Flip­kart to in­vest $500 mn in pay­ments arm Phonepe

Mint ST - - CORPORATE - BY ANIRBAN SEN feed­back@livemint.com BEN­GALURU

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.

HEMANT MISHRA/MINT

Phonepe CEO Sameer Nigam. Flip­kart has al­ready ploughed in roughly $75 mil­lion since it bought the pay­ments start-up in early 2016.

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