Update: In a conversation with MediaNama, MobiKwik’s COO Mrinal Sinha said that the company is talking to the RBI to clear matters on the scheme. He also said that the communication on the offer wasn’t clear enough and that the company will be continuing the scheme as a loyalty programme. He added that MobiKwik has no intentions of building a deposit base.
“We have seen that users sometimes spend more than Rs 10,000 on the wallet, so we introduced this scheme so that they would not keep loading their wallet again and again and offer them some reward in the form of cashbacks,” Sinha added.
Regarding, the ‘core portion’ of the funds used to earn interest in a separate account, Sinha did say that this was a revenue stream for the company.
Separately, MobiKwik CEO Bipin Preet Singh sent a statement:
MobiKwik is the most rewarding loyalty platform for users. Loyalty points, incentives, cashbacks, etc. are among the benefits to MobiKwik users for going cashless. We launched the profit cashback offer as part of an overall package of incentives, to reward our existing users and encourage more users to load & therefore transact on MobiKwik. There were certain concerns on the language of the campaign that were flagged to us and we are working with the regulators in resolving these concerns so we can continue with the offer.
Earlier: Digital wallet MobiKwik has withdrawn its offer of ‘6% annual profit’ to customers who hold a wallet balance above Rs 5,000 after the Reserve Bank of India (RBI) said that the scheme was not allowed, reports Mint. Accordingly, all promotions regarding the scheme on the website and app have been removed.
MobikKwik launched the product on June 1st which was similar to interest earned on savings bank account and offered it as a monthly cashback to customers. The Mint report added the the RBI would not allow wallet companies “to mobilise funds/deposits by offering cash back in nature of interest etc.” At the launch, MobiKwik said that all wallets were allowed to earn interest on balances with escrow and it was passing it on to customers.
A MobiKwik spokesperson said that company cannot comment on the issue at this point. Calls made to MobiKwik co-founder Upasana Taku could not be connected. We have left MobiKwik and Taku an email and will update once we hear from them.
It seems that MobiKwik was using a loophole in the RBI’s guidelines which would allow them to transfer a ‘core portion’ of the funds in escrow accounts into a separate account on which interest is payable. From the RBI guidelines:
The entity can enter into an agreement with the bank where escrow account is maintained, to transfer “core portion” of the amount, in the escrow account to a separate account on which interest is payable, subject to the following:
1. The bank shall satisfy itself that the amount deposited represents the “core portion” after due verification of necessary documents.
2. The amount shall be linked to the escrow account, i.e. the amounts held in the interest bearing account shall be available to the bank, to meet payment requirements of the entity, in case of any shortfall in the escrow account.
3. This facility is permissible to persons who have been in business for at least ONE YEAR and whose accounts have been duly audited for the full accounting year.
4. NO LOAN is permissible against such deposits. Banks shall not issue any deposit receipts or mark any lien on the amount held in such form of deposits.
5. Core portion as calculated above will remain linked to the escrow account. The escrow balance and core portion maintained should be clearly disclosed in the Auditors certificates submitted to Reserve Bank of India on quarterly and annual basis.
The company said it wants to become a ‘digital bank.’ Last month, MobiKwik expanded its services by offering instant micro loans of Rs 500-2,500 to wallet users running short on balance while making a purchase, according to this PTI report. MobiKwik has partnered with consumer-lending marketplace, CashCare for the service.
Funding: Last month, MobiKwik raised $50 million in a series C round of funding led by Japan’s GMO Payment Gateway and Taiwan’s Mediatek. Existing investors such as Sequoia Capital and Treeline Asia also participated in the round. In April last year, MobiKwik raised~$25 million in Series B funding led by Tree Line Asia, existing investor Sequoia Capital along with Cisco Investments and American Express for investing in technology data analytics, brand building and growing its user and merchant base.
Financials: For the year 2014-15, MobiKwik’s parent One Mobikwik System, had reported revenues of Rs 13.97 crore and net loss of Rs 41.5 crore. Revenues grew from Rs 5.07 crore in the preceding quarter and losses expanded from Rs 6.39 crore. Expenses ballooned to Rs 55.13 crore in 2014-15 from Rs 9.91 crore in 2013-14.