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Something occurred to me this afternoon which I didn't really dig in to until now. Has anyone else found it odd that Mobile banking and Telco transactions have increased exponentially but the receipts from customers appears to be only growing very marginally?

I really like to look at the numbers and don't generally focus too much on the analysis provided by the company but I wanted to figure out an answer to my question above and that's when it hit me. This line from the two previous business updates relating to the mobile banking division.

"Mobile banking revenues are steadily increasing however this growth is not completely reflected in Receipts from Customers due to the payment terms with banks and other mobile banking customers extended from 30 days to 90 days during the extended MCO period"

I believe Stig may have actually mentioned this and I honestly let it slip by.

I went back and found an old 4C statement (prior to BNPL) which showed receipts from customers which could only really be made up of mobile banking. I couldn't find the number of transactions during the period but I believe this was around the time the company stated on their website that they processed 17m transactions a month totalling 51m a quarter give or take. I divided the receipts by this number ($1,164,000 / 51,000,000) which works out to be 2c per transaction.

So let's say it's 2c per transaction based on those numbers. We know the number of transactions for the September quarter was 85,385,966. Multiplied by the cost per transaction (85,385,966 x 2c) equals $1,707,719.

The company also calculated normalized net outflow deducting payments to merchants which worked out to be $2,193,000

If you take the transactions for the quarter multiplied by the transaction cost of 2c per transaction $1,707,719 and add the Net transaction revenue of $492,124 you get $2,199,843. This would be the actual revenue generated in the quarter.

Subtract the normalized outflow $2,193,000 from the actual revenue for the quarter $2,199,843 you get $6,843 which means the company is break even in terms of normalized outflow and revenue. It also looks like the company will get close to $4m annually for the of 42% of ISDB. With the mobile banking, BNPL and ISDB the company would be profitable. I guess the deceptive thing about BNPL is that the company fronts the money for a purchase and then it is repaid over the duration of the term by the customer. Meaning during that time the company is without that money until it is paid back by the customer (excluding events of bad debts of course). During the growth stage and more customers make more transactions, it's always going to look like a loss until such time as the mobile banking and BNPL repayments outweigh payments to merchants (pretty impossible). In a third party funded scenario this could look quite different of course because the money comes from a loan book and the margin would decrease. This would also make sense why expansion has not been rushed because costs would accelerate quite rapidly.

IOU is in a particularly good and interesting position in that it does generate revenue from other divisions rather than solely relying on BNPL revenue. The final result ends up much more balanced while at this stage it's going to be treading the line for revenue vs costs.