“The reality is, the smartphones that I see, are not good enough. They’re not good enough if I want to pay a shopkeeper, or if I want to pay a cab driver, or your maid, or if they want to pay each other. The apps that are there today do not serve the purpose. They are too big. They are made for people like us. In India, there is a digital divide, which is congruent with the class divide. That is what separates India from Bharat. Out of the 250 million people who have smartphones today, there are only 60 million who use Internet regularly. I’ve met people whom I wanted to pay using the Mobikwik app, and seen them struggle to download the Mobikwik app. For someone who hasn’t used mobile payments, to start understanding the sophisticated world of e-wallets, and that made us think: what do we do now?”, Bipin Preet Singh, co-founder of Mobikwik pointed out while launching Mobikwik Lite, the company’s low bandwidth app, which allows payment transfer between users.
Mobikwik lite has currently been launched only for smartphones – the company “promised” to roll out a feature phone version – and is available in English and Hindi. A version in all Indian languages is expected by the end of this week. The application is less than 1mb in size, takes very little time to download (the company said 28 seconds on a 2G connection; it took me less time on my 3G connection). It is not on the Google Play store (we checked), and is available for download via a missed call system: 8097180971, which directs users to http://www.bit.ly/cashlessIndia. The company says that they’ll push auto-updates to the application outside of the Play Store. Singh said, about users they surveyed, that “There is no play store, no app store, no email ID required. Most people who are using android phones do not actually use the play store. They use the browser, and can share apps with each other. They don’t use email ID.”
Mobikwik is planning a non-Internet rollout for merchants as well: “as a customer, I can have card, a wallet, a smartphone, but the person who is accepting the payment may not have Internet running all the time. (Right now) We are creating a solution for intermittent Internet, and the second step, is that all the things that you saw in this app can be done through SMS. All it needs is an SMS gateway, using which you can transfer money to a bank account. All the major functionalities will be available without Internet as well.”
Demonetization came at a time when Mobikwik had just started onboarding unorganized retail players, Upasana Taku, co-founder of Mobikwik said at the launch of their low bandwidth app Mobikwik lite. The company had so far focused on large retailers like Domino’s Pizza, Big Basket, flight ticketing, hotels, movies, so far. “Thanks to demonetization, it is happening much faster. Retailers are accepting mobile payments more quickly. We have a long list, of 250,000 merchants who are accepting Mobikwik.”
Taku said that the company has seen a 75 times increase in transaction volume post demonetization. “This is a phase where we want to get people on to the digital and electronic system. We will make money from this. Right now, the focus is to enable hundreds of millions of charging merchants.”
The Mobikwik Lite – Zaakpay relationship
What’s interesting about this application is that it isn’t just about Mobikwik: the company says it has integrated other wallets: Payzapp (HDFC), Oxigen and Pockets (ICICI) are integrated, as is UPI (the unified payments interface), which allows transfer of money to any bank. Upasana Taku, co-founder at Mobikwik, said that “we’ve got our own payment gateway which is accepting payments, and we are tying up with all the wallets.” UPI is live, and the option is available when sending money to a user. When a merchant received money from someone, they typically get a link, which has all the options for withdrawal. That is where, according to Taku, they’ll get an option for the other wallets.
The “our own payment gateway” that Taku referred to at today’s press conference is Zaakpay, which works with UPI. Remember that Zaakpay and Mobikwik were once separate companies.
But how does it work strategically for Mobikwik? The core business, and where the battle currently lies, is the wallets business: the customer is yours, because she stores money in your wallet, as opposed to a payment gateway, business-to-business operation. What strategic benefit does Mobikwik get from the interoperability between wallets that Zaakpay brings, if the customer can use any wallet, and not just Mobikwik?
Singh’s answer: “I think it works for us as a payments company, because there are a large number of merchants in this country right now who do not have a mechanism, who accept money from anyone who is coming in, if he doesn’t have an e-wallet, or this guy doesn’t have a sticker, or a proper onboarding process. In this case, the merchant can simply download an application and become a recipient of e-money. Ultimately, that user can actually start using the e-wallet also. It serves our strategy of making the merchant a user of e-wallets, and identifying with the Mobikwik brand.”
Merchant or P2P?
The tricky part here is to identify if a transaction is to a merchant or a P2P transaction. On the UPI, banks are allowed to identify a virtual address which belongs to a merchant and charge them an inter-bank exchange fee (a fee which is similar to the MDR on cards). While P2P payments on the UPI are free.
Says Taku: “(Today), nobody is stopping any autowallah from downloading the Mobikwik app from the Play Store. There is no way to know if a transaction is P2P or P2Merchant. There are shopkeepers who are signing up as users by themselves, and they’re getting tagged as P2P, but that (deposits) deposits are limited to 20,000. No app can stop a small business from using it as a user”.
Fair point. Mobikwik is looking at two means of ensuring that merchants sign up as merchants: firstly, the Rs 20,000 per month limit on deposits push merchants to upgrade their account with Know-Your-Customer norms. Secondly, Mobikwik has a field force has an agent application “where we take down the KYC information, and sign them up as merchants. Mobikwik’s field force, since demonetization, has grown from 1000 to 10,000.
As of now, Mobikwik is not charging small merchants anything. When will you start charging merchants? “Till 31st March 2017, it is free. Depending on the (market) penetration, we’ll decide.” However, later on, the company did mention that charges will be applicable to large format retail and ecommerce merchants (BigBazaar, Myntra, IRCTC etc) even now. 0% charges are only for small shopkeepers and retailers.
In an echo of questions on business models asked of Paytm CEO Vijay Shekhar Sharma at the launch of the ill fated App-PoS (which led to an expansive monologue on how and why Internet businesses don’t look at profitability in their initial years) several journalists raised questions about Mobikwik’s business model: What’s your monthly burn rate? When will you be profitable? You run on cashbacks, how do you make money? The answers were more specific here:
- Business model: Customer doesn’t pay, the business pays. The entire payments industry is built on a model where a small amount of money gets exchanged between businesses for a transaction from a customer.
- On cashbacks: “We’ve done a brilliant job of making everyone believe that we give a lot of cashbacks. We look at our business deeply, and there are segments of our business are profitable on unit economics after cashback.
- On profitability: “There are other segments which are evolving. We will be losing money here. This is an inroad into building a new base of merchants, which will eventually become profitable. The formula for the other business is not going to be same”…”In our ecommerce, more than 80% of our business is profitable, even after giving cashbacks. On recharges we are almost break even. It’s only in other segments like offline we are creating a business…”Lastly, “We expect to make profits by mid 2018.”
Mobikwik and Paytm: no love lost
“Are you open to partnering with Paytm, given their reach?
“We are open to partnering with Paytm.”
“Will Paytm partner with you?”
“You should ask them that.”
Mobikwik calls itself the largest “independent” mobile payments network, and this positioning strategy finds parallel in the ad-tech space, where Inmobi called itself the largest independent mobile ad network, to differentiate itself from larger ad networks like Google’s Adsense, and the listed Millennial Media. So, who is Mobikwik being compared with? Paytm, I would guess, which is backed by Chinese behemoth Alibaba, and recently launched and withdrew its “App PoS” feature, which was to allow merchants to accept payments. To say that there’s no love lost between the companies would be a gross understatement, and that undercurrent ran through the press conference:
- “We are owned and managed by Indians, owned and managed by Indians.” (Paytm is backed by Alibaba, a Chinese commerce behemoth. To be fair, Mobikwik has non Indian investors as well).
- “Before we launch any major product, we have done all the testing, security checks before launch. If we’re going to create a product that is created by 100 million Indians, that everything is buttoned up before we go to the market.” (Security concerns were raised about Paytm’s App PoS)
- “Entering details is on your own phone, not on the merchants phone, which is very very risky.” (Paytm’s App PoS did this)
- “We don’t want to engage in a strategy of just pasting stickers. We are doing a proper KYC process, which the RBI has given us a guideline for.”
- “On Android we can set up a pin for every transaction. We have a setup for disabling an app if the phone gets lost. We have taken security very seriously.”
Lastly, someone asked: “How will you beat Paytm, in terms of strategy?”
“We have a different product. As far as competition: as of now, our competition is not with any other company, it is with cash. Like the PM said, that we have to make our country cashless. There are so many people who aren’t able to use the Internet. Or they don’t know how to use the Internet. With this product, we’ll beat that.”