Mobile wallet player MobiKwik aims to be profitable by the second half of 2018 and is looking at a strong play in financial services to boost revenues. In conversation with BrandWagon’s Ankita Rai, MobiKwik’s Bipin Preet Singh talks about the company’s focus on merchant expansion, brand marketing, creating a data-oriented platform for financial services and why it is not looking for a payment bank licence. Edited excerpts:
MobiKwik plans to invest Rs 300 crore by December 2017 and is said to be looking for a fresh round of funding. Where does the company plan to invest the money?
There are continued discussions with investors on funding but there is nothing concrete as of now. The focus is on acquiring more merchants, in both the government and private sectors, starting with core services like travel, transit and grocery. For example, we recently tied up with Amul and Verka because dairy is a high frequency daily-use category.
Overall, we are setting up offices and putting local teams in place for acquiring merchants to make it easy for people transitioning from cash to cashless. So far, the focus has been on top cities. This year we are planning to go beyond tier 1 cities. We have launched MobiKwik Lite which works in 8-10 different languages. We are also working with local media on awareness. The biggest thing still missing is awareness.
A large portion of the Rs 300 crore will be invested in creating a local market for electronic payments and investing on the brand. At least 20-30% of the money will be invested on marketing. As a company, we have not invested much on the brand so far, but we are looking to correct this. We have a bigger user base now and have grown from Rs 6,400 crore ($1 bn) to Rs 12, 800 crore ($2 bn) in GMV in last three-four months and now the focus is to touch Rs 64,000 crore ($10 bn) by the end of this year. We are also looking to open more offices. Currently, we have offices in Delhi, Mumbai, Kolkata, Bengaluru and Pune. We plan to add cities like Indore and Raipur.
Have you noticed any change in MobiKwik’s customer profile and the average transaction value post demonetisation last year?
We are already at $2 bn in GMV, which doubled from $1 bn in the last four months after demonetisation. We plan to get to 10 million merchants from the current 1.5 million. Our current user base is 55 million and we plan to get to 100 million.
A lot of change has happened in the customer profile since demonetisation. Earlier it was confined to students and corporate employees using it for convenience. After demonetisation, the occupation, age and location of customers have changed. For example, small businesses are not only accepting MobiKwik but have also become active users. They are also paying other merchants through MobiKwik.
The small trader/merchant base is a very significant edition across the age group. The transaction size has also improved. The average ticket size is around `600 and is increasing. We make commission of around 1.8%. We are at two million transactions a day.
You recently launched SuperCash as a loyalty initiative. Is it just another name for cashback?
Cashbacks are not sustainable. The money that you make in payments is less than 2% from every transaction. So you can’t give 10% cashback to all customers on all their transactions. Also, it doesn’t create customer loyalty. SuperCash, on the contrary, is aimed at making users adopt MobiKwik on a long term basis.
Before we launched SuperCash, only 10-15% of our customers used cashback. After SuperCash, the percentage of users has grown to 50%. We expect it to lower the burn, improve loyalty and increase the number of transactions. We have seen 30% growth ever since we launched SuperCash in February and have been able to create customer stickiness while reducing our spend. It also allows us to segment our customers.
Detractors say the margin per transaction is wafer thin in the payments business. How do you see the payment business making money going forward? In FY15, MobikWik reported a loss of Rs 41.5 crore.
Even after demonetisaton, UPI, etc, our fee continues to be constant. We are in a business where we own customer data and aim to make the transition to financial services. For every one rupee of payment revenue, we aim to make Rs 10 in financial services revenue.
When it comes to cutting down our losses, we are looking at different segments of burn. One is acquiring more users and merchants, which will continue. Two, SuperCash has significantly reduced our burn; three, is fixed cost. We are very lean as a company. Our core team is less than 300 people.
At our scale, a loss of Rs 42 crore is not much. We aim to be profitable by the second-half of 2018. And we are well on our way. Some of the segments have already achieved a breakeven such as recharge and bill payment.
Are you looking at monetisation through ads?
We experimented with ad monetisation but rates in India are not very encouraging. There is a lot of fraud in the digital ad industry, such as misalignment of incentives, overbilling, fake traffic, etc. We would rather make money from customers around transactions, lending and insurance than advertising.
Guidelines proposed by RBI talk about interoperability between mobile wallets, in addition to access to UPI, and tough compliance norms. How do you see it benefiting mobile wallet players in India?
If interoperability works for users, it works for us. However, it can introduce an element of risk and requires more security. If 40 companies are in the interoperable space, all of them need to have the same level of security. There is a greater emphasis on security in guidelines, such as audit processes that have been strengthened. While we welcome this, on the KYC part, we don’t think draft guidelines are in the right direction. If the KYC norm for a wallet user is same as the KYC for a bank, what is the point? We are not looking for a payment bank licence. We are in a far better position as we are not competing with any bank or NBFC. Our strength is payments.