Evolution of a startup: Mobicred one year on

Just over a year ago, we told you about Mobicred, South Africa’s first online-only credit facility. The brainchild of Jason Sive, who is also the director of First Health Finance (FHF), the startup was aiming to attract the kind of people usually averse to buying online with their actual physical credit cards. As an added bonus, it would offer a centralised account that you can access across a number of merchants.

The technology behind the facility would also ensure that only the people least likely to default would be given credit, with merchants and customers paying fees similar to what they would be offered on mid-range credit products at a traditional bank.

It all sounded pretty neat, but how has Mobicred fared one year (and a bit of change) on?

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Life after Naspers

Well it’s still alive and kicking, which is an achievement in and of itself, but there have been stumbling blocks. When we profiled Mobicred in 2013, a large portion of the merchants it had managed to bring on board were with MIH-owned outfits like furniture outlet 5Rooms and online clothing store Style36 and baby goods retailer Kinderelo. If you’re a regular Ventureburn reader, you’ll recognise those names as being among the sites shut down by Naspers earlier this year.

Sive admits that the closure of the sites was punch in the stomach and that the company was forced to regroup and look at other ways to integrate Mobicred’s technology into ecommerce sites.

The first step on that front was building Mobicred’s functionality into the major payment gateways. On that front, it’s now integrated into Payfast and Mygate, two gateways especially favoured by the small- to medium-sized ecommerce outfits that Mobicred’s been targeting in its early growth phase.

The major force behind that integration is Geraldine Anderson, who has joined the team since we last checked in on Mobicred. Anderson, a co-founder of Retailcapital, and before that head of sales at RCS, has also been a major factor in getting the number of merchants signed up to Mobicred up to above 50, with an extra five signing on every week.

One of the bigger ones on-board when we last spoke to Mobicred last year was Digicape. It’s been joined by iStore, as well as host of smaller players. While the service is currently growing in increments, Anderson expects that to change within the next few months. “There’s not a site that isn’t interested,” she told us in an exclusive interview.

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Lessons learned

While it’s obviously helpful to have electronic players like Digicape and iStore on board, that’s not exactly the space the Mobicred team thought its product would thrive in. Initially, it was betting that it would do well on fashion sites and is actually a little surprised at how big the appetite has been to buy electronics on credit given the comparatively high costs involved.

Success in the tech and electronics space has also gave Mobicred the confidence to up the maximum amount of credit it offers to its customers to R20 000. It wouldn’t have been able to do that however if it wasn’t certain that its credit checks worked.

And according to Sive, they’ve been pretty robust so far. There were plenty of attempts at getting fraudulent credit at the beginning, but it died down pretty quickly and had all but vanished within four months of the startup launching.

It’s also a lot more people-friendly than it was before, thanks in part to a new application form designed to serve ordinary customers rather than professional finance types.

Despite those successes, Anderson does admit that the company has had to a fair amount of work selling merchants on the Mobicred offering.

“Some merchants don’t get it,” she told us, adding that she’d had to do a fair amount of educational marketing in the ecommerce space.

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Making gains

If Mobicred’s to be believed however, the rewards are pretty high for the sites that do “get it”. The startup reports that between 10 and 20% of a site’s customer’s use Mobicred once it’s an option and that around 35% of those customers make repeat purchases. That’s something which Sive and Anderson reckon is largely down to the fact that once someone’s on the system, they don’t have to repeatedly enter their credit card details onto the site.

That’s a pretty big validation, especially as more and more sites sign up to Mobicred and the company makes it easier for them to do so both through its partnerships with the payment gateways and the use of APIs. It could probably make a pretty good go of things on that front, with Sive and Anderson both suggesting that capturing a portion of the online market would be enough for the business to sustain itself.

Interestingly though, it may have unlocked a potential gold mine in a much more low-tech market. A number of physical retailers, Anderson told us, are keen to use the Mobicred offering in-store. That’s understandable, given that so many retailers have been burned by their own forays into the credit market over the past year or so.

Mobicred represents a much safer option and, if it can keep its credit checks as tight as they have been, then it could lay claim to the good parts of the business those retailers are so ready to give up.

Another thing worth bearing in mind is that the data Mobicred collects on its users could be immensely valuable to both ecommerce outlets and physical retailers, especially if it finds a way of handing over that information ethically.

Another possibility the Mobicred team is open to is providing credit to other businesses. The risk is greater, but not massively more so, especially if you limit the size of the business you’re dealing with.

“It’s very easy to move from consumers to small businesses,” Sive told Ventureburn.

For the moment, Mobicred’s path seems pretty set and, for now, it makes a lot of sense to stick to it.