“Our business model is sustainable only with a customer base of 20 million to 25 million. We expect to breakeven in three years”, Abhishek Sinha, CEO of Mobile Payments company Eko India Financial Solutions tells Mint. Now 20-25 million is a fairly large customer base, so are mobile payment companies waiting for a miracle?
While unspecified estimates quoted by Mint say that there will be 50-100 million mobile banking customers over the next two years, to expect 1/5th of the expected mobile user base to transact using the mobile phone would be far too optimistic. Also, even if that 50-100 million user base is going to be divided among MChek, Paymate, Obopay, Eko, CSam, Jigrahak, and maybe even Billdesk, it’s unlikely that any will have 20-25 million subscriber base, hence be sustainable.
In two years, Obopay is targeting 5-10 million customers, while MChek looking at “upto” 2 million. Going by Sinha’s reasoning, sustainability is a long way away. Eko is looking to raise $10 million in funding, with a target of 5 million customers in 2 years, and revenue of Rs. 50 lakh.
Another thing to bear in mind is that one may talk about revenues of Rs. 50 lakh, but like in the case of the Online Travel business, these are essentially pass-through revenues, and the service providers will get a small fraction of this. Banks are going to be an integral part of this system because mobile operators don’t want pass-through revenues added to their books, since it will result in an increase the license fee they pay to the government.
Do also take a look at some systemic issues pointed out by Ravi Shankar, EVP and Country Head-Cash Management & Direct Banking for Yes Bank at the IAMAI MVAS conference last month.
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8 Comments until now.
If you cut the operator out of the loop, mobile payments could start working as soon as 2 million users per service. Of course there will be consolidation in the number of providers, but that is later.
I think its also about the number of transactions and not only the number of user on the mobile payment. I believe they are hoping to get greater number of transactions.
Zen: it’s a mix of both number of subscribers and transactions per subscriber.
Lord Haw Haw: you can’t really cut the operators out of this, right?
I wonder what PE’s are thinking right now with all the money invested in mobile content.
On one side you have the operators putting on the squeeze and on the other you have the handset manufacturer (nokia ovi) so first you got 30% share from the operator now you will share say 50% of that with the HS guys as well. and then cost of tech and content….
How will this ever work? time to either join an operator or a handset co.
If u take the GPRS/EDGE route. You can cut the operator out of it. You just need to be smart about it. You need a bank. A large bank with a lot of clout. Kick-ass billing (no cheating and fraud towards end users like the telcos do in this country) and you can screw the operator.
Bye Bye operator and handset maker. They are commodity service/goods providers. Nothing more. Imagine the railways saying they will take 70% of whatever u transport over the tracks. or ABB asking for 30% of goods transported with their locomotives.
That the Indian Mobile VAS industry has not banded together to try and screw the operators, is something quite asinine. It also at some level indicates that TRAI is hand-in-glove with the operators (have a look at the sms rates in this country), or atleast the telcos have managed to game the system and push their agenda. It also shows the relative immaturity of the players. Obviously no one went to B-school (or even if he did, he didn’t understand too much of strategy).
A demand side cartel/monopoly (telcos) can only be broken by another cartel/monopoly (VAS providers) on the supply side or MRTPC or by legislative action.
e.g. consolidation on mining (Rio Tinto, BHP Billiton) led to the eventual consolidation of the steel industry (Arcelor-Mittal, Tata-Corus) etc. Standard Oil was broken up, AT&T was broken up. Maybe our telcos need to be broken up.
I can go on and on about this…
There’s also talk of competition…but where is it? These are circle-wise monopoly-like situations. for example, can anyone operate in Delhi without a tie-up with Airtel?
Abhishek of Eko just shot himself in the foot..after putting it in his mouth…Ouuch !
GK
Just came across this discussion. I would like to make some clarifications. Eko is not clubbed along with Obopay, mChek, PayMate, ngPay. These players and similar others are looking at the banked customer base and adding value by giving efficient, secure and user friendly mobile interface for various banking and commerce needs.
Eko is in the financial inclusion space wherein the model is entirely different. Here we see a potential to bank 400 million people in the next 5-7 yrs.
We are doing a pilot on Branchless Banking using Mobile Phones and Agent Model. We see that the need for domestic remittance will drive the adoption of service. Eko believes that it can facilitate this through a bank-led Business Correspondent model and offer many more services to the customers based on aggregation.
As our model is a bank-led model, we first give a bank account to the customer. Kindly have a look at the following video; http://www.youtube.com/watch?v=YzfJsnaa0To
In the video, you will see basic user interface for people who may be just about number literate. Unlike the sophisticated interfaces offered by other players.
I hope this justifies the difference in the game, the customer segment and hence the size of the market for Eko.