‘Our key competitor is cash’
IPO-bound MobiKwik is on a high. After turning profitable in FY24, the fintech platform says its market share in PPI (prepaid payment instruments) wallet transactions has increased from 12% in March to 23% currently. In this interview, Co-Founder & CFO Upasana Taku speaks to Toshiro Agarwal about some of the top trends in the category and MobiKwik’s growth plans. Edited excerpts.
Q: MobiKwik recently turned profitable. So what are those things you did right?
The first thing is that we’ve been a very focused company from a product and growth perspective. Instead of trying to get into many different business areas, payments have always been our foundation which we use to acquire users and merchants. Then digital credit is the second vertical where we have been able to monetise either users or merchants by giving them their first credit products. All these products are in partnership with banks and NBFCs, but the distribution fee we make here is much higher than what we make in the payments business. In addition to that, now we are also trying to bring savings or investing products for our users and merchants. My idea is really to become a powerful finance app for our users. So if you ask me what are the reasons for profitability, the first is scale-up in the platform users, and merchant growth at a very low customer acquisition cost (CAC). We have one of the lowest CAC in the industry. The second is strong monetisation by cross selling financial products. About 55% to 60% of our revenue comes from distribution of credit products. This is much higher compared to competitors.
Most importantly, while scaling up our revenue substantially — we’ve grown 60% from FY23 to FY24 in terms of total income — our fixed costs have been in check. Fixed costs have been coming down as a percentage of the total income and that is how we turned profitable.
Q: MobiKwik’s user base exceeds 150 million. How do you plan to engage this user base and expand it especially in the face of growing competition?
We’ve been around for 15 years and every year we add anywhere from 15 to 20 million new users on the platform. Most of it is organic, which means that people come to us via the use cases that we are presented. And then of course, we do paid acquisition also. In the financial year ending March 2024, we’ve acquired about 17 million new users. We are also adding lakhs of merchants every month. We stand at more than 4.5 million merchants currently.
There is no dearth of opportunity. Digital payments have reached 350,000,000 Indians but all other financial products have not even reached 100 million Indians. So the total addressable market (TAM) is extremely large. There is no problem in acquiring users or growing from a scale perspective. The tightrope or the balancing act is really how much should you grow while being focused on revenue, margin and also cost control so that you can be profitable. If you try to grow too quickly, it’s like expecting a baby to be born in less than nine months. Is that going to be sustainable? That is the thought process — whatever we build has to be sustainable and must continue month over month, quarter over quarter.
Q: You said you have 4.5 million merchants currently. How do you plan to scale merchant adoption?
We want to only acquire merchants that have an establishment, that have the right KYC documents and in high frequency use cases because my payment user will go there and I will be able to help the merchants in collecting the payments. That merchant will also become a user for us to whom we can cross-sell investing products or lending or working capital products.
Because most small merchants in India are not digitised, they have a bank account, but they are severely underbanked from all other financial services perspective. We have been quite focused. Let’s say my competition is acquiring 100, and I acquire 50, but those 50 will be such that I am able to earn a stronger margin. So my cost of acquisition and my revenue per merchant is balanced.
Q: At what point does customer acquisition for a small business or a micro merchant become profitable?
For a micro merchant, it typically takes us three to six months to turn profitable. First we find the merchant, do the KYC, we put them on QR code payments and if the scale is substantial then we’ll migrate them to a sound box or an electronic data capture (EDC) card machine. Then based on their payment receivables, we start giving them merchant loans. This is the kind of growth journey we have in terms of cross-selling to the merchant. We start breaking even on that in a span of three to six months.
Q: And if we consider it from the other side, how does Mobikwik make it simpler for small businesses to accept digital payments from customers?
First, given that we have a QR code play, we want to enable every merchant to accept payments digitally. But let’s say people want to accept credit based payments but the merchant is not willing to accept that because they don’t have a card device and they don’t want to spend that kind of cost. In this case, the user can load the money in the wallet using a credit card and then scan the QR. That is our Pocket UPI offering where spends are happening via wallet (Pocket UPI), and the wallet can be loaded via multiple instruments, not just UPI money.
If a user doesn’t have a credit card, but he or she has a buy-now-pay-later or a digital credit offering, that is also linked to the MobiKwik account. In this case a MobiKwik user will be able to use that credit limit also to pay another.
Q: Payment security is becoming increasingly important to both businesses and consumers. Which innovations are the most promising in ensuring a safe payment experience?
One of the big things I talked about was Pocket UPI because again here you don’t want to link to your bank account for every single transaction. Also, it’s easier if all your spends are happening from a single digital wallet instead of hitting your primary savings account for every transaction.
Another interesting thing is from the perspective of Lens, which is also something that we have launched in the MobiKwik app. It’s already live. From a personal finance perspective, just like ChatGPT, you could ask questions, such as, what are the kind of investment dividends I have received this month or what are my spends this month across different sectors or different pay modes. It will be able to show that.
Q: How important is after sales support in your business area?
After sales care in our business is 24/7. It’s not as if you will download the app today and I can’t support you tomorrow. I have to support you forever because you may be making a payment, you may want a refund. You may face a phishing or a fraud issue. I have to support you. We have to support the customer for a lifetime and to that extent we are easily available on our “help” section in our app, in our call centre as well as all social media.
Q: How do you see the adoption of digital wallets growing in the coming years?
I think that our key competitor is cash and what people need to understand is that right now the whole of India has not migrated to digital payments. Only 350-400 million Indians are paying digitally today. Everybody else is still on cash even though 850,000,000 Indians have a bank account. So the market is going to double in the next 5-8 years. There is immense scope this year in terms of the wallet business. We’ve already shown a substantial milestone — from a market share of 12% in terms of wallets in March, by April-June,quarter we had doubled that number to about 20-23%. We have become the largest wallet player by virtue of the GMV or the spends that are happening on our platform. This interplay of wallet, credit card on UPI, the digital credit offerings that we have and the pocket UPI feature… all of these are going to grow immensely and are going to help us engage in a more meaningful manner with our users and our merchants.