The bank funding is a very positive sign for NNW. In the NNW mobile market place, cash purchases are settled by customers T=0 or T+3 days which means NNW can pay Merchants easily. With point redemption , the Merchants have to be paid and NNW accrue a receivable from predominantly Bank and Insurance company business partners….so…the capacity of NNW to fund the Receivable’s directly impact there capacity to monetise the growth opportunity of point redemption in the Chinese market. The key factors to consider here are;
i) The financing of “ point redemption” in a mobile market place in China is a new financing activity. Given the risk counterparties are banks and Insurance companies, you can assume that other funders will see this as a growth financing segment in China
ii) Given NNW’s alignment with the major banks in China, they are currently the only mobile market place that can utilise loyalty points accrued by customers from credit card usage offline line in an online mobile marketplace
iii) Given that the activity of “point redemption” in the China market is in an early growth phase, the addressable market opportunity is still very significant. ie $US tens of billions.
iv) From a customer facing perspective, the utilisation of points in China for the average Chinese consumer is a key driver for purchase decisions as they are perceived as products and services paid for by their Bank or Insurance company. In other words..100% discount..
v) When you analyse the utilisation of Receivable funding in this context for NNW, each additional dollar of funding translates to an increased capacity for point redemption of 30 times. This is because the receivable funding drawdown is only required to fund the monthly incremental GTV growth.
From my view, in simple terms,…if they can turn the tap on for “point redemption” receivable funding in the China market, this will translate to very significant growth in there GTV…therefore their revenue and then….Profitability..))
The current size of this business today and its profitability are irrelevant.. they have basically established a B2B mobile commerce business model in the China market that can now be scaled. The most important thing they can do now is scale and dominate the B2B model they have established.
I don’t really think the Australian market gets this business….for that matter any other major tech success from China..
DYOR
