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PayU eyes MobiKwik’s payment gateway

MobiKwik is fighting a broader battle against deep-pocketed rivals such as Paytm, PhonePe and GPay.

Updated: Oct 22, 2019, 08.52 AM IST
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Two of the biggest sources of transactions for MobiKwik’s payments gateway business are ride hailing firm Uber and its own mobile wallet business One MobiKwik, said another person aware of the development.
BENGALURU| MUMBAI: Naspers-owned digital payments major PayU has held discussions to acquire MobiKwik’s payment gateway business, valuing it around $45-50 million and signalling consolidation efforts in the hyper competitive sector, two people in the know of the matter told ET.

Other strategic and financial investors are also in talks to buy the fintech firm’s payment business, the persons said.

MobiKwik is fighting a broader battle against deep-pocketed rivals such as Paytm, Flipkart-owned PhonePe and Google Pay in a highly competitive digital payments sector. Its payment gateway subsidiary, Zaakpay, has been looking for fresh funding for a fairly long time, having held discussions with potential investors, people in the know said.

mobi

A lack of investor interest may have been the reason why MobiKwik decided to put its payment business on the block, said one of the sources.

As a part of the payment gateway business, MobiKwik processes card transactions for merchants and earns a commission per transaction. The company also runs a mobile wallet service, sells micro insurance products, and offers mutual fund investments and digital credit.

PayU, owned by South African internet conglomerate Naspers, competes with the likes of Billdesk, CCAvenue and newage player Razorpay.

Uber account

If the transaction goes through, PayU will snag the Uber account, as the ride-hailing platform uses MobiKwik to process all card-based transactions.

“For PayU, the deal makes sense since it is consolidating the online merchant payments space and will give them a good revenue channel with Uber coming under them,” said another source.

“We deny we are in discussions for an outright purchase of MobiKwik's payment gateway business,” a PayU spokesperson said, responding to ET’s queries.

When contacted, Bipin Preet Singh, cofounder and chief executive officer, MobiKwik, termed the news factually incorrect, adding “MobiKwik and its payment gateway Zaakpay are in fact fundraising”.

Two of the biggest sources of transactions for MobiKwik’s payments gateway business are ride hailing firm Uber and its own mobile wallet business One MobiKwik, said another person aware of the development.

These businesses account for 90% of the transactions on the MobiKwik payment gateway, the person said.

“This deal will further reinstate the leadership position that PayU has in the payment gateway space and give them access to card transactions happening on Uber, which will be a big win,” said one the sources mentioned earlier.

Singh and wife Upasana Taku founded MobiKwik ten years ago.

Even as marquee investors like Sequoia Capital, CISCO Investments and American Express backed the company initially, it has not managed to raise equity funding in quite some time. Earlier this year, the company raised venture debt from Trifecta Capital.

Recently, the company claimed it had become profitable, and told technology news site Tech-Crunch that it had cut cash burn as it consolidated the financial services business. “In the mobile wallet space, MobiKwik lost market share to bigger rival Paytm. Then, with the emergence of Unified Payments Interface players like Google Pay and PhonePe, its share further declined, thereby causing a dent to its consumer payments business,” a top executive at a digital payments company said on the condition of anonymity. “Since then, it has been a challenge for MobiKwik to raise equity funding.”

The company recorded losses of Rs 204 crore for financial year ending March 31, 2018 on revenues of Rs 85.6 crore. For PayU, acquiring MobiKwik’s payments business will come at a time when it has been growing inorganically, buying into companies in the domestic fintech space.

In 2016, it acquired Citrus Pay, a Mumbai-based digital payments startup, and earlier this year bought Wibmo, which offers payments security to online merchant transactions.

ET reported on August 21 that PayU was in talks to scoop up lending startup PaySense.

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