Balancing Act: How MobiKwik Transformed Its Business Model for Sustainable Growth in Ultra Competetive Fintech Space
December 7, 2023
In 2018, MobiKwik emerged as a rising star in the Indian fintech arena, with a vision to extend its offerings to an astounding 250 million users. The company aimed to offer a diverse array of financial and credit products that cater to the ever-evolving needs of its customers.
Within this wide product space, MobiKwik excelled in facilitating seamless bill payments and digital transactions with both online and offline merchants, amounting to an impressive 400 million USD. Furthermore, the company ventured into Buy Now, Pay Later (BNPL) options, peer-to-peer transfers, lending solutions, and wealth management services. By encompassing such a wide range of offerings, MobiKwik aims to become a one-stop solution for all financial needs.
The rise of UPI and the need to navigate decreasing profit margins had driven MobiKwik to adopt a strategic approach. The company recognized the importance of adaptability and innovation to maintain its foothold in the competitive landscape dominated by industry giants such as Paytm, Paypal, Razorpay, and other payment gateways.
However, amidst this rapid expansion and diversification, MobiKwik faced a significant challenge – the management of its cashback strategy. Historically, cashback had been a powerful tool for customer acquisition and retention. Yet, as the company grew, this strategy began showing signs of strain. Each subsidiary within MobiKwik operated autonomously, devising its own cashback policies. This decentralization led to inconsistencies across different units, creating confusion among customers and hindering the effectiveness of marketing campaigns.
This fragmented approach to cashback also impacted the company's financial health. Despite being a popular feature, the cashback was centrally consumed - users earned cashback in one business unit but could use it across the board. This practice, while user-friendly, did not effectively encourage loyalty to specific services or products. More critically, it contributed to a significant cash outflow without a proportional increase in user retention or engagement.
Understanding the Cashback Landscape
Cashback’s internal users were the Marketing team, which sought the ability to manage versatile cashback campaigns, and the Business Vertical Tech Teams, which required streamlined processes for cashback allocation to maintain focus on their main operations. Externally, MobiKwik catered to a segmented customer base including Students, Early Career, and Mid-Career Professionals, each with varying needs from savings on transactions to transactional security.
Metrics Evolution for Strategic Growth
North Star - Our North Star metric, the 30-day Repeat Customer Rate, stood at 15%, emphasizing the goal to build a loyal customer base beyond the initial transaction.
The Counter metric, a crucial Secondary Metric, monitored the 30-day Cost Per Transaction, which was at 2.2%. This breakdown included Money Loading Costs at 1.25% and Cashback Costs at a significant 0.95%, underlining the necessity to balance customer incentives with profitability. The introduction of a Counter metric was necessary to maintain a sustainable business model. It ensured that while customer activation and retention were prioritized, the financial health of the company was not compromised.
The Opportunity Hypothesis: Implement targeted incentives and improve transactional efficiencies by Q4 2019 to increase the 30-day repeat customer rate to 20% while reducing cashback costs to 0.6%.
The Introduction of SuperCash
As the Product Owner, I led the launch of SuperCash at MobiKwik, transitioning from the traditional full cashback model to a more sustainable rewards system. Unlike the previous approach where users could utilize their entire cashback amount for transactions, SuperCash allowed them to apply only a portion of their rewards to each purchase. For example, if a user accumulated 100 Rs in SuperCash, they were limited to using a set percentage, like 10% of the transaction amount. This strategic innovation, implemented under my guidance, aimed to balance customer incentives with the financial prudence of the company, encouraging ongoing engagement while maintaining fiscal responsibility.
Technical Design of the SuperCash Ecosystem
Debit Microservice: This service acts as the financial hub of MobiKwik, deducting the appropriate user funds from various sources such as wallet top-ups, referral money, and other use case-specific buckets. Its role is to manage the outflow of funds seamlessly during transactions, interfacing with the SuperCash Engine for each operation.
SuperCash Microservice: At the core of the rewards system is the SuperCash microservice, which calculates both the SuperCash to be consumed and the SuperCash to be awarded for each transaction. It operates in tandem with the Debit module, analyzing transactions and adjusting the SuperCash application as per the ongoing offers and user eligibility.
User Transaction History Microservice: Initiated through Kafka messaging, this service is responsible for recording each transaction. It compiles a comprehensive history of money deductions and credits, which is then made available to users through the app, offering transparency and a detailed transaction narrative.
Reporting Module: This module is crucial for regulatory oversight, interfacing with the Kafka system to report transactions for compliance purposes and to maintain the integrity of funds in escrow.
The below infrastructure was designed to support MobiKwik's goals of providing a seamless user experience and a robust, compliant financial environment.
Key Results
Cost Savings: The 30-day average Cashback cost decreased by 0.56%, resulting in substantial savings of $2 million in 2019
North Star:
30-day repeat customer rate declined to 13%
The decline in the 30-day repeat customer rate can be attributed to user backlash against the SuperCash system. Users found the concept of SuperCash to be unclear and preferred the straightforwardness of the traditional cashback model. The feedback indicated a preference for simplicity over the complexity of the new rewards system, which likely impacted their decision to engage less frequently with the platform.
Key steps were taken in Q2 2019 to improve NPS of SuperCash
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