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MoneyOnMobile revenues decline down as it tweaks business model

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How is demonetization affecting wallets that use cash for remittances? MoneyOnMobile CEO Harold Montgomery said the the demonetization of Rs 500 and Rs 1000 notes would create an initial rush into digital payment systems but pointed out it would create hardships for their agents.  “Unfortunately, the other side is it’s made it harder for our agents to deposit their own operating cash. At the same time, it provides an opportunity for them to help consumers transfer money into bank accounts and digital payment means and avoid long lines at banks”…”Now, the longer-term affect could more consumers willing to put money into digital wallets and performing digital transactions themselves as they understand now that cash is a difficult medium to transact,” Montgomery added.

Note that there is still no clarity from the Reserve Bank of India (RBI) regarding cash loading with old denominations in digital wallets and wallets which offer money transfer service.

Retooling the business

Mobile wallet and money transfer service MoneyOnMobile reported revenues of $1.1 million for the quarter ended September 2016 (Q2 FY17), down 21.43% from the same quarter last year. Sequentially, revenues were down from $1.4 million. The management attributed the fall in the revenue to a decrease in processing volumes and the retooling of the business model.

The company processed payments worth $140 million in the quarter compared to $154 million in the quarter period last year, a decline of 9%. MoneyOnMobile had processed payment volumes of $224 in the preceding quarter.

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“Our main growth driver in processing volume in prior quarters has been domestic remittances, this product requires cash collateralization, and the Company has been operating in a capital constrained environment. However, we believe that our retooling of the business model will result in an operation that will allow us to replicate prior quarters’ growth, at higher margins, on a flat expense base, with lower cash collateral requirements,”  CFO Scott Arrey said in an analyst call.

MoneyOnMobile says that it has served 188 million mobile users till date and has 326,401 retail stores on its retail payment network. Gross profit stood at $585,377 down 13% from $675,441 in the same quarter last year. However, the company reported an operating loss of $2.3 million compared to the loss of $6.1 million in the same quarter last year.

MoneyOnMobile’s primary business is money transfer within India, and like other offline digital wallet players such as Oxigen, the money is also used for purchasing tickets and paying bills. Consumers deposit cash with one of its agents at a retail location, and it gets deposited into a wallet. Then an agent can use that money to pay bills or transfer the money to a designated user elsewhere, using only the mobile phone and SMS text messages.

Fund raising

Last quarter, MoneyOnMobile said that is looking to raise $10 million in a Series E round of funding and engaged US Capital Partners, a San Francisco based investment bank. However, no timeline about the fund raise was given. Montgomery said that it is looking at a valuation similar to Citrus Pay.

Download: Financials | Quarterly report | Transcript 

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