MobiKwik Aims IPO Boost with Lending and Financial Planning: Betting Big on Credit Cards, UPI, and Loans

MobiKwik, which is preparing for its IPO, is focusing on lending and financial planning to improve its profits. Co-founder and CEO Bipin Preet Singh shared in an interview that MobiKwik is building on three main areas: payments, lending, and savings and investments.

Payments as a Base, Lending for Profit

Payments have been MobiKwik’s foundation for attracting customers in India. However, Singh explained that the payments business itself doesn’t generate much profit. To grow margins, MobiKwik is cross-selling other financial products, with lending being a key focus. Over the last two years, the company has also started offering savings and investment services.

Singh mentioned that many people need access to credit, so MobiKwik launched its first secured credit card in partnership with SBM Bank India. The credit card requires a minimum fixed deposit of ₹5,000 and is designed to help self-employed individuals and small business owners access credit, even if they have no credit score or a weak one. As customers use the card, their transactions are reported to credit bureaus, which can help improve their credit scores over time.

Expanding Credit Offerings

MobiKwik allows users to make UPI (Unified Payments Interface) transactions using the credit card, earning rewards that aren’t available with regular UPI payments. Since the card is backed by a fixed deposit, there is no credit risk, which has prompted MobiKwik to explore similar partnerships with other banks.

MobiKwik’s payments business gives the company valuable data on customer behaviour, which helps them offer loans and other high-margin products. Singh said the company’s experience with payments helps them understand users better, allowing them to offer more personalised financial solutions.

Looking to the Future with UPI Credit Lines

The company is also exploring the idea of credit lines through UPI, which could work with platforms like ONDC (Open Network for Digital Commerce) or the newly announced Unified Lending Interface (ULI). Once these frameworks are standardised, MobiKwik plans to partner with them to offer more credit options.

Strong Financial Growth

According to MobiKwik’s IPO filings, the company generated ₹381 crore in revenue from operations during the six months ending in September 2023. Of this, ₹137 crore came from payments and ₹244 crore from financial services, including loans worth ₹412 crore.

The lending business has seen the fastest growth, contributing 64% of MobiKwik’s revenue. The company offers wealth and insurance products and had ₹1,332 crore in assets under management by September 2023. MobiKwik reported its first profitable year in FY24, with earnings of ₹14.1 crore, compared to a loss of ₹83.8 crore the previous year.

Challenges Ahead

While experts agree that diversifying into lending and financial planning is a smart move, some have doubts about how successful it will be. Jyoti Prakash Gadia, managing director at Resurgent India, said platforms offering just payment services face cost challenges and competition. Expanding into credit and financial products could help MobiKwik attract more customers and increase revenue.

However, Ram Rastogi, digital payments strategist and chairman of FACE (Fintech Association for Consumer Empowerment), raised concerns about the sustainability of these lending models. He noted that many customers may prefer to approach traditional banks like SBI for secured loans, rather than using third-party platforms.

Attracting Customers with Simple Financial Products

MobiKwik’s new financial planning segment focuses on engaging users and keeping them on the platform. Singh explained that many of MobiKwik’s users are in the ₹30,000-1.5 lakh income range, living in smaller cities, and want to save but aren’t interested in the stock market. The company is introducing simpler products that offer returns of around 10-13% with lower volatility, such as digital gold, mutual funds, and fixed deposits (FDs) through partnerships with banks.

Data-Driven Financial Solutions

MobiKwik recently launched MobiKwik Lens, an account aggregator tool that helps users track their income, expenses, and bank balances. The company analyses this data to offer personalised financial solutions, including tax-filing assistance and tailored investment products.

MobiKwik faces competition from other platforms like CRED, IndMoney, Fi, and Jupiter, which also offer payment, lending, and investment services. These companies are moving beyond basic payments to offer more holistic financial planning, as payments alone haven’t been highly profitable.

MobiKwik entered the lending space with its Buy Now Pay Later (BNPL) product called Zip, launched in 2023. Since then, it has expanded to offer personal loans and small merchant loans.

Preparing for IPO

MobiKwik is awaiting approval for its IPO, after initially filing to go public in 2021. The company refiled its draft prospectus earlier this year and is looking forward to moving ahead with its ₹700-crore IPO. Singh expressed hope for quick approval, while co-founder Upasana Taku explained that the IPO delay was due to increased regulatory scrutiny after the Reserve Bank of India asked Paytm Payments Bank to halt operations due to compliance issues.

MobiKwik plans to use ₹250 crore from the IPO proceeds to grow its financial services business between FY25 and FY27.