Fintech Mobikwik Enters B2B Merchant Lending to Serve SMEs and Expand Revenue Streams

Fintech Mobikwik Enters B2B Merchant Lending to Serve SMEs and Expand Revenue Streams
Fintech unicorn Mobikwik is gearing up to enter the business-to-business (B2B) merchant lending sector, with plans to offer small and mid-sized loans to its existing merchants. This move aims to not only expand its revenue streams but also meet the working capital needs of small and medium enterprises (SMEs) primarily located in Tier II and Tier III cities. “In addition to QR-based payments and payment soundboxes for merchants, we will also be looking at offering merchant loans. We are experimenting with a few merchant lending products right now,” said Upasana Taku, Co-founder, and Chief Operating Officer (COO) of Mobikwik.
While Mobikwik has not yet launched this new lending product, it has a track record of providing credit products to its customers. The company has already extended credit facilities to its customers, including Buy Now, Pay Later (BNPL) options for shopping and EMI loans ranging from Rs 50,000 to Rs 1.5 lakh with repayment periods of 12-18 months. “We have been scaling lending in a very healthy manner. For Mobikwik, the lending business disbursals in FY21 were around Rs 300 crore, and in FY22 it was Rs 5,100 crore. Going ahead, it will be large with newer lending products,” Taku said.
Mobikwik’s lending business has shown growth in recent years. In the financial year 2021 (FY21), the company disbursed loans totaling around Rs 300 crore, which grew significantly to Rs 5,100 crore in FY22. With the rapidly expanding digital lending market in India, Mobikwik aims to capitalize on this trend and introduce newer lending products to its portfolio.
India’s fintech landscape has been witnessing a surge in digital lending initiatives, driven by the demand for credit in an underserved market. Other prominent players like PhonePe and Paytm have also ventured into merchant lending to provide credit access to micro, small, and medium enterprises (MSMEs). “Mobikwik products, especially in the credit space, are mainly focused on middle India. Most of the users are using Rs 50,000 to Rs 60,000 per month and do not have access to loans at bigger banks,” Taku said.
In the lending landscape, the Reserve Bank of India (RBI) has made regulatory adjustments, allowing regulated entities (REs) to enter into First Loss Default Guarantees (FLDG) agreements with unregulated entities, subject to a 5 percent cap on the loan portfolio value. MobiKwik has been collaborating with established banks and non-banking financial companies (NBFCs) to offer loans to its customers, with the loans being held by these partner institutions. “The loans are not on our balance sheet; they are with banks and NBFCs. This has been adding a lot of revenues to us and doing very well. Our customer repeat rate for all our credit products is around 80-90 percent,” Taku said.
As of now, Mobikwik claims to have turned profitable in the last quarter of FY23 and anticipates nearly doubling its revenue to over Rs 1,000 crore in the current fiscal year. The company’s revenue sources are divided equally between payments and lending, with the latter expected to contribute 60-65 percent as Mobikwik enters the merchant lending space.