastern Europe, Middle East and Africa. If you want to monetize your users in countries where people don't have credit cards, Fortumo should be your first choice.

Globally, we also compete with other alternative payment options in each country, for example scratch-cards, local wallets, etc. However, as these payment methods tend to be fragmented and a merchant does not want to do 100 different integrations for 100 countries, he is usually better off with a global carrier billing solution such as Fortumo.

YS: What is your revenue model?

Rain: First, merchants need to integrate Fortumo payments into their apps, websites or other services. When the end-user pays with Fortumo, the charge goes to his mobile operator bill. The mobile operator then takes their commission from the payments and forwards the money to us. We receive these payments from 300 operators in 80 countries, handle tax and compliance on behalf of the merchants, take a small percentage cut and pay the money out to merchants as one easy monthly payout.

YS: What next?

Rain: Fortumo's goal has always been to build the best mobile payments company -- one whose customers, partners, employees and owners are happy. We also see that there is so much untapped potential in the mobile payments, coming from the fact that there are hundreds and hundreds of million people around the world who are just now getting their first ever smartphone. We're focusing our efforts on doing our part to make sure that those people can participate in the digital economy and consume the goods that the rest of us can.

YS: Any parting words for the new wave of entrepreneurs?

Rain: In the early days of my first company, a lot of people around me were asking when I would stop playing around with these startups and get a job. At some point, when they saw that we could actually be successful, they stopped asking. Now, some of them are working at Fortumo.

You can never overestimate the importance of starting the company with right people and hiring the right people, but the most important thing that always makes or breaks the startup is whether there is a customer. To get the customer, one must sell. For first-time entrepreneurs, it is all too easy to get caught up with all the non-essential activities, like setting up an office or making sure you have good-looking business cards -- or even spending six months on product development without meeting a customer. I argue that the most important activity for startup founders to focus on is selling -- to get those first customers, and working 24/7 to solve their problem.

Fotumo was one of the many startups that participated in the Slush 2013 conference last year. 


Updates from around the world