International segment
The strategy of the International segment is to pursue growth opportunities for Group and third-party products and services across its global footprint, by systematically rolling out points of presence, in a replication of the proven South African business model. International operations comprise Blue Label Mexico and Oxigen Services India.
Blue Label Mexico (BLM)
BLM continues to deliver its growth strategy of building market share by expanding its POS network and distributing incremental products and services through its technology platform
Currently, some 81 000 terminals are deployed. Initiatives to drive additional product and service transactions through the Red Qiubo terminal base include utilising data analytics.
The range of products and services includes “PINless” airtime recharge, SIM card distribution and bill payments. Financial services, such as cash collections and card acceptance and acquiring, are offered with CitiBanamex as the acquirer and Visa as a strategic partner. Digital food vouchers are delivered on behalf of the major food distributors, namely Edenred, Si Vale, Sodexo and Inbursa.
Blue Label’s share of losses continue to narrow and amounted to R37 million (2016: R63 million loss).
The government’s demonetisation of high denomination notes in November 2016, intended to transition India’s cash economy in favour of digitisation, resulted in the dynamics of the fintech sector changing significantly.
Initially the floodgates for the creation of e-wallets were opened. Subsequently, the introduction of new legislation and technologies has required fintech businesses to adapt and modify their strategies.
Since inception, Oxigen focused on expanding its offline network of retail outlets, currently reaching approximately 200 000 merchants. In support of government’s call to industry for deploying up to 20 million terminals over the next few years, Oxigen has embarked on rolling out its own micro-ATM POS to access “the last mile”.
Each micro-ATM is equipped with a biometric scanner allowing customers to transact by using their Aadhaar ID number as authentication. Micro-ATMs are connected to the National Payments Corporation of India (NPCI), which facilitates cash deposit and withdrawal transactions. Oxigen’s platform already enables it to perform the functions of a bank by delivering the convenience of comprehensive payment solutions through connectivity to NPCI’s Bill Payments and Settlement System (Bharat) and IMPS (Immediate Payments Service), an instant 24/7 interbank electronic funds transfer service.
Oxigen’s main offline products include mobile airtime top-ups, data card recharge, satellite TV recharge, bill payments, correspondence banking and domestic remittances.
Whilst Oxigen entered the online wallet market some years ago, the effects of demonetisation continue to evolutionise and disrupt the e-wallet industry. For example, government’s Unified Payments Interface (UPI) app allows merchants and consumers to pay and receive money in an instant transfer between any two bank accounts, a facility that is not afforded to other apps.
As a result, Oxigen is now focused on its core business of rolling out its footprint in the offline environment, whilst its e-wallet strategy follows a B2B2C approach of acquiring subscribers through white labelling its platform. Consequently, the online business and its high cost base is being scaled back significantly.
Blue Label’s holding in Oxigen is held as a venture capital investment. The fair value gain of R160 million and the Group’s share of losses to 30 November 2016 of R125 million equated to a net contribution of R35 million to core headline earnings.