In an interaction with Moneycontrol, Taku, co-founder of Mobikwik, fields all questions about the company’s future plans
As if heavy weight rivals such as Paytm and PhonePe were not enough trouble for Bajaj Finance-backed mobile wallet firm Mobikwik, reports of exits of senior executives such as CBO Vineet Singh, head of retail business Vivek Sinha and payment gateway head Rukhaiya Rangawala, have only added to its troubles.
Speculation is rife about the future of the firm. Unlike arch rival Paytm, which last year raised USD 1.4 billion from SoftBank, and Flipkart which committed an investment of USD 500 million in PhonePe, Mobikwik has so far raised just USD 115 million.
The uncertainty gets further fuelled by the lack of a robust profitability model that is casting a shadow over the mobile wallet ecosystem.
In an interaction with Moneycontrol, Upasana Taku, co-founder of Mobikwik, fields all questions about the company’s future plans, including their thoughts on profitability and getting into newer segments such as lending and insurance.
Taku also said that the company will invest around USD 40 million in this expansion and can possibly hit the market to raise atleast USD 100 million.
Edited excerpts:
Lack of a robust profitability model has been raising questions on the future of mobile wallets in India. Are mobile wallets really dying a slow death?
If you look at the numbers that the Reserve Bank of India (RBI) publishes, the payments volumes across PPIs have only been increasing. Our own numbers (transaction and GMV) have tripled in the last one year. This year again, we are looking at seeing a four fold growth. We are looking to hit USD 20 billion in terms of transaction in the next three years. I don’t see any reason why payments is not a viable business. For us it is a viable business.
If you look at the bookings of Ola and Uber or look at Swiggy or Zomato, wallet payments are growing by leaps and bounds. 30-35 percent of the total payment volume of food and grocery ordering is from wallets. And that would be us and Paytm.
Payments is a vast area. We have grown very large in terms of user and retailer base and the total number of transactions we do. So are sitting on a pool of data. Therefore we are going to try to diversify and monetise better. But that does not mean that there’s no business in payments.
Now because companies like us are looking at diversifying into other things, it is leading people to believe that there’s no business in payments.
Where is the vision for profitability? Wallets don’t charge money from consumers but just the merchants. What are your plans to make wallets a profitable segment?
Even Flipkart and Amazon are not profitable but nobody calls them unviable. If we want, Mobikwik can be profitable today, which means if I am happy with the organic growth, then I can stop burning money and turn profitable. But we have to acquire more users and merchants and it costs money. On the other side, we are trying to improve our revenue margins by launching new financial services.
Which are the new products being launched?
We want to become a full stack financial services firm. By that order, we are definitely going to launch insurance products or bundled products. For example, if you are buying something on travel, then you can have travel insurance. Then there will be wealth management and remittances.
How much commission are you charging the payments merchants? Will the commission be larger for other segments?
The number is anywhere between 1.5-2 percent. In some use cases it is lower. Yes for the new use cases the commission will be more.
Initially you were waiving off this money also.
Only for small retailers, when we had on-boarded them. When we on-boarded them, it was for P2P transaction which means that the money went into their wallet not to their bank account. But since then RBI changed the KYI norms, so now we require all merchants to be fully KYC which means the money has to go to their banks. So we have 3 million merchants and all of them are paying commission.
Is profitability not a short-term goal?
But in the 2-3 years time frame, (it will be).
And that will be triggered by what all factors?
Adding all these financial services. Currently, I am only serving you with payments and let’s say my margin is 1.5 percent. But if tomorrow if I am servicing you with other products where my margin is 3-5 percent, overall the profitability of the company will increase.
Will this be in partnership with NBFCs and banks?
Yes
What percentage of Mobikwik’s revenue will come from these new verticals by the end of March 2019?
Around 30-40 percent because the margins will also be much higher.
What sort of investment is required for the launch of these verticals?
We need to get the alliances in place. We are also looking at doing remittances which is cross border. In all of these cases there will be product fit to be created, regulatory clearances needed and of course team to be hired. So, USD 30-40 million will be invested in 1-1.5 years.
For this, you will need to raise a fresh round of funds. Have you started reaching out to investors?
I guess we have a good story to tell. We have been working very hard since the last seven months on building the right data platform. Some of these products we are going to pilot this month.
Your biggest competitor Paytm raised 1.4 billion last year. Flipkart recently announced that it would invest USD 500 million in PhonePe. Mobikwik on the other hand has raised a total of USD 115 million ever since it was founded. It is inevitable for you to not raise a funding and sustain against this sort of competition, especially with so much expansion lined up.
If you look at our trajectory, we have been raising every year since 2013. I am not speculating on that, but the number has to be upwards of USD 100 million. We have not started the conversations yet. We want to go with some numbers to show that we have built up this.
But what about the exits that are happening in your current business? Company’s chief business officer Vineet Singh, payment gateway head, Rukhaiya Rangawala, head of retail business, Vivek Sinha are few of the names in the list who have exited in the last few months. What has been the reason behind these exists?
You know how a cricket team or any football team works. Every person has to pull their own weight but they also have to work in tandem with other members of the team and despite the fact that you are Tendulkar or Rahul Dravid, everyone has an exit time. Some people leave on their own, some people are asked by the BCCI. So I think both the cases are there. There is no love-lost.
Vineet was a notable exit but it was well understood on both the sides. He was hired during demonetisation and in thick of things he did some things really well. But as we wanted to grow in all the other areas we thought that his experience was not the most relevant because he had come from real estate back ground. He also had other areas, he wanted to work on. We thought the time was right for him to exit because as we build out towards this financial services vision we better get to understand that well and come from that background. So that was the only notable exit. Other names that you mentioned would be senior slash mid level people.
Who is replacing Singh?
Right now, we do not have plans to hire anyone. But for all these business heads we have got replacements.
The company reported a revenue of Rs 40 crore and loss of Rs 114 crore during the financial year 2016. The revenue barely inched up to Rs 44 crore even as the company reported a loss of Rs 132 crore for the financial year 2017. The revenue should have grown much faster but the reason why it didn’t is because 2016 saw demonetisation.
What is the vision on the revenue front now?On the revenue front, we are looking at 4x growth. This will be on the back of two theories – the payment business is scaling fast and we couldn’t charge some merchants last year whom we are charging now.
