'OneLoad will become a financial brand in its own right' an interview with Muhammad Yar Hiraj, CEO OneLoad

Muhammad Yar Hiraj is the CEO of OneLoad. OneLoad is owned and operated by EP Systems, a subsidiary of System’s Limited (PSX: SYS). Mr. Hiraj, who is also the founder of EP Systems, is a technology entrepreneur with experience in designing large-scale software systems for the financial services sector. Before joining OneLoad, he spent over a decade with Morgan Stanley's Technology investment and advisory businesses in New York, San Francisco and Tokyo. Below are edited excerpts from BR Research’s recent conversation with the OneLoad CEO:

BR Research: Starting off, what are the defining product features of the prepaid aggregation solution, OneLoad?

Muhammad Yar Hiraj: OneLoad is an app that makes money for small and micro-retailers. It enables retailers to effectively serve mass market, low-income consumers and satisfy their demand for a number of services.

Under digital products and payments, OneLoad offers mobile top-ups, internet packages, and media and entertainment services. We are connected to all telecom companies and have integrations with branchless banking players such Easypaisa, JazzCash, HBL Konnect and UBL Omni.

Under banking access, OneLoad enables money transfers, utility bill payments, deposits and withdrawals for digital wallets, wallet account opening and biometric verification, and government-to-person (G2P) payments – in partnership with banks.

BRR: In essence, you are an intermediary between telco’s / banks and retailers?

MYH: Yes, that is correct. There are companies that tried to do the same thing as we are doing, especially on the telecom side. But there were issues with their business models, as they were relying on being very capital-intensive at the onset. We have seen that if somebody starts with a high-end model or a sophisticated device model, there is a risk of them falling flat within a matter of months. When upfront costs go up, the business model can become unviable.

We, at OneLoad, lucked out as we tried to slowly integrate a simple technology over time. And we had the ability to be patient and collaborative. We also kept working on automating existing industry processes to become more cost-efficient and hopefully more long-term viable.

BRR: What is the revenue model? How does OneLoad make money? Is it profitable, or is it too early to be breaking even?

MYH: Just like our retailers, we also get commissions from corporate partners for each transaction done through the retailer app. Our core business is operationally breaking even. What this means is that whatever we are doing today with the current retailer base, we are breaking even on the fully-loaded costs.

While the business is breaking even, we will be more profitable once we launch and scale additional services, including financial services. The telecom top-up is, at best, a breakeven business, and even that is hard to achieve.

BRR: What’s in it for the telco’s?

MYH: Working through us allows the telecom companies to broaden their target market and lower their costs. Let me explain this point in a little detail.

Currently, about 85 percent of top-ups happen through retail channels. Previously, top-ups used to happen only through scratch cards, which was a process involving a whole lot of printing and logistics on the telco’s part. Now retailers are provided with specialized Sims to top-up a consumer’s airtime. But this has the effect of making the target market for telco’s narrow, as a retailer needs a specified Sim to top up. It becomes a problem for modern trade or larger retailers, who are different from the owner-operator retailer model of telecoms.

This is where OneLoad comes in. When you use the OneLoad channel, anyone in a shop can log in or log out. Any shop can use it, and we do verify all the retailers. This is how we extend the telco’s capability to reach out to retailers on a mass level. Besides, this helps consumers get an airtime recharge of any amount, no matter how little, unlike scratch cards where there are denomination limitations.

BRR: How does OneLoad make money for retailers?

MYH: For retailers, having OneLoad not only increases their income, it also increases customer footfall to sell other products in their shops. For consumers, they are able to avail access to digital services at their neighborhood convenience store or pharmacy, instead of being limited to a retailer served by a particular telecom company or bank.

For retailers, the alternatives to OneLoad are expensive and painful. OneLoad enables retailers to use an all-in-one app to procure products from all major providers of digital services and mass-market banking services. Dealing with individual vendors of numerous large companies requires much larger amount of upfront capital. OneLoad reduces upfront costs and working capital, takes away the hassle of using multiple devices and scratch cards, and the pain of being at the mercy of vendors of large companies.

BRR: If the alternatives to OneLoad are costly and burdensome, what is keeping the market from pulling towards you?

MYH: We currently have only about two percent market share in the mobile top-up business through our more than 30,000 active retailers. Our challenge is convincing a new category of retailers, those who are not providing telecom services today, to provide digital products and services. Due to the declining commission rates of the telecom industry, retailers sometimes feel they may not be making enough money from telecom services to start functioning as a telecom retailer. However, with the additional products we are integrating, OneLoad becomes a very viable proposition for them without getting into telecom sales. Hopefully, our new offerings will significantly increase our product traction.

BRR: What is the scale and scope of addressable market for these kinds of prepaid solutions in Pakistan?

MYH: About 20 million people visit retailers each day in Pakistan to make payments for prepaid services. That figure is broken down into segments like plain-vanilla top-up credit, data services and consumption of media and entertainment services. For these 20 million daily users, this short-term digital consumption is like getting a water bottle to quench their thirst. This is the user base that matters to us.

There are about 200,000 retailers that provide such services today. With OneLoad, the addressable market of retailers increases beyond the traditional telecom retailer. Our retailer base is in more than 135 cities in Pakistan. We expect to reach masses through our retailer footprint.

BRR: How much of that market is covered by OneLoad until now? What has been the growth trajectory like over the last few years?

MYH: The overall market is several hundred billion rupees each year. OneLoad currently has a small portion of it. We serve only about 8 million customers a month. This gives us tremendous opportunities for growth. Most of the current users want mobile top-ups. Since last year, Internet data packages and bundles have increased in demand significantly.

As for growth, last year, the economy was really tough for our business. Our margins were cut by telecom partners, who suffered declining average revenue per user (ARPU). Still, we pretty much doubled our digital product sales last year to about Rs10 billion.

This year, we should be growing faster. After all, we have more capital availability and an increasing service offering beyond the telecom sector.  There is also business-model refinement that is taking place; and we will also be doing OneLoad advertising and branding for the retail market.

BRR: Do you treat “cash” as a rival?

MYH: When mass-market retailers work with suppliers of products in Pakistan, they typically use cash for all transactions. Our main issue is convincing the retailers to use OneLoad and to have them pay us through the banking channel. However, the retailers prefer cash, since all their customers also use cash.

BRR: Tell us a little bit about OneLoad mobile app. How many active users are currently there on the app and what are the main customer transactions driving the app usage?

MYH: We have over 30,000 retailers using our app. The typical use-case for our retailer is to serve walk-in customers through the app and earn commissions. They do so by providing mobile top-ups, data packages, deposits in Easypaisa accounts, and more.

BRR: What was the thinking behind launching a mobile app instead of using the USSD channel? Are there any plans to improve the user experience (UX) of the mobile app?

MYH: Yes, the UX improvement is an ongoing exercise on our end. As for opting for the mobile app, the problem is that when you are aggregating a bunch of services, USSD makes it hard for retailers to remember codes for different services. Another problem is that USSD has not been interoperable across networks, something which the telecoms regulator needs to look into.

Our vision from day one, when we began designing the app, was to have an aggregation play. It was a bit of a gamble, because back then smartphones were more expensive, 3G wasn’t available, so we had to go for 2G optimization. But we soon realized that retailers were willing to go through those hurdles simply to be able to use our app.

BRR: How has your marketing strategy evolved in recent years?

MYH: We have never engaged in any formal marketing campaigns, simply because we initially focused on retailers by engaging them through our sales team. Going forward, we expect to conduct digital marketing campaigns. Primarily, it will be retailer driven. It will be engaging retailers through the app to push both digital and non-digital products through incentives that can drive engagement.

BRR: Recently, the SBP granted EP systems, which owns OneLoad, an in-principle approval to operate as an electronic money institution (EMI). How will the EMI license help OneLoad level up?

MYH: Currently, OneLoad is a commercial platform, not a financial platform. Right now, we are only bringing “digitization” to the mass-market retailer. The EMI license will allow us to provide full-service e-money accounts to our micro-retailers, who function like consumers, and also enable us to add additional consumers to our network.

The EMI license allows us to operate in the blue-collar mass-market and bring banking services to the masses. We have certain financial products in the pipeline, which we will announce in the due course of time. With EMI, OneLoad will become a financial brand in its own right.

BRR: What can you tell us more about the recent development where the World Bank’s International Finance Corporation (IFC) has acquired a 20 percent equity stake in EP systems?

MYH: The IFC’s investment is a great validation for our business model as well as the positive social impact OneLoad is driving in Pakistan. This is an opportunity for us to leverage the IFC Fintech group’s knowledge and experience from around the world and apply best practices in Pakistan.

This development is very significant. IFC has a dedicated Fintech team, which already has an investment in Bangladesh. This is an investment that is based on commercial imperatives. In fact, this is the first Fintech application that the IFC has invested in Pakistan. They have spent a lot of time and energy to get comfortable with the country, the sector, and the company. Besides, PKR stabilization and the recovering confidence of international community towards Pakistan have also helped.

BRR: In general, what are the main legal and regulatory challenges for a Fintech company operating in Pakistan? What can be done to encourage digital platforms to take root here?

MYH: The regulatory environment in the past was geared to facilitate large banks, their corporate customers and high-income consumers. The State Bank of Pakistan’s frameworks of branchless banking, and now the Electronic Money Institutions regulation, focus on low-income consumers, as evidenced by their monthly total throughput limits.

However, even with the new regulations, there is a very large missing-middle of four million informal-sector shops and their suppliers and distributors who remain outside of the digital world. There is an opportunity to digitize this missing middle for positive benefits to the economy.

BRR: Why do you think is it that the local telecoms sector and the financial sector have been unable to come together and become fully interoperable? What type of measures can discourage this “walled garden” approach?

MYH: The regulator stepping in can make a difference. And regulations in the past have been able to force collaboration between telecoms as well as between banks. I believe there are a number of initiatives being looked at by the regulators.

We have addressed this issue that you have pointed out through direct integrations with banks and telecoms. In this way, we are a neutral player that simply creates interoperability between different telecoms and banks and facilitates the distribution of their products and services in the mass market.

The banking regulator, in the last one year or so, has become proactive again. There is a culture change that we observe at the SBP, especially at the payments department. There seems to be some turbo-charging of the regulator, and that is very welcome.