On a muggy afternoon, I meet Upasana Taku, co-founder of fintech start-up MobiKwik, in Gurgaon's Cyber Hub. She had just finished lunch with a potential hire. Now, it is time for some caffeine kick. Things were not kicking at her company even a year ago. A few sips of coffee, and she says that around the time demonetisation hit, MobiKwik had 50-60 million users and two million merchants. The payment transactions fetched the company a mere 1-2 per cent on the payment interchange. "How are we ever going to become profitable?" she questioned herself. "In payments, money was being thrown left, right, and centre. Then there was UPI."
Last year, the firm's monthly revenues were around Rs 8 crore and burn at Rs 13 crore. Payments business was fast becoming a big boys club where only those with pot loads of investor money could survive. "Our focus had to be sustainable growth, and profitability," she says. These are less heard terms in the cut-throat world of start-ups.
But there was a turnaround. By August 2019, MobiKwik was chugging at revenues of Rs 36 crore a month and had stopped burning cash. "We were operating at negative contribution margin until September 2018. Since October 2018, we started operating at positive margins. In October 2018, our margin was about Rs 14 lakh. Now, in August 2019, our monthly margin is positive Rs 11 crore, which is sufficient to cover all our costs. Hence, we are EBITDA positive," Taku tells.
How did MobiKwik manage this? The trick, she says, was boosting the topline significantly while keeping costs at the same levels. It was about finding new sources for revenue growth. "We looked at our assets. We have users, merchants and the platform. But then data was our biggest asset," she says. In the summer of 2017, the company started investing in data and by the end of 2017, it had a strong data model in place. The firm could track hundreds of variables on the user. What sort of device you use, what is your income, how much you spend, if you own a vehicle. How stable is your location. "On top of all these variables, we came up with a score. We were able to segment our users into many buckets, on risk, on affluence, location, age etc," Taku says.
On the back of this data, a loan product was built and launched.
"On the app, you may see an offer that you qualify for an X amount of loan. If you click, there is a loan KYC process and a mandate on the bank account for the EMIs. In two minutes, the money is in your app. We are trying to become the user's digital credit card," the co-founder says.
What exactly is a digital credit card? "You get approved for a digital credit limit - it could be Rs 40,000 or Rs 50,000 - but you can use whatever amount you want. You will pay interest only on what you use, just like a card," she explains.
MobiKwik has helped disburse 800,000 loans in one year with an average ticket size of Rs 10,000. The company, of course, doesn't lend from its books. At the back-end, there is a network of banks and NBFCs. But it executes everything else, from the user selection, credit underwriting, policy, the loan journey, disbursal and the collection process. The interest rate the user pays varies between 24 and 28 per cent. "These are short term loans, so people don't care much for the interest rate. They care more about the convenience," Taku says when I ask about the seemingly high rates.
While users get convenience, the company makes more money. Previously, when users bought a phone, or a Railway ticket, MobiKwik made just 1.5 per cent on the payment interchange. Now, it makes 7.5 per cent. About 5-6 per cent on the loan disbursed, plus the 1.5 per cent. Until last year, the main source of revenues were payments. Now, it is fintech revenues. The firm has also ventured into micro-insurance, using the same data models to underwrite. Depending on what you earn, the policy gets tweaked; the premium varies. If your income is Rs 25,000, you can be shown policies with a premium of Rs 20-50. There is a personal accident cover, a cyber fraud cover, insurance for home products, diseases and even life insurance. "It sounds like we are trying to do too many things but the aim is to cover the user for all their financial needs. Why should middle class Indians not get access to all fintech products?" she asks.
The muggy afternoon gives way to a bit of drizzle, and then, a heavy downpour.
Taku hurries her concluding comments. "Our goal is to get to $100 million revenue run rate and we hope to get there in six-seven months," she says. "Our strategy is focussed on credit-led payments, which is to say we want to be the largest digital credit issuer in India. C = Credit is a better strategy than C = Cashback. So, while all the competition is focussing on the user paying via UPI/debit card/savings account balances, we are focussed on the high-quality credit worthy user."