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Net1 UEPS Technologies (NASDAQ:UEPS)
Q1 2020 Earnings Call
Nov 08, 2019, 8:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good day, ladies and gentlemen, and welcome to Net1's first-quarter 2020 earnings conference call. [Operator instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Dhruv Chopra.

Please go ahead, sir.

Dhruv Chopra -- Head, Investor Relations

Thank you, Judith. Welcome to our first-quarter 2020 earnings call. With me today is our CEO Herman Kotze; and our CFO Alex Smith. Our press release and the supplementary investor presentation are available on our Investor Relations website, www.ir.com -- no, ir.net1.com.

As a reminder, during this call, we will be making forward-looking statements, and I ask you to look at the cautionary language contained in our press release regarding the risks and uncertainties associated with forward-looking statements. In addition, during this call, we will be using certain non-GAAP financial measures, and we have provided a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures. We will discuss our results in South African Rand, which is a non-GAAP measure. We analyze our results of operations in our press release in rand to assist investors in understanding the underlying trends of our business.

As you know, the company's results can be significantly affected by currency fluctuations between the U.S. dollar and the South African Rand. We have a Q&A session following our prepared remarks. But with that, let me turn the call over to Herman.

Herman Kotze -- Chief Executive Officer

Thank you, Drew, and a good day to everybody. There has been no strategic shift since we last reported only six weeks ago. And therefore, I want to focus today's discussion mainly on our European strategy following the exercise of our option to take a controlling stake in Bank Frick, as well as the developments and progress we have made since September. The highlights of our Q1 2020 results include: First, we reported revenue of $81 million, which included approximately $8 million of ad hoc hardware technology and telecom product sales, but still a nice improvement over Q4 2019 in constant currency.

Second, we reported adjusted EBITDA of $2.8 million, finally returning the group to positive EBITDA as a result of our actions over the past nine months. Third, EPE accounts remained relatively stable at $1.1 million as did related financial services. Fourth, KSNET EBITDA margin improved over 200 basis points again this quarter to 23% compared to Q4 2019 as a result of our efforts to exit unprofitable agent and merchant relationships. And finally, we exercised our option to acquire a further 35% of Bank Frick by March 2020, which would give us a controlling interest and help us accelerate our ability to provide a vertically integrated fintech solution in Europe.

Let me now address the progress on our four key objectives for 2020. The first objective was the transition of our South African business from a B2B model to a B2C model. Our target is to grow our active account base by at least 10% from the 1.1 million customer level we had in Q4 2019. We expect the EPE base to naturally churn over time and new account growth to be driven by the Finbond offerings.

We also intend to increase our loan book by at least 10% subject to having access to sufficient liquidity to fund the book. EPE accounts were at $1.06 million, which is slightly down on the $1.065 million at the end of Q4 as a result of natural accretion and in line with our expectations. We commenced a soft launch of our new Finbond offerings on October 1, and without any marketing efforts, opened 7,000 new accounts to date. We will continue to refine the product and value proposition in the short term as our financial and value-added services offerings are the key differentiators and play a critical role in driving account growth.

As soon as we are able to inject sufficient liquidity into this business, we expect account growth to accelerate meaningfully during the second half of fiscal 2020. We continue to see demand for ATM infrastructure and in Q1, continued with the rollout of ATMs in the country and installed 110 new machines, bringing our total deployed base to 1,405. EasyPay continued to gain market share, both with retailers and billers, winning a number of mandates during Q1 and grew 4% sequentially compared to Q4. We also made significant strides in our R&D to build a cloud-based UEPS/EMV, issuing an acquiring system that can significantly accelerate time to market for any new issuing banks anywhere in the world including Finbond.

Lastly, on DNI and Cell C. In Q1 2020, DNI announced the acquisition of two businesses that will provide further diversification of these revenue sources and meaningfully scale the operations. We believe these acquisitions will expand the appeal of DNI to prospective investors and ultimately result in the exercise of the call option to acquire our remaining 50% at a strike price of $56 million. We may extend the validity of the call option to March 31, 2020, to allow DNI to conclude its acquisitions and raise the necessary capital.

For Cell C, we continue to carry the value of our Cell C investment at 0 in Q1 2020. Cell C has been actively pursuing its proposed infrastructure sharing agreement with MTN and subsequent to that, expects to conclude its recapitalization. Our second objective for 2020 is to introduce and scale our new payments, crypto and blockchain offerings in Europe. We expect to launch the first of its kind brand-new crypto and blockchain products, along with a new brand before the end of this calendar year, and IPG's new issuing and acquiring products in the second half of fiscal 2020.

All of these products are rolled out in close cooperation with Bank Frick. As these products scale, we expect IPG revenues to scale as well, in turn, first reducing losses and then becoming accretive to the group. On October 2, we exercised our option to acquire an additional 35% interest in Bank Frick. The transaction is subject to approval from the Liechtenstein Financial Market Authority and is expected to close in March 2020.

Bank Frick provides the cornerstone of our European strategy to deliver all-encompassing financial technology and banking services to SMEs in the region. I will discuss the European strategy in more detail shortly. Visa concluded its on-site audit of Bank Frick and has given them conditional approval with final approval once they visit IPG's Nerve Center in Malta, which has been scheduled for the end of November. We are dependent on Visa and their timeframes to provide unconditional approval, and to account for Visa's December freeze period, we believe this process will be completed during Q3 2020.

Lastly, on India, in fiscal 2019, MobiKwik applied for direct membership with Visa and became an associate member in Q4 2019. In October 2019, the Reserve Bank of India approved the application by MobiKwik and Visa to launch programs with MobiKwik as the issuer. We are currently working with MobiKwik to relaunch our virtual card offering on a much larger scale across a qualified customer base, which has in excess of 10 million users. MobiKwik itself has performed ahead of expectations, primarily due to its successful transition to being a digital financial services provider.

In September 2019, MobiKwik reported unaudited annualized revenue of $60 million, up from $26 million in September 2018. It has been contribution margin positive since October 2018 and achieved cash EBITDA breakeven in the month of August 2019. Digital financial services now account for approximately 25% of MobiKwik's total monthly revenue compared to 0 during the previous fiscal year, and it is currently disbursing in excess of 100,000 new loans per month. Our third strategic objective for 2020 is to rapidly grow payment solutions sales in Africa.

We aim to accelerate market penetration in Africa through Net1, Zap Group and Carbon. We expect Zap Group to start generating revenue and enter at least one other country outside of Ghana during fiscal 2020. Zap Group continues to deliver its solutions for the multiple customers signed in Ghana earlier this year and expect its partners to roll out these offerings commercially starting in Q3 2020. In addition, Zap Group has commenced discussions with multiple parties for its market entry into Nigeria.

In addition to the progress they have made, we are also particularly pleased with the sales leads for Net1 products they have begun to generate. Carbon continues to report exponential sequential growth across all the key indicators of its business, number of app installations, unique customers, loans disbursed, number of value-added transactions and most importantly, delivering profitable financial results. Carbon's continued growth will be driven by its ability to access capital and/or funding in order to meet the demand for its suite of products. And finally, our fourth strategic objective for 2020 is the implementation of the turnaround plan and strategic review in South Korea.

During Q1 2020, we commenced Phase 2 of the implementation of our turnaround plan in Korea, which included the exiting of certain unprofitable agent and merchant relationships. This resulted in a modest reduction in revenue, but a tangible improvement in profitability. Pertaining to our strategic review of the business, our financial advisors have continued to progress the evaluation of a potential disposal of the business. While we do recognize the importance of these efforts, this is an ongoing competitive process being managed by FT Partners, and we cannot comment further at this stage, but we do expect to conclude this process in the next few months.

I would now like to provide some further detail and context around our European strategy and the synergies with Bank Frick, which resulted in our decision to take a controlling interest in the bank. Over the past two years, we have developed state of the art issuing, acquiring and processing technologies for SMEs, as well as solutions for the nascent blockchain and virtual financial assets, or VFA, industries. Our target markets, predominantly e-commerce and blockchain-based transactions, are growing rapidly and present a significant opportunity for new entrants. Europe's leading fintech companies include Adyen, Wirecard and PayPal have a common trait in that these businesses are able to offer a vertically integrated service at the lowest cost as they all own a European banking license and are not dependent on third-party providers.

However, given the scale of these entities, we have identified an opportunity for the underserved SME market, where a vertically integrated solution can disrupt the market. A key requirement for any payments company is to have access to Visa and MasterCard membership, usually available only to fully licensed banks. Companies can operate independently from a bank via partnership model, but the pricing offered by the banks makes it difficult to compete with them while also presenting the risk that the agreement may be terminated at any time, placing a business at risk. For this reason, coupled with our experience in South Africa with third party banks, we negotiated an option to acquire a controlling interest in Bank Frick at the time of our original investment.

We gave ourselves two years to determine if the market was viable. And to develop the technology, we would need to address that market opportunity efficiently. Bank Frick has also established itself as the leader in banking services for the crypto industry in Europe with the added benefit of operating in a fully regulated banking environment. It has developed several products, custodial arrangements, as well as advisory services, to the world's leading VFA exchanges and virtual currency operators.

The new crypto and blockchain products developed by IPG complement Bank Frick's activities and relationships. IPG has completed the development of its new product range, which has been developed with the singular purpose of simplifying and streamlining the complicated process of investing and storing virtual financial assets. We are in the final phases of user acceptance testing and plan to launch our product range before the end of December. Our offerings will enable new transaction-based revenue streams, subscription-based revenues and hardware sales.

The last two years of significant investments in personnel and technology has resulted in lower returns for the bank during this period, but these investments are now largely complete, and we expect top and bottom line growth from 2020 onwards with a target ROE of at lost -- of at least 12% within the next three years. So in summary, a combined Bank Frick and IPG payment entity will provide the platform to deliver a competitive, vertically integrated end-to-end payment solution in Europe, driving meaningful revenue and profit in hard currency for the group over time and, therefore, significant value creation for Net1. To conclude, we are excited with the new products, markets and business models we have developed and look forward to focusing on execution rather than be tied up with legacy and nonproductive issues we have endured over the past 18 months. Let me now hand it over to Alex to go over the financials.

Alex Smith -- Chief Financial Officer

Thank you, Herman, and good day to everybody. I'll be discussing the key results and trends within our operating segments in the first quarter of 2020 compared to a year ago, as well as to the fourth quarter of 2019, as sequential comparisons are more relevant today given the changes endured by the group over the past year. For the first quarter of 2020, our average rand-dollar exchange rate was ZAR 14.35, compared to ZAR 14.86 a year ago and ZAR 14.29 in the fourth quarter of 2019. We recorded a fundamental loss per share of $0.02 this quarter, compared to the $0.01 of fundamental earnings per share a year ago, which included a contribution from DNI.

This compares to a fundamental loss per share in the fourth quarter of 2019 of $0.11 if you exclude the impact the Cell C-related fair value adjustment, the Cedar Cellular impairment and the impact of the Supreme Court of Appeal Ruling. This sequential improvement is pleasing as we saw the full effects of the restructuring work for the first time, but was also assisted by certain ad hoc technology and telecom product sales. By segment, South African transaction processing reported revenue of $19.4 million in the first quarter of 2020, down 49% compared with the first quarter of 2019, but up 6% from the fourth quarter of 2019 on a constant currency basis. The year-over-year decrease was primarily due to the termination of the SASSA contract, including those with SASSA Grindrod cards and to a lesser extent, the reduction in the number of EPE accounts.

These decreases in revenue and the resulting impact in operating income were partially offset by higher transaction revenue as a result of increased usage of our ATMs. Our operating margin for the first quarter of 2020 and 2019 was negative 17.4% and negative 9.3%, respectively, and compared to negative 13.1% in the fourth quarter of 2019. The deterioration in margin in the quarter was due to the nonrecurrence of several cost reversals in the fourth quarter of 2019. International transaction processing generated revenue of $34 million in the first quarter of 2020, which was down 14% compared with the first quarter of 2019 and down 7% compared to the fourth quarter of 2019 in U.S.

dollars. A year-over-year decrease in IPG revenue was the largest contributor to the year-over-year decline. Segment operating margin improved to 11.1% in the first quarter of 2020, compared to 7% a year ago and 6.1% in the fourth quarter of 2019. For the first quarter of 2020, KSNET revenue in Korean won was down 4% year over year to $32.8 million, primarily due to lower volumes processed as a result of exiting certain unprofitable agent and merchant contracts and 2% down on the fourth quarter of 2019.

However, we are seeing the benefits of the various initiatives that have been undertaken in the EBITDA margins, which have been consistently expanding over the last year and improved by more than 300 basis points compared to the previous quarter and was 23% in the first quarter of 2020. KSNET's cash conversion remained strong with a much lower need for capital investment than was historically the case. IPG's legacy businesses have continued to decline, but once we roll out our new products, we expect the business to return to growth and pare its current losses. IPG losses also include approximately $300,000 of development costs in respect of the crypto asset storage product incurred during Q1 on top of the $1.4 million incurred for fiscal 2019.

These development costs should start to reduce during fiscal 2020 once we've launched the product. Financial inclusion and applied technologies generated revenue of $30.1 million in the first quarter of 2020, which was down 43% compared with the first quarter of 2019 but 77% higher compared to the fourth quarter of 2019. The decline from the prior year was primarily due to the deconsolidation of DNI which started at the beginning of the fourth quarter of 2019 and lower lending and insurance revenue. However, compared to the previous quarter, we saw strong ad hoc technology and telecom product sales that positively impacted revenue by approximately $8 million.

Operating margin was 5%, compared to 21.2% in the first quarter of 2019 and negative 61.2% in the fourth quarter of 2019. The operating margin is heavily influenced by the revenue level as there is a significant fixed cost component in this segment primarily related the costs incurred to operate our financial services branch infrastructure. Active EPE accounts remained fairly steady through the first quarter. And with the stable EPE base, our lending and insurance businesses have also returned to more normalized operating performance levels.

Our net loan book was at a similar level to the start of the quarter. And with that stability, we have seen default rates moving back toward historical levels. We have also launched new variable loan products during the quarter and are monitoring the take-up and impact on credit risk. Our micro insurance policyholders have also remained largely flat at around 220,000 over the last two quarters, and we are implementing new plans to grow the policyholder base across a much wider customer base.

This will involve developing new distribution channels for the traditional funeral policy product, as well as potentially other new products. Our corporate expenses in the first quarter of 2020 were in line with the fourth quarter of 2019 once the previous quarter is normalized for the $1.8 million write-back of stock compensation charges. The corporate costs are slightly higher than the equivalent quarter last year due to higher advisor fees related to some of our strategic initiatives, but this is more than offset by lower acquired intangible asset amortization following the deconsolidation of DNI and the fact that IPG's acquired intangible assets are now fully amortized. We continue to assess the fair value of our investment in Cell C at a 0 value.

We do not see any likelihood of increasing that fair value until the recapitalization has been completed. Cell C itself is seeing some benefits from increasing focus on the core operations instead of liquidity management, but needs to complete the recapitalization to create a sustainable business. We continue to provide support to the management team and are looking to leverage our distribution network for Cell C's benefit. We recognized income from equity accounts and investments of $1.1 million during the first quarter of 2020, compared to $1.3 million in the same period last year.

Within that amount, we saw a contribution of $0.7 million from our 30% investment in DNI, a business that was consolidated in the equivalent period last year. The reduced contribution from Finbond in the quarter is a result of the reduced lending book in Finbond following the migration of SASSA beneficiaries to the SAPO bank accounts in the second half of last year. Bank Frick's near-term profitability continues to be impacted by its investment in people to expand its operations, but we expect to see a stronger performance into the end of the calendar year. Overall, we expect the contribution from our equity accounted investments to be positive on an annual basis, as it is impacted by the timing of reported results by our various investments.

At September 30, 2019, our unrestricted cash was approximately $42 million, compared to $46.1 million at the end of June. Setting these amounts off against short-term credit facilities of $10.3 million and $9.5 million, respectively, means our net unrestricted cash reduced from $36.6 million to $31.7 million in the quarter. The decrease in our cash balances was largely due to the investment into working capital in the quarter that has largely reversed post quarter end. The investment in working capital of $21.4 million reflected in the cash flow is inflated by the purchase of Cell C airtime of $12.7 million, which was funded through borrowings.

Adjusting for this effect leaves a net investment of $8.7 million into working capital from cash resources. Capital expenditures in the quarter of $2.6 million is related to a bulk order of ATMs, which should satisfy our requirements for the next two quarters. We had short-term banking facilities available to us in various territories of $31.6 million at September 30, 2019, $10.3 million of which have been utilized. As of September 30, 2019, we have restricted cash of $68.8 million and associated short-term facilities utilization of $68.8 million.

We have in place short-term credit facilities of ZAR 1.45 billion or $95.6 million specifically to fund our ATMs in South Africa and have presented cash drawn under these facilities and in the processing system as restricted cash on the balance sheet. Adjusting for the purchase of Cell C airtime, our free cash flow utilization amounted to $8 million, which included an $8.7 million increase in working capital. The only debt on the balance sheet relates to the funding of the Cell C airtime purchase, which we expect to be able to settle once Cell C's recapitalization is complete or under the terms of our borrowing arrangements. As discussed in our last call, we continue to have liquidity requirements in the short-term that constrain our ability to commit resources to share buybacks or fund investments required to fuel internal growth.

In particular, there are working capital funding requirements in respect to intermonth cash flows in all the businesses. We need to continue to funding the international operations and the SA operations as they return to profitability. We have some new product launches and some operational requirements on growth opportunities in some of the SA business units. However, on the occurrence of a liquidity event, such as the disposal of the remaining DNI investment on the sale of other businesses, this will create capacity for share buybacks and/or dividends alongside our other capital requirements.

Our first quarter 2020 tax expense was $2 million, compared to an expense of $6.5 million in the first quarter of 2019. Our effective tax rate continues to be impacted by the losses incurred by certain South African businesses as we have effectively not recorded a deferred tax asset benefit related to these net operating losses. Our effective tax rate is likely to continue to be distorted by losses incurred by certain of our businesses. Our weighted average share count has remained relatively constant at 56.6 million shares through the first quarter of 2020.

Despite the improved performance in the first quarter, we maintain our guidance to generate adjusted EBITDA of at least $16 million using our fiscal 2019 exchange rate of ZAR 14.27 to the dollar with improvements in South Africa and South Korea being partially offset by losses in IPG, new start-up operations internationally and corporate overheads. We will revisit the guidance as our visibility over the potential liquidity events improves, and we can then commit the necessary resources to the regrowth of our South African business, in particular. We can now open up the call for Q&A.

Questions & Answers:


Thank you very much, sir. [Operator instructions] The first question comes from Scott Buck of B. Riley.

Scott Buck -- B. Riley FBR, Inc. -- Analyst

Hey. Good morning, guys. I appreciate the time. You had a negative of a court ruling, I guess, you have a court ruling that went against you in the quarter.

I'm curious what the next steps there are and then how we should think about potential liability?

Herman Kotze -- Chief Executive Officer

Sure. Hi, Scott. We have decided to appeal the ruling to the Constitutional Court. So that actually suspends the implementation of the Supreme Court of Appeals' judgment.

So the next step is that we will be waiting for the decision from the Constitutional Court as to whether they will hear the appeal or not. As soon as we've -- we don't expect that to take too long. Hopefully, we will get the response and the court date set for the early part of 2020, calendar 2020. And so as soon as we've been through the appeals process, we'll be able to give more color around the status of that particular claim.

Scott Buck -- B. Riley FBR, Inc. -- Analyst

OK. Great. Second, it sounds like some of the businesses are really in a bit of a holding pattern now until you're able to access some liquidity through potential sales, divestitures, etc. Can you talk a little bit about the commercial products, I guess, in South Africa? And then kind of what is geared up and then ready to go and maybe what the long-term opportunity is there?

Herman Kotze -- Chief Executive Officer

Sure. So in the South African market, our core focus over the next year to two years will be to rebuild our base of account, bank account holders, EasyPay Everywhere as we used to call it in the past, account holders. We have finalized all of the work required to issue the new court in collaboration with Finbond. Finbond, as you may know, is an investment company of Net1.

We own approximately 29% stake in the bank. And so for obvious reasons, we decided to develop our new product offering in collaboration with one of our investment companies. So the offering is really very similar to what we've discussed in the past. We aim to put together a basket of products that is targeted at the so-called unbanked and underbanked markets.

So I think it's important to differentiate that this is not only what we traditionally service in the form of social grant recipients. We have a broader market segment that we address with this product. The products within the offering includes a retail bank account, which we think is the lowest cost bank account of its type in the country in terms of service and transaction fees. It includes access to cheap, unsecured credit in line with our current portfolio.

So anything between one to six months. Then it includes access to cheap life insurance or low-cost life insurance and ultimately, also access to low-cost telephony products. So for the next year or two, we will focus our efforts on rolling out this basket of products to our target base in collaboration with Finbond. Net1 has approximately 250 branches or locations across the country.

Finbond has approximately 450 branches or locations across the country. So the distribution network exists. The logistical network exists. All it needs is for us to put all of our financial services products together, that, as we indicated, has now been done in the pilot phase.

Started that on the 1st of October. We think that we will be ready to do a proper launch, including full marketing and advertising, by the beginning of calendar 2020, and that will drive a number of revenue lines for the company. It will obviously drive the financial services revenues that we earn, as well as the transactional and fee revenues that we earn as our customers also make use of our ATM network, our point-of-sale network, purchasing value-added services, prepaid utilities, etc., etc.

Scott Buck -- B. Riley FBR, Inc. -- Analyst

OK. Great. Last one for me. The $8 million benefit from ad hoc tech sales this quarter.

Are there additional opportunities there that we could see over the next few quarters? Or is that kind of a one-time shot?

Herman Kotze -- Chief Executive Officer

It's not always easy to predict these ad hoc sales with great accuracy. We do have a number of business lines where hardware sales is a component of the revenue that we generate. We have a hardware security module units, we've got our SIM card and chip unit, we've got our point-of-sale sales units. Those are all businesses that, also, in addition to generating annuity-based revenues, sell hardware.

We have longtime customers that place orders on us from time to time. We believe that those customers will continue to place orders on us. And the way we look at this is it's not really a core part of our business. It is an incidental upside, if I could call it that, from what we actually provide.

But looking forward over the next year, there's no reason to believe that, from time to time, the same sort of hardware orders will not materialize.

Scott Buck -- B. Riley FBR, Inc. -- Analyst

All right. Perfect. I appreciate the time. Thanks, guys.


Thank you. [Operator instructions] The next question comes from Stephen Ranzini of University Bank.

Stephen Ranzini -- University Bank -- Analyst

Good morning, Herman and team. My question is that it seems like there's a great deal of synergy between your South African businesses and Finbond Bank. And it seems that you're not hesitant to take full control of a bank, as you just done with Bank Frick. It looks like there's a great deal of synergy there.

Why would you not emerge your South African businesses into a transaction, so a stock transaction with Finbond? What are the considerations that hold you back from doing that? Are there negative consequences under South African law of becoming a bank holding company? Or are there issues with shareholders that are unwilling to do that or don't see the synergies there that are clearly apparent? I'm just curious to hear your thoughts on this.

Herman Kotze -- Chief Executive Officer

Not a problem. Thanks for that, Stephen. It's kind of like stating the obvious, I think. It makes a lot of sense for us to cement our South African business also with having unfettered access to a local license, and it certainly is something that is well-considered and discussed on our side,in great detail.

There are a couple of things or factors that we need to consider in the South African environment, which makes it a little bit more complicated from the European scenario. The first thing is that Finbond is a public-listed company. So it is listed locally here on the Johannesburg Stock Exchange. That means any transaction will be subject to a number of shareholder approvals, consultations, fairly lengthy and complicated processes, not insurmountable processes, but just time-consuming and relatively complicated when it comes to the documentations and timing processes.

We would locally also need to obtain approval from the specific regulators. Most specifically, I think, the competition authorities. So that is another factor and delaying consideration that we need to take into account. Finbond as a mutual bank in South Africa is obviously also regulated by the South African Reserve Bank, and they would need to be consulted into this process.

And I think the final consideration here is the Finbond actually comprises of two distinct geographical businesses. It has a South African business. And in South Africa, it owns a mutual banking license. It also has a North American business, which is a significant component of Finbond's current financial results.

The last results were published a couple of weeks ago, and they reflect that the North American business contributes roughly two-thirds of the group's profits at this point in time. So we are looking at the corporate finance element of things all the time. But the very specific focus right now is to launch the products together with Finbond in the interim. I think it's safe to say that the cooperation that we've got at a professional, at an operational level in terms of getting the various financial services and products commercialized is really great and is what we would expect from one of our investee companies.

Stephen Ranzini -- University Bank -- Analyst

Thanks very much for the color on that, Herman. As a follow-up, does it make sense -- as a follow-up, does it make sense for Finbond to obtain a U.S. bank license? Or is that not an option?

Herman Kotze -- Chief Executive Officer

I think they are --

Stephen Ranzini -- University Bank -- Analyst

Just U.S. operations, the demerged U.S. operations from its South African operations.

Herman Kotze -- Chief Executive Officer

Yeah. I think, logically, that is a step that would make sense in the longer term. But obviously, being part of a South African holding company, we also have some exchange control and other considerations to take into account. But ultimately, it would make sense to have those two businesses separated, in my opinion.

Stephen Ranzini -- University Bank -- Analyst

From my observation as a bank executive in the United States is that the environment in the United States to obtain a new bank charter is the best that it's been in probably the last 20 years. And I don't know if that window of opportunity will stay open after the next election, to be frank.

Herman Kotze -- Chief Executive Officer

So right. So that's something we'll obviously be keeping a close eye on, Steve.

Stephen Ranzini -- University Bank -- Analyst

Great. Thank you very much.


The next question comes from Mr. Kaufman, who's a private investor.

Unknown speaker

All right. I'd like to know the status of MobiKwik and perhaps you can monetize that investment.

Dhruv Chopra -- Head, Investor Relations

Yeah. Hi, Alan, this is Dhruv. So MobiKwik, yeah, I think over time, we would look at that. But again, the strategic rationale for us to make that investment was to help us with market entry and penetration into a new and sizable market.

So for now, we are still in the early innings of that objective and we're working in close cooperation. But in the long term, they have plans to do an IPO. Those sorts of events would have liquidity events, and we can certainly look at monetization according to events at that time.

Unknown speaker

Over what period of time will they consider the IPO? Is it going to be in five years, one year, six months?

Dhruv Chopra -- Head, Investor Relations

So I think according to what they've talked to the press about in India is probably '20, '21, '22.

Unknown speaker

Thank you very much.


The next question comes from Mr. P.J. Solit of Potomac Capital Management.

P.J. Solit -- Potomac Capital Management -- Analyst

So as we look forward a little bit and assume that you do ultimately have some liquidity from divestitures and you can apply that to the two main growth areas that you focused on earlier, the rebuilding the account base at EasyPay Everywhere and then the European card opportunity. I'm not going to focus on Africa for now. But previously, when EasyPay was ramping toward 3 million, 4 million, 5 million subs, that was a business that you had outlined economics of getting to I think it was something like $30 million to $50 million in EBITDA at your targets. I guess my question is, are those types of economics still valid to think about? Or is it better because you've got Finbond or worse? And similarly, can you quantify the European card opportunity over a multiyear period as well just so we have a sense of what this could look as focus shifts to operations in the next few years?

Herman Kotze -- Chief Executive Officer

Sure. Looking first at the South African side of things, I think the economics that we held up previously before the great account heist still stack up. We, in fact, would expect those economics to be marginally better, specifically because we -- including Finbond in the rollout. There's obviously, on top of the usual transaction fees and financial services fees that we would earn as the service provider, the addition of the profit share, effectively or the equity accounted share that we have in Finbond.

But I think as a broad matter, you can take the same economics that we have always put forward on the provision of these bank accounts within the South African environment. When we get to the European opportunity, there's -- we obviously need to launch first. That's our focus over the next couple of months. But we would expect over time, and when I say over time, I mean the medium-term, let's say, three to five years to earn at least $25 million plus in EBITDA.

The opportunities in Europe are obviously multipronged today. It's not only a card issuing opportunity, but there's the card acquiring and the payment gateway opportunities. It will depend how fast those relevant components ramp up. And each of them has a specific economic metric to it.

It's got different cost bases. And we'll have to see exactly what the product mix ends up being. But for us, the target will be to get to that sort of $25 million EBITDA level in the medium term.

P.J. Solit -- Potomac Capital Management -- Analyst

Great. Thank you.


[Operator signoff]

Duration: 47 minutes

Call participants:

Dhruv Chopra -- Head, Investor Relations

Herman Kotze -- Chief Executive Officer

Alex Smith -- Chief Financial Officer

Scott Buck -- B. Riley FBR, Inc. -- Analyst

Stephen Ranzini -- University Bank -- Analyst

Unknown speaker

P.J. Solit -- Potomac Capital Management -- Analyst

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