Here in the United States, Bitcoin is the rage. It’s all over the news, everyone is talking about it, and fortunes are being made in ICOs and other digital currency derivatives. It’s likely a bubble, but it’s definitely the most exciting thing going on.
Contrast this with India, a nation with four times as many citizens as the US, but a very underdeveloped banking and digital network in place. Forget about the internet, over 600 million people in India don’t have bank accounts! For these people, Bitcoin isn’t the rage. Instead, cash is king.
It’s tough to imagine that time before credit and debit cards; before even checking accounts. A time when all transactions took place at the physical location, with cash being the preferred payment methodology. This would seem to be the dark ages to a US investor, but, to the 600 million people in India without bank accounts, it’s their everyday life. For this pool of people twice the size of the United States, there are simply no viable alternatives to cash.
Many companies are looking to help bridge this divide, seeking to bring electronic services to India. However, the typical company looking to break into the market of digital transactions requires two things that are generally lacking; Bank accounts for the customers to back up the transactions, and dollar volume per transaction at a level high enough to justify the fees associated with electronic transactions.
One company, MoneyonMobile (MOMT), is taking a different approach to the market. They have developed an incredibly low cost payment system that doesn’t rely on customers having bank accounts. Instead, it relies on cell phones; if you have a phone, you can be on their network. And, while half of India doesn’t have a bank account, just about everyone has a phone.
MoneyonMobile is the only company that has a platform capable of bringing digital services to these 600 million people in India. And, with their recent financing, they are capitalized to take continue the astronomical growth they demonstrated last year. With several major milestones coming, 2018 looks like it could be a great year for MOMT.
In this article, we will discuss MoneyonMobile’s platform, the opportunity in front of them, the management team in place, and recent financial performance.
The MoneyonMobile platform
Here’s how payments for the unbanked work today. They pay for every most services, like cellular minutes, plane tickets, digital TV, etc., in advance. This is done by taking cash, often a lot of it, around town and distributing it to the companies that provide these services. This system is obviously suboptimal. It requires a lot of time running around, often on a frequent basis, while carrying a lot of cash. It’s a crazy way to operate in this digital age. Yet, for half of India, this is their reality.
MoneyonMobile allows these unbanked people to start making electronic payments, even without access to a bank account. Here’s how it works…
Consumers who want to pay a bill can go to any vendor on the MoneyonMobile network. They give the vendor cash, he then pays their bills. There is a small fee, that MoneyonMobile splits with the vendor, but, for the consumer, all he needs is a cellphone that is tracked to his account. He pays the bill and gets a text message, before walking out of the shop, informing him that the transaction is complete.
It’s a simple process and the key to it working is the cost structure. Have you ever seen a sign in a store that says something like, “$10 minimum on credit card transactions”? This is due to the expense of processing payments that involve banks and card companies. Contrast this with MoneyonMobile who acts as simply a conduit between the payee and the customer, which enables them to process the same transaction at a tiny fraction of the cost. This would be great in America, much less in India where the average transaction is much, much smaller.
Thus, the MoneyonMobile system enables card-less people to pay electronically for any transaction; it is like a virtual debit card and a web-based payment platform for someone who has neither a bank card nor internet access. It is bringing digital transactions to the unbanked.
It is also connecting hundreds of thousands of stores and kiosks into the world of online payments. MoneyonMobile’s system is currently installed at over 350,000 locations in India. It has served over 200,000,000 unique consumers. This means it is already by far the largest mobile payment platform in the country. And, it’s only just begun.
The Initial Opportunity…cash in, cash out
A country the size of India represents enormous opportunity. MoneyonMobile has, through its network of locations, positioned itself to dominate the last mile for delivery of financial services. What this means is that over 600 million people who don’t have bank accounts, and have been running around paying for things in cash, now, for the first time, have a digital alternative.
“The real competitor for us in India is cash, and consumer preference for handling transactions in cash. Our product helps bring digital transactions closer to the end consumer.” ~ Will Dawson, COO
The current business of MoneyonMobile, paying bills for consumers, is great. MoneyonMobile works with over 7 million each month and that number continues to grow. There are 600 million people who could benefit from this, and 200 million already have on at least one transaction. As the number of retailers accepting payments through MoneyonMobile increases, their consumer engagement rate should increase, driving new users and increased frequency of usage.
However, handling payments of bills is simply the tip of the iceberg…the first course that brings the consumer in the door. Going forward, MoneyonMobile has a whole suite of products to roll out. Each of these products benefits consumers, companies and, by bringing half of their population into the 21st century, the whole of India.
The second product for MoneyonMobile is already here on a limited basis. Called the MOM ATM, they have enabled stores to act as ATMs for customers, giving cash out to consumers. This service only works with customers who have bank accounts, but that’s a large population of over 500 million and effectively almost doubles their potential customers.
Why is acting as an ATM a big deal? Well, in a country where half the people don’t have bank accounts, you might imagine just how few and far between the banks’ physical locations are located. For those who have bank accounts, the branches are often very inconvenient to access. For these people, having an ATM option closer to home is very useful.
Many Americans take cash back when shopping, right? Imagine being in a city where there isn’t a bank near your house. The cash back option sounds great. It’s not only a convenience for the consumer, however, it’s also a win for the store as they are typically only taking cash in. Now, they can get an extra fee for distributing back cash and there’s less need to take accumulated cash to the bank (or keep it on hand, which is never a good idea).
India has 200,000 ATMS. That’s it for the whole country. Compare this with 425,000 in the US, a country with one-fourth the population. The penetration of ATMs in India is far too low to properly service their population. Meanwhile, MoneyonMobile has 350,000 locations that are potential MOM ATMs. This is a big opportunity for the Company.
To date, they have converted over 3,000 vendors into MOM ATMs. How have these locations fared? According to Will Dawson, “Net revenue generated for the Company from enabled retailers grew on average of 172% when comparing to the month prior to taking on a MOM ATM to the first full month of having the MOM ATM.”
Having been cash constrained, the MOM ATM rollout hasn’t gone as quickly as possible. Now, with their recent financing, things are going to accelerate. MoneyonMobile is actively converting retailers over to the MOM ATM model on a rapid pace. With the huge revenue gains achieved at each locations, it’s obvious that people want this product and it is filling a need in the market. The MOM ATM is the first new product for MoneyonMobile, and it’s already proving itself to be a success.
The concept of comparing what life is like here in the US with India is interesting in that, it’s likely that, from a technology standpoint, they are simply behind us and will continue to follow our lead in many ways. For instance, MoneyonMobile is bringing digital payments to the masses, something that was done here years ago.. This is taking India a giant step forward from a cash economy in a very short time.
What about ecommerce? At my house, Amazon Prime is a staple of existence, especially at the holidays. However, try shopping online without a credit card…you can’t.
In India, the 600 million unbanked consumers are limited to what is available near them. It is impossible for them to go online and shop for items as they don’t have the credit to do so. MoneyonMobile has a solution to this called MOM CART.
“Through an agreement with a third part company called ShopClues, consumers who visit one of our enabled retailers will now be assisted by the retailer to order online, pay for their goods in cash, and have them delivered to their home or to the address of the retailer.” ~ Will Dawson
The ecommerce market in India is relatively small right now, but this is going to change. Ecommerce business is expected to triple in size over the next three years, from $38 billion in 2017 to $119 billion in 2020. The MOM CART platform ensures that anyone in India can shop online, and pay for those goods in cash. Once again, MOMT is offering a solution to the last mile problem.
Without this platform, around 600 million people would not have access to e-commerce for a long time to come. With MoneyonMobile, everyone can start accessing e-commerce. Amazon must be salivating.
Other Products Here Now or Launching Soon…
As I mentioned earlier, the MoneyonMobile platform’s key to success is the lowered cost of payments. By reducing fees to such levels that small transactions can be profitable on the system, it opens up a bunch of new opportunities. MicroLoans and Two-Wheeler Insurance are two other products that are available today on the MoneyonMobile platform.
Both these products rely on the ability of MoneyonMobile to reduce the time and cost of payments by consumers to the vendors. In doing so, businesses that were not profitable before, suddenly can become little cash cows.
But, perhaps the biggest product that could be the biggest revenue driver for MoneyonMobile is the remittance business. This is where money is sent, typically between family members, from one location to another. Without bank accounts, how do you get money to your spouse or parents when they live in another city?
Remittances are a big deal for a lot of poor countries and India is no exception. The world bank estimates that India is the largest recipient of international remittances, with over $60 billion a year coming into the country.
With retailers having locations all over the country armed with MoneyonMobile, they are a natural fit for being the distribution arm for a third party remitting payments into India. The RBI (Reserve Bank of India) recently made changes that allow firms like MoneyonMobile to be active in the remittance industry. Looking at the backgrounds of the management at the firm, it’s hard not to imagine them trying to play in that space.
Speaking of Management…
If it’s been said once, it’s been said a million times; when looking at micro-cap companies, the management is the key. It’s as true today as it has ever been, and even more so when looking at companies working in foreign markets like India. Without experience, not only in your industry, but operating in-country, it’s real easy to get fleeced.
The management team at MoneyonMobile is seasoned in the payments industry. CEO Harold Montgomery has over 25 years of experience and is a widely-known industry authority, writing a monthly column for Transaction World Magazine.
The rest of the team is equally impressive in their experience. The CFO was CFO of the Commercial Bank Division at Bank of America. Their Managing Director, Ranjeet Oak, has spent 20 years in industry. And, most impressively, COO Will Dawson was the COO of a Mastercard JV that created mobile money ecosystems in Asia, the Middle East, Africa, and Latin America.
Adding to the experience of this team is a board that includes Jim McKelvey, a co-founder of Square, one of the fastest growing companies in the payment industry. McKelvey’s involvement has been invaluable to MoneyonMobile in their early operations and adds significant credibility to the Company. All in all, for a Company of this small size, it’s a high-quality team in place with the kind of experience you’d like to see.
We have discussed the products of MoneyonMobile and the team in place to deliver on bringing those products and services to market. The network has been built out to over 350,000 retail locations and over 200 million unique users have executed transactions with MoneyonMobile.
With large numbers like that, it’s easy to see that the potential is immense for the Company. Revenue, however, starts small when you’re dealing with micropayments in a 3rd world country. It takes time to build traction and that’s really the exciting part of MoneyonMobile…after years of building out a network and developing products, they are now starting to see real traction in terms of revenues and, with gross margins in excess of 50%, cash flow.
MoneyonMobile reports their revenues on a monthly basis. Here’s the revenue history for 2017, from June through the end of November.
Author’s note: in late 2016, the Indian government announced the demonetization of all 500 and 1,000 Indian Rupee banknotes, which had a dramatic, but temporary, impact on MoneyonMobile’s business. Thus, starting looking at revenues from June onwards eliminates the months of disruption and provides a better analysis of current business. Also, due to holidays, October is a very big month, which led to its large gains and, consequently,a small sequential downtick in November.
As the table clearly shows, MoneyonMobile’s revenues are growing dramatically. The average month over month sequential growth since June 2017 is 15%. And, all indications support December being another record month.
This growth is translating directly into more cash flow for the Company and is bringing them closer to EBITDA breakeven, which they hope to achieve sometime in the first half of next year.
It’s tough to continue growing at this pace without a strong balance sheet. To that end, the recent financing helps a lot. Now, with the installation of high margin MOM ATMs picking up, there’s no reason not to believe that a high rate of growth can’t continue through 2018…it’s very foreseeable that MoneyonMobile could exit 2018 with a revenue run rate in excess of $30M, which puts the Company’s valuation at well under 2X the potential year end run rate.
The valuation and opportunity here are reinforced by the actions of management as the CEO, CFO and a board member all purchased shares in the open market in the last few weeks.
MoneyonMobile represents an exciting opportunity to participate in the transition of a country of over 1 billion people as it moves from a cash economy to the digital world. With a unique platform that allows them to process transactions at a fraction of competitors’ costs, MoneyonMobile is positioned to lead this charge.
The Company already has the largest mobile payment platform in the country, with over 350,000 venders and having served 200,000,000 people. Now, with new products rolling out, they are at an inflection point, with revenue growing rapidly and cash flow breakeven projected in several months.
The management team has built platforms in 3rd world countries already and, collectively, has decades of experience in mobile payments. They are also buying shares personally in the open market. Meanwhile, the Company has just shored up their balance sheet, and is targeting a Nasdaq listing sometime in 2018.
With a target customer base of over 600 million people, no real competitors other than cash, and a platform that is the cheapest in the industry, MoneyonMobile’s plan of banking on the unbanked of India has all the makings of a huge success.
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