Giving part of the cash spent on transactions back to customers had so far been the most preferred approach for online retailers and mobile wallet companies in India to lure users. But that burnt a big hole in the companies’ pockets and forced them to look for a more sustainable business model.
No wonder, then, that One Mobikwik Systems Pvt. Ltd, India’s second-largest mobile wallet company, has stopped offering cashback to users and is focusing on a loyalty programme called Supercash that it launched in March.
Gurgaon-based MobiKwik’s strategic move comes at a time when market leader Paytm is repositioning itself as a payments bank and looking to acquire Snapdeal-owned mobile wallet FreeCharge. Effectively, therefore, MobiKwik will be the only standalone wallet company to operate in India.
Supercash allows users to save Rs 10-20 on every transaction on the MobiKwik platform. For every subsequent transaction, the company will first deduct 10% of the Supercash amount to make a purchase.
Sample this: If a user has Rs 100 on his MobiKwik wallet and Rs 100 as SuperCash, and the purchase is worth Rs 100, the company will pay Rs 10 from the user’s Supercash account and Rs 90 from the wallet. But if the transaction is, say, worth Rs 10, then it would debit the entire amount from Supercash and nothing from the wallet.
“People will be transacting more to consume Supercash and sometimes they may even think of saving their Supercash points for bigger transactions. Thus, they will try to earn more Supercash by doing more transactions. It brings more stickiness on our platform. Going by the numbers, we can say that loyalty will always trump cashback,” Soni added.
MobiKwik claims to have already started reaping the benefits of the loyalty initiative. According to a company spokesperson, since the launch of Supercash, the company has witnessed a 17% month-on-month increase in active users, 28% growth in transactions per user and a 32% improvement in customer retention.
In May, Supercash helped the company save a considerable amount on 20 million-plus transactions. The platform has seen over 10 million users availing Supercash in their transactions for over four times a month. “We have reduced our burn rate by 24-25%. It is huge,” he said.
While the company has about 1.5 million merchants on its platform, the loyalty programme primarily works with big and organised merchants.
“Funding happens in two ways. Whenever a merchant comes on our platform, we invest to drive sales and usage for him. When that merchant matures, both of us invest in Supercash depending on what the deal cycle is. Merchants are also seeing value because they know if a user is coming through Mobikwik, they do not need to give a cashback. Moreover, the loyalty points are tangible and can be used across merchants,” said Soni.
The move has also drawn interest from a host of players in the ecommerce space, including MakeMyTrip, Zomato, Swiggy, Amul, BookMyshow, BigBasket, BigBazaar and Myntra.
“Our stakeholders have appreciated our efforts in building sustainability. We are in the game for the long run, and we have to build financial services on top of it. We cannot burn ourselves and say at the end of the year let’s raise our next round,” he added.
MobiKwik, which has nearly 55 million users on its platform, is, however, looking to raise its next round of funding at a valuation of $1 billion. It has so far raised $80 million from Sequoia Capital, Tree Line Asia, Cisco Investments, American Express and MediaTek.
Financial services: M&A play?
Soni said MobiKwik’s sustained effort to transform the company into a financial services platform is on track, but refused to divulge further details. “We are going to enter this in a very structured way. We are already in talks with a number of players, including banks. All I can say at this point in time is that it not very far off. There are some regulatory stuffs involved. But we are in a state of readiness.”
The Sequoia-backed company is also eyeing to acquire startups in the lending space. “As we gear up to launch financial services on our platform, we have a lot of companies on our radar. The internet startup ecosystem is growing and we are watching players in the lending, micro-lending, SME lending, and B2C lending space very closely. We might look at cash and equity deals.”
Going the Paytm way?
Soni believes the payments banks model has both advantages and disadvantages. “Now that Paytm is becoming a bank, we will have an advantage in a way because we can work with any bank as they will not see us as competition.”
Soni believes banks consider wallets as a complimentary service to have access to consumers and a destination where a consumer comes and transacts, and they can offer loans or other insurance and financial services products on the platform. “But, I think Paytm will find the going tough now as it will have to directly compete with banks,” he added.
However, Paytm’s superior retail presence may be a slight setback for MobiKwik, feels Soni. “I think users will feel closer to them because of the physical presence.”
Despite that MobiKwik is confident of growing at a fast clip. “My user is the smartphone. Our whole value proposition is on the small screen. Our vision was to be an independent B2C wallet company in India and that still stands strong. One key performance indicator that will remain a priority for the company is the number of transacting users,” Soni said.