Mobikwik is a fintech company - one of the largest mobile wallets (MobiKwik Wallet) and Buy Now Pay Later (BNPL) players in India in Fiscal 2021. Their business operations are divided into three distinct business segments: (i) BNPL; (ii) Consumer Payments (MobiKwik Wallet) and (iii) Payment Gateway (Zaakpay).
Company is focused on addressing the unmet credit needs of the fast growing online transactors. They are a technology-first company leveraging big data analytics and deep data science (including machine learning) to better serve users and merchants on the platform.
Set up in 2009, Mobikwik started as mobile wallet to pay utility bills. Over the years, the wallet use case expanded to include, among others, ecommerce shopping, food delivery, petrol pumps, large retail chains and pharmacies. The merchant network includes mobile apps, websites and physical stores to make payments at checkout, QR code based payments, peer to peer UPI payments and bank payments. As of March 2021, company had over 10 crore Registered Users and more than 34 lakhs ecommerce, physical retail and biller partners.
ABOUT THE INDUSTRY
India’s online transacting users have rapidly grown at a CAGR of approx 15% from 18 crore in Fiscal 2018 to over 25 crore in Fiscal 2021. However, India had only 3-3.5 crore unique credit card users resulting in a low credit card penetration of 3.5%. In addition, India’s online BNPL market has rapidly grown to reach USD 3-3.5 billion in disbursals in Fiscal 2021 and is expected to grow to USD 45-50 billion by Fiscal 2026 driven by user growth. This presents a large opportunity for online payment and BNPL providers.
Strengths And Risks
+ Strong Network Effects: Mobikwik ecosystem connects end users, retail merchants, lending institutions and other partners, generating attractive networks effects that benefit all parties. With the BNPL Mobikwik Zip, users are able to make frequent and higher value purchases and refer more users. The retail merchant benefits from higher transaction values which encourages more merchants to join the network. This helps more user data into system, better credit scoring and lower NPAs, a win-win effect for all parties involved.
+ Low Customer Acquisition Cost (CAC): Mobikwik has low customer acquisition cost as they acquire users mainly through SEO, mobile ASO
(application store optimization) initiatives, user referrals, POS placement at merchant checkouts etc. In Fiscal 2021, 77% of Registered Users were added organically without any cost. The CAC has come down from Rs. 13.39 in Fiscal '20 to Rs. 11.51 in Fiscal '21.
+ Strong Consumer Brand: Mobikwik brand is synonymous with digital payments and their users associate them with comprehensive digital payments offerings. The strong brand recall exists across small and big Indian cities due to brand presence across channels including ecommerce, physical, retail and bill payments.
+ Technology and Product First Approach: Company follows a digital-first and technology-powered approach towards making the products highly personalized, intuitive, simple to use and designed to drive high user engagement. They leverage deep data science including machine learning to continuously drive innovations.
- Security Breach Risk: Their business generates and processes a large amount of personal data, including contact information, spending patterns, geolocation, financial information etc. through the transactions. Any security breaches and attacks against the platform, and any potential breach could damage company's reputation and adversely affect the business.
- Intense Competition: The fintech industry is fast growing, highly innovative and competitive and increasingly subject to regulatory scrutiny. Increased competition could result in the need to change the pricing offered. If the company is not able to compete effectively and differentiate the offering to users and merchants, it may impact market share and business.
- Credit Risk: BNPL products are relatively new and their credit-risk scoring algorithm is still evolving and may not accurately assess credit-risk and predict the credit losses as company scales up the BNPL segment. If the
credit assessment falters, their lending partners may be hesitant to continue to partner with them.
- Losses: Company has a history of losses, including in Fiscals 2019, 2020 and 2021. If the losses continue to increase, while they continue to grow at an accelerated rate, they may be unable to achieve profitability in near future.
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