Exactly mate - I made the post about EML and IOU's prepaid inventory business yesterday - link below - however at the time I was not 100% sure about the application of it. After today's video presentation by IOU's CEO i am certain we are on the right track here.
What I see IOU is doing is very shrewd business wise.Basically we have a 3+1 business division as we can see from the presso below - Mobile Banking Services + Digital Payments (Prepaid Inventory & BNPL) + Digital Services
Mobile Bank Services - This business has low execution risks and high margins and is part of IOU's legacy core expertise - however it suffers from cyclical dips in revenue when IOU does not get new contracts/projects from banks to build them new apps and software then we see revenue in this division affected. Historically this division generates circa $5mil to $10mil revenue annually
Digital Services - This is more of an enigma at this stage but I think we will see more of this division once BNPL and customer spending data starts flowing in - data mining can be better monetised.
Digital Payments - Here we have the Prepaid Inventory digital payment processing business - this part of the business is highly dependent on available cashflow and capital funding - but this business is extremely very low risk and and execution is not as hard as BNPL. IOU previously were restricted with the available cash to allocate to prepaid inventories. In fact IOU didn't raise the $10mil until mid-November. So once they got the cash - in December last year IOU could re-establish its prepaid inventory sales distribution channels. Another $55mil in mid-Feb now would allow IOU unrestricted expansion in processing prepaid inventory - which I believe now would just be limited to the speed of expansion of IOU's Prepaid sales distribution channels. We are now in Msia, Indo and Phillipines according to March 16th update. Remember, with just $1mil allocation to 1 country market this would generate $36mil quarterly prepaid inventory sales revenue. Margin are low at circa 3% per month but once we allocate greater funds to this gross profit will start to pile up proportionately.
Digital Payments - BNPL sits as a subset to IOU's overall digital payment division. This takes more resources to execute and risks would be defaults but can be mitigated with IOU's approach IMO. I am sure everyone is well versed in the BNPL business. Suffice to say this will only add further to IOU's footprint and boost revenue even more.
Hope we can appreciate where IOU's revenue is headed with this run down - and from the above we can see IOU is taking a very risk adverse approach to its business and in IOU's CEO video presentation today he stressed that the company is laser focused on profitability and returns for shareholders. With that type of mindset I can see IOU developing into a business similar to EML Payments which is a highly profitable payments processing and services business.
Another thing with IOU going big into the digital payment business (Prepayments & BNPL) would help IOU's revenue grow exponentially whilst taking away the reliance on the higly cyclical nature of mobile banking services revenue which in prior years made up the bulk of IOU's revenue.
(20min delay)