Flipkart to invest $500 mn in payments arm Phonepe
E-commerce firm’s digital payments unit aims to at least double number and value of transactions over next three to six months
Flipkart’s payments arm Phonepe Internet Pvt. Ltd is looking to at least double the number of transactions and their value on its platform over the next three to six months, even as parent Flipkart looks to invest a further $500 million in growing out the payments business.
On Thursday, Flipkart said it would commit to invest at least $500 million to grow out Phonepe. Flipkart, which had committed to invest $100 million in Phonepe last year, has already ploughed in roughly $75 million since it bought over the payments start-up in early 2016.
Since then Phonepe has launched an app based on the Unified Payments Interface (UPI) platform, as part of a broader strategy to take on the likes of Paytm and Freecharge for a piece of India’s rapidly growing digital payments business.
“We’ve set ourselves a very aggressive target of doubling (transactions) every two months. We have actually managed to double every two months in a calendar year. Transactions are also scaling up very fast, especially on the merchant side,” Sameer Nigam, co-founder and CEO of Phonepe, said in an interview.
Nigam said that Phonepe witnessed 16 million transactions on its platform during September, up from around 10 million in July. Total payment volumes have touched an annualized run rate of $3.5 billion, up from $2.5 billion in July, he added.
“What is most heartening for us is that the consumer loyalty on the platform is very, very high. We see very high repeat rates within categories and overall as well—and that’s been a key area of focus for us. Starting this financial year, we’ve been investing a lot in our data analytics, we’ve also built capabilities around setting reminders for monthly payments, etc. We will keep adding more features over the next 12 months,” said Nigam.
Phonepe was launched in December 2015 by Nigam and Rahul Chari, who had left Flipkart earlier in 2015, and Burzin Engineer, another former Flipkart executive. Flipkart bought Phonepe for an undisclosed sum in April 2016. The three of them had previously founded digital content start-up Mallers, which was bought by Flipkart in late 2011.
Even arch-rival Amazon India is significantly beefing up its payments arm. Mint reported earlier in October that Amazon India is preparing to make a big push into digital payments and compete aggressively with the likes of Paytm, Freecharge and Phonepe.
According to filings with the corporate affairs ministry, Amazon India is preparing to increase investment in its own payments arm by at least five times and has increased its authorized capital for Amazon Pay India Pvt. Ltd to Rs2,000 crore from Rs400 crore.
“Because of UPI, our key advantage is that when people are spending from their bank accounts, we don’t have to incentivize them to load a wallet. Most of the digital payments players have been funding you to load a wallet to spend money. For us, we escaped that journey altogether,” said Nigam.
Earlier this week, the central bank directed wallet operators with prepaid payment licences to make their payment instruments interoperable within the next six months. Nigam said Phonepe is still waiting for specific guidelines on the know-yourcustomer (KYC) procedures.
“As far as availing interoperability with full KYC, I’m not sure what it really solves because you’re still paying the banks for money moving from bank accounts into the wallet and moving money into your bank account from the wallets. Why would I do a full KYC to move money between my wallets? That’s still not very clear,” said Nigam.
Phonepe CEO Sameer Nigam. Flipkart has already ploughed in roughly $75 million since it bought the payments start-up in early 2016.