| First Global Data Interview Part 1 |
One of the companies we are delighted about is Global Data (OTC: FGBDF) (TSX,V: FGD). We introduced you to the company about two months ago when it was trading at $.12/share. Today it sits around $.35/share. I recently had the pleasure of interviewing Andre Itwaru, Chairman, President and CEO.
I believe the company is just starting its growth ascension and we are pleased to bring you the first part of the interview – next week we will share the second part.
We are also expecting to provide you with a SWOT analysis on the company ranging from the positives to challenges.
Today the company released their record revenue growth for the month of December. Please click here: news release.
*Andre’s AT&T background, led him to a dotcom payment processing company in the gaming space. He learned valuable lessons about regulatory and compliance; he saw the future in mobile phone tech as it relates to the payment space and transmission of currency, and he spent the last 9 years to perfect the technology platform to get to the point of becoming an overnight success*
Question 1:
Kal: Can you start by telling our readers and listeners about yourself and your background that lead you to First Global Data?
Andre: Kal, my background is telecom and payments. I have a depth of knowledge and experience in the telecom sector. I left my senior executive position at AT&T to become the founder of a company that became one of the world’s top 5 payment processors. We eventually sold that business to an interested party, and founded First Global.
First Global started from a trip to South America. Myself and Nayeem Alli, our CFO who are founders of First Global, took a trip to Guyana in South America where we had some ties to the government at the time, and started to explore the possibilities of what we could do to assist. We stumbled on an opportunity where in a country of 600 000 people at the time, there were approximately 300 million dollars flowing in from remittances. We saw long line ups, and thought ‘Wow! We need to put some technology around all of this.’ We had a serious vision for technology way back in 2007, and always had a vision for mobile because of our background with AT&T.
Question 2:
Kal: Can you explain step by step, how the payment process works?
Andre: With mobile technologies, and mobile payment technologies, it is broken down into a series of three challenges. Number one is: how do you get money or value into the mobile wallet? Number two is: once it’s in there, what do you do with it? And, number three is: how do you get the money back out if you so choose to do? The strategy we take at First Global is that we have two different methods of getting money in: Electronic and Non-Electronic methods.
Electronically, if the customer has a bank account or a credit card, we link with the banking system so we can electronically debit the money from the customers’ bank accounts. We are essentially taking the money out electronically, and loading it into the wallet. With a credit card, we are one of the first companies that will be attaching an M VISA, which is a new product in India, to the mobile wallet so people can actually load from their credit card.
Non-electronically focuses on cash loading. For example, in India right now, we have a variety of cash loading locations for people that are unbanked, and don’t have bank accounts where they can actually load money into the wallet. A good example in Canada would be the initiative that we are moving forward with the post offices in which we are going to be using them as loading points to get the money into the wallet. Canada Post has 55 hundred loading points across Canada. We are also working with thousands of loading points in the United States to get the cash loading in.
The next challenge to address is, when there is money in there, what do you do? The value added services that we have are really services that are in demand in the market place. This may vary from market place to market place. Using India as an example, there is a large appetite for the mobile wallet due to recent events of demonetization. The mobile wallet is of value to customers for a number of reasons: paying a bill; buying mobile minutes, which in the developing nations are considered a lifeline to some extent. We are allowing people to send money to each other back and forth. People are able to use the mobile wallet to pay for tolls. In addition, we have an entire retail application that we recently just announced. We are starting to move into the retail and goods side allowing mobile payment services to be used for buying health products and purchasing food. Physical retail outlets across India and other parts of the world will accept our mobile payment services as a payment instrument.
The final challenge is cash redemption. If the customer wants to cash out, or take money from their mobile wallet, they can credit the funds back to their bank accounts or cash out at the many locations across India.
Kal: Just for further clarification Andre:
Let’s say my marketing assistant Saarika goes to India, and wants to deposit money into her mobile phone – what are the steps?
Andre: Because of Indian law, the VPayQwik service launched in India with Vijaya Bank is limited to Indian residents only. If she is an Indian resident she can load funds directly from her bank account, credit card, or debit card in India. If she does not have a bank account, she would go to an outlet or a bank that is a partner of First Global and Vijaya Bank and load funds. She could pay for goods and services available on her mobile phone, such as bill payments, or visit a retail store which is a member of VPayQwik, and shop and spend. The merchant being a member of VPayQwik is a very similar model to Visa, wherein merchants that accept Visa cards must be members of the Visa network.
Payqwik is our mobile payments brand and mobile platform. The variation of the brand differs based on the partnership strategy. VPayQwik is the brand in India, which is a joint brand that we have launched together with our partner Vijaya Bank. VPayQwik is a creation of First Global in terms of the platform, technology and services it has to offer. Everything that is on that platform, we brought to the bank. In return, the partnership they bring to us is of tremendous value in terms of brand recognition; bringing us clients, as many as 14 million consumers that Vijaya Bank already has and are actively marketing to. Every time we add a new service, it benefits both Vijaya bank and First Global. There is an active marketing effort in place with the objective of having consumers adopt, download and use VPayQwik as a payment service.
We started off first with electronic payments including topping up mobile phones, paying bills etc. We are now moving into the retail sector. This is an interesting model because the retail outlet, for example KFC, does not have to be a customer of the bank. They could be banking with another financial institution. All they have to do is be a VPayQwik member, meaning they are a merchant that accepts VPayQwik as a service. When a customer goes in and makes a purchase at Kentucky Fried Chicken for $10, we deduct the money from the customer’s mobile wallet, and credit the money into the merchant’s account to the financial institution they deal with.
Kal: What is the split?
Andre: For each service we offer, for example: mobile top up or bill payment, the revenue model differs. In the example of a mobile top up, we will make approimately 6% of the face value of the mobile top up. So for $100 of value, we make $6 on those transactions. We then split that revenue with Vijaya bank 50-50. This underlines our philosophy in life and business, which is to bring value to our partners. For a transaction at a retail store, if we charge the retailer 1.5%, then the proceeds of that will be split 50-50 between Vijaya bank and First Global. If it is a $300 purchase, it is $4.50 that we are sharing between the two of us. Of course, in India these funds are Rupees.
We have used the example of Vijaya Bank; however, the model is applicable in Ethiopia, Indonesia and other marketplaces as we expand across the world. In some cases, our license partner may want to use our PayQwik brand, in others we may agree to use an alternate brand. In the Caribbean, and parts of Latin America our brand will be called FasPay. Regardless of what the brand name is, it is PayQwik inside. All of the inner workings, technology and functionality are PayQwik. Our strategy is not to spend a tremendous amount of money creating a global brand, but rather to partner with organizations around the world that have a better brand than we do, partner with them, and penetrate their existing base of customers.
Question 3:
Kal: You “cleaned up” First Global Data and its debt. Can you explain how you accomplished this?
Andre: We cleaned up First Global’s data debt in two ways. One, we encouraged some of our debt holders to convert debt which we recently made an announcement on. And secondly, we paid down significantly on a lot of the debt that was outstanding. In addition to the debt clean-up we were able to drive profitability in the 3rd quarter of 2016 as compared to the 3rd quarter of 2015 which represents a signifiacnt turnaround and swing of approximately 4 million dollars in the positive direction.
Question 4:
Kal: We’ve heard you mention the value of a FINTECH user versus other users in the social media space. Can you elaborate?
Andre: There are two ways we came up with this formula, and it just so happens that both of them collide arriving at the same conclusion. Going over the first model which is the value of a FINTECH user, it is based on a recurring transactional model. A Facebook user generates an average of $16 of revenue annually [Source quarterly report]. A FINTECH user generates $280 revenue annually. If you look at some of the competitors and current operators that are out there, and if you look at the current experience that we are seeing now based on our modeling, we are expecting a $280 revenue per user annually [ARPU = Average Revenue Per User]. Therefore, a FINTECH User is worth 17.5 X more than a Facebook user solely based on per transaction revenue. Facebook is currently valued at $292 billion dollars; they have 1.7 billion users; each Facebook user is valued at $170 dollars. A FINTECH user therefore is $170 multiplied by 17.5 times, which equals to $2,975 dollars per year. That’s what a FINTECH user is worth based on this model. Assuming you have 1 million users, you arrive at a value of approximately 2.9 billion dollars. Because we have a revenue model at splitting that half and half with our partners, we arrive at a valuation of approximately 1.4 billion on an annual basis for First Global as we penetrate 1 million consumers.
We have another model that says ok: We have a number of different buttons on the mobile phone. If a customer taps on those buttons on the mobile phone, [as each button drives us a specific amount of revenue], a certain number of times per month, assuming at 1 mill active consumers, our numbers roll out to being the same: About a 1.4 billion dollar valuation. So, when we look at it in two different ways, the valuation of First Global as we penetrate the 1 million active users, we will arrive at 1.4 billion dollars in value. This is a blended number between Indian users, Ethiopian, Canadian, American etc. and all those going to be using our platform across the board. 1 million users in both case scenarios creates a UNICORN.
Question 5:
Kal: Given there are so many FINTECH companies created today, how do you see First Global Data separating from the FINTECH herd? What is your differentiating model?
Andre: Number one is that our business philosophy is very different. It is one of cooperation, leveraging partnerships and the value that they bring. We are not really obsessed with having our brand be known like an Apple. We are really driven to run a business, and be profitable. In light of that, we partner with organizations, share revenue, and leverage their existing client bases. There are not a lot of companies out there using this approach. Rather, many companies are out there in the FINTECH sector spending hundreds of millions of dollars acquiring customers and still not being profitable. We find this deeply disturbing in terms of our business approach. We have shareholder money, we have to give them value, drive value into the company and be profitable.
The second differentiator is that we have a combination of assets that is really unparalleled. We have a mobile technology platform that is now being wooed by some of the largest organizations of the planet. We have been able to demonstrate clearly that we have something very different meaning it adds value to the consumer. Consumers WANT the service. We have demonstrated that we are growing 22% week over week. Consumers are adapting to the technology and adopting it.
The other element of that is the money service license we have internationally allows us to move money internationally in full compliance with the law. There are not a lot of other organizations that are out there that have such a portfolio of assets that allow them to have such an international reach – to move moneys internationally in full compliance with the law, to also do it domestically, and to provide a penetration into all these different verticals, both virtual [mobile top up] and also in the retail space.
We believe to have a powerful combination as we have approached things from a different perspective.
One of our other key differentiators is that we are a licensed money transmitter, In India for example, soon one will be able to send money to a loved one back home in India who has downloaded VPayQwik. We will be able to originate transactions in different parts of the world and terminate them onto a mobile phone in India allowing customers to receive and spend money as it arrives. Currently, within different states in India, we are able to perform peer to peer money transfer domestically if both parties have downloaded VPayQwik. Indian law limits us from sending money outbound from India. First Global has always been in compliance with the law, and our newest endeavor is that we will soon be able to originate transactions from different parts of the world and send them into India into the mobile phone. Our current revenue model we have built doesn’t even include those forecasts. We are focused on driving revenue on an international level, and essentially blending two worlds of payments. One which is the remittance side and the other being the payments side, and we are converging them effectively onto our platform right now.
Life is about experiences. I come from a developing nation where people line up to pay bills, therefore have an appreciation for things that can add value to my life and make it easier. We started this mobile app by seeing the value we bring as a company to provide a technology that enables people to help themselves and help their family. If we can allow someone to help one of their family members overseas to pay a bill electronically, wouldn’t that be a wonderful thing? That is really our foundational philosophy and the basis around which we started this whole movement.
We look forward to providing you with the second part of the interview next week.
Disclosure: We own shares in First Global Data and have been offered stock options. We are biased. Do your own due diligence.
Happy Investing!
Dr. Kal KoTECHa
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