upay's accumulated losses cross Tk300cr in 2023

Infographics: TBS

upay, a mobile financial services (MFS) provider, recorded accumulated losses of Tk313 crore in the last three years since it started the business in 2021, as it is still in investment mode to spread its foothold in the competitive market.

The United Commercial Bank (UCB), a listed bank on the stock exchanges, has been running the MFS business under the brand upay. To operate this business, the bank formed a fully owned subsidiary named UCB Fintech Company Limited in 2020.

According to the financial reports of the bank, upay incurred a loss of Tk85.43 crore in 2023, which was Tk117.84 crore in 2022 and Tk110.20 crore in 2021.

Although its revenue has gradually increased over the years, it is still far behind the market leader bKash.

Last year, upay earned Tk43.32 crore in revenue, marking a 114% growth from 2022. The revenue was Tk17.41 crore in 2021.

Anisuzzaman Chowdhury, chairman of UCB Fintech, in the annual report of UCB for 2023, said upay has been operating in an industry characterised by a large and aggressive market leader, an aggressive challenger, price sensitive customers and low-margin products. 

Gaining and maintaining traction in this industry is not only difficult but also expensive; particularly, for new entrants like upay, he added.

He further said that it is not possible for a new entrant to this industry to create a footprint without significant investment in customer acquisition, channel development and in brand building.

Continued investment in customer acquisition, channel development, brand building, and technology resulted in incurring losses, Anisuzzaman said in the annual report.

Competitive forces and customer behaviour are not expected to change much in the near future and, hence, more investment will be necessary so as to reach more customers and, thereby, to gain more market share, added Anisuzzaman. 

Despite stiff competition, upay achieved a remarkable performance in the year 2023. Total transaction value increased to around Tk9,826 crore in 2023, an 87% growth over 2022, according to the annual report.

Similar to the overall industry, cash-in, cash-out and send money accounted for the most of the transaction amount, it said.

Registered customers stood at around 8.5 million at the end of 2023. The number of retail agents was around 154 thousand and the number of merchants was 14,519 at the end of the year, the bank added.

UCB Fintech increased the paid-up capital by Tk200 crore to Tk500 crore in the last year.

Currently, two banks—BRAC Bank and Trust Bank—operate the MFS business through subsidiaries. Prime Bank received a licence to form a subsidiary to run MFS in May this year.

bKash—a subsidiary of BRAC Bank— started the MFS business in 2010. In the first three years till 2013 since its inception incurred a total loss of Tk34.57 crore. 

It had been profitable until 2018 but suffered significant losses between 2019 and 2021 due to investments in technology upgrades and adding more features to ensure better services for customers. 

Moinuddin Mohammed Rahgir, chief financial officer (CFO) of bKash, told The Business Standard earlier, "During the early stages, customer-centric fintech companies like bKash with a sustainable business model needed patient capital and a growth mindset." 

He said it was a prerequisite to invest in the expansion of technological capabilities, infrastructure, digital literacy, and awareness.  

"bKash remains a textbook example of a company pursuing growth, including the expansion of its service platform, customer acquisition, and maintaining its agent network. Now, steady returns on those investments are bringing revenue growth," he added.

Trust Bank operates the MFS platform under the brand "tap" through its subsidiary, Trust Axiata Digital Limited. As of 2023, the platform has accumulated a total loss amounting to Tk49 crore.