With 10mil consumers, 505k microSMEs, Boost looks beyond market share for growth

• 70% of merchants start applying for micro-financing,  micro-insurance within a year
• Aims to bring technology to its customers instead of trying to change their behavior

Being a subsidiary of a listed company, ie Axiata Group Bhd, means that Boost Holdings Sdn Bhd, which runs four brands, Boost Life, Boost Biz, Boost Credit and Boost Connect, while operating like a startup, has its revenue and customer metrics made public.

[Ed: Para edited for accuracy.]

And the key take-away from the data shared during Axiata’s recent 1H2022 results is that building an e-wallet/fintech business takes time and requires scale as the low average gross transaction volumes from both the consumer and small and medium business segment, coupled with low single digit fee charged, make for low revenues.

To wit look, at the traction of Boost Group. Since unifying its financial services under one umbrella, ie its lending business and e-wallet business last year, overall growth was over 25% with a Gross Transaction Value (GTV) of US$1.11 billion (RM5 billion) in 2021. As at end June 2022, its consumer business, Boost Life hit 10.1 million users on the back of a 10.5% year on year growth while Boost Business saw its merchant touchpoints grow by 43.1% to hit 505,000.

Note that touchpoints means that a business could have five outlets and that means five touchpoints, assuming all the outlets are Boost customers.

Many businesses would love to have such an annual performance. Yet, the financial metrics for Boost’s 1H2022 performance paints a sobering picture of the long path to profitability. Revenue in 1H2022 stood at RM31 million versus RM28 million in the same period in 2021 with the 11.9% increase driven more by Boost Credit, the lending business that used to be called Aspirasi. Despite the revenue uptick it had a negative EBIT for 1H2022 of RM107 million and a negative PATAMI (or net loss) of RM101 million.

[RM1 = US$0.222]

Focusing more efforts in delivering value to business and consumer users

Still, the strong rise in the number of users since 2020, at both the consumer and business side, with Boost Life users nearly doubling to 10 million and merchant base quadrupling, with over 50% being micro SMEs, leads Boost Group’s CEO, Sheyantha Abeykoon (pic) to declare, “We believe we have gone beyond market penetration and are more  focused on usage.”

In other words, it is spending less on the costly exercise and imperfect science of user acquisition, and focusing more efforts in delivering value to its business and consumer users.

The signs are promising.  As of Q3 2021, 67% of Boost Life users have been using the ewallet for their day-to-day usage. Boost induces that people are carrying less cash and digital payments are becoming the current preferred method for many Malaysians.

Meanwhile GTV for 1H2022 stood at a strong RM2.9 billion or 26.8% increase over the same period in 2021. This was despite headwinds Boost has observed from micro-economic challenges and where some small businesses are struggling to restart their businesses. And then there is the strong competition from the likes of Grab and Touch ‘n Go in the Malaysian market.

Economic conditions aside, Boost has noticed consistent challenges that other research have pinpointed as well, which micro SMEs in Malaysia face when embarking on their digitalisation journeys. For instance:

• A misconception of the costs of digitalisation
• Low access and awareness to financing
• Lack of digital savviness especially amongst the older generation
• And, not knowing where to start with so many digital providers offering services 

Sheyantha says Boost rolled out a two-prong approach to tackle this. “The first is our constant advocacy in promoting digital payment adoption as a simple stepping stone to a access a wider range of digital financial services and business solutions.”

For instance, its data shows that 70% of Boost Merchants start applying for micro-financing and micro-insurance within the year of being onboarded. Sharing some data, Sheyantha notes that overall, comparing 2021 to 2020, total micro-insurance policies sold increased by over 160%.

• To date (as of end June), we have disbursed about RM1 billion worth of loans in Malaysia, with over 40% of our borrowers having never received credit from other financial service providers before.” Its non-performing loan ratio is below 4% in Malaysia.

The second approach Boost has taken is to work together with partners like MDEC to help mSMEs shift online at zero cost to build more sustainable and resilient businesses. Last year, Boost rolled out the Go-eCommerce Onboarding campaign that reached an uptake of 42%. According to Sheyantha, “this shows MSMEs’ greater willingness and awareness of the need to digitalise their businesses.”

Embeding its services into the existing micro SME transaction journey

At the same time, Boost has also learned to adopt its message. “We believe it’s important to bring the technology to our customers instead of trying to change their behavior.”

On a practical level, this means trying to embed its services into the existing transaction journey that the business already has. Sheyantha says Boost finds that this is a more effective way to get early adopters with Boost integrating its lending solutions via the application programming interface (API) into existing purchasing modules of the micro SMEs.

Sheyantha’s stepping stone analogy is well borne out by the strong growth that its AI-lending unit, Boost Credit, has enjoyed since 2020. “Before the pandemic, loans disbursed averaged at RM3.7 million per month and by May 2021, this  increased to RM30 million.  Currently, it has soared to between RM50 million - RM60 million per month on average as Malaysia transitioned to the endemic phase,” he says.

[Ed: Para edited for clarity.]

Helping it manage this surge in loans, while keeping NPLs below 4% means a heavy reliance on data and AI. But here, Sheyantha makes an interesting point. “Our view is that data and AI is not a competitive advantage, but more of a hygiene practice for any digital company. For micro-financing, leveraging data has helped us carry out preliminary financial checks and assess credit risk  and improve how we underwrite and credit score MSMEs, as well as create a much better loan book quality,” he says.

With its journey of going beyond an eWallet platform, into becoming the regional fintech arm of Axiata, Sheyantha describes Boost as a company excited over its journey to further drive financial inclusion amongst underserved segments.