Flipkart Infuses $79.6 Mn Into UPI Based Digital Payments Arm PhonePe

To bolster its presence in the burgeoning digital payments space, Flipkart has reportedly infused another $79.6 Mn (INR 519 Cr) in fresh funding into Phonepe.

As per sources, the latest capital infusion is part of the earlier $500 Mn investment made by the ecommerce parent in October 2017.

The current investment has been made through Flipkart Payments, a Singapore-based subsidiary of the homegrown ecommerce giant, against the allocation of 2.45 Mn equity shares in PhonePe.

As shared by Sameer Nigam, the CEO of PhonePe, the fundraise that took place in October was geared towards helping the company scale up its technology platform and expand their merchant network and consumer base rapidly.

In response to Inc42’s queries on the latest funding, PhonePe declined to comment. 

Earlier, in August last year, Flipkart pumped $38.7 Mn into its digital payments arm PhonePe. As per filings with the Ministry of Corporate Affairs, the investment was made on August 31, 2017, and entailed the allocation of nearly 1.76 Mn equity shares at a subscription price of $22.2 (INR 1,445.29) apiece.

PhonePe Growth Story: 2015 To Present

Founded by Sameer Nigam and Rahul Chari in December 2015, PhonePe is UPI-enabled a mobile payments app that allows users to transfer money instantly from their smartphones by using their unique identification number (Aadhaar), mobile phone number or a virtual payment address.

It was later acquired by Flipkart in April 2016. At the time of acquisition, Flipkart co-founder and former CEO Binny Bansal had said, “Payments has been one of the biggest hurdles for mass adoption of online shopping in India. UPI has the potential of transforming the entire payments ecosystem in the country. The acquisition of PhonePe is in-line with Flipkart’s focus on driving innovation on the payments front.”

In July 2017, the company claimed to have partnered with 25,000 merchants across the country to promote UPI-driven payments. PhonePe is currently working with YES Bank for the UPI payment solutions.

Later in November last year, the Bengaluru-based fintech firm launched Point of Sale aka POS device to serve the needs of the small merchants, taking another step to expand its presence in the offline payments segment. The company claimed it is the ‘lowest cost’ PoS device in the world.

A month later, in December, the Flipkart-owned company claimed that it had processed over 1 Mn daily transactions worth over $15.4 Mn (INR 100 Cr) every day in November.

Also, the app achieved a total Payments Volume (TPV) annual run rate of $6.1 Bn (INR 40K Cr) within 14 months of its launch. At the time, it was reported that PhonePe was targeting to double this metric by March 2018.

The PhonePe team further announced that the monthly transactions on the app had grown 8200% since November 2016, driven by exponential growth in its online merchant, bill payment and peer to peer transactions. As claimed, the PhonePe mobile app had been downloaded by over 55 Mn Indians, as of December 2017. At present, it boasts more than 75 Mn downloads across Android and iOS platforms.

Around the same time, following in the footsteps of rival Paytm, it forged a partnership with SafeGold to launch a digital gold product. As per the official statement, users will now be able to buy and sell certified 24-karat gold via the PhonePe app.

Towards the beginning of this year, the Flipkart-owned digital payments arm announced that it is now geared up to develop independent fintech solutions, particularly insurance and mutual products. Besides fulfilling the Flipkart’s needs, PhonePe is also building solutions that are correlated to its knowledge expertise.

In the same month, PhonePe added more apps on its platform as part of its in-app offerings, including bus booking app RedBus’ facilities. As reported at the time, PhonePe will soon introduce food ordering, groceries ordering, travel and entertainment apps from service providers over the coming months.

In February 2018, reports surfaced that Flipkart-owned PhonePe was aiming to give a bigger thrust to its offline payments strategy in order to garner a larger share of the transactions from its offline business than online by the end of the year.

Two weeks later, PhonePe joined hands with Indian Oil Corporation Ltd to deploy its POS devices at all IOCL outlets nationally. As part of the pilot programme, the POS devices were installed at 30 IOCL outlets.

Recently, it got embroiled in a war of words with arch nemesis Paytm, when the latter claimed that it the largest player on the unified payments interface (UPI) platform with over 68 Mn UPI transactions in February 2018.

In a blog post titled ‘All that glitters is not gold’, PhonePe termed Paytm’s claim of being the biggest payments network on UPI as unidimensional and misleading, and added that broad-based adoption of UPI has not happened on Paytm yet.

A Look At The Indian Digital Payments Sector

As per a report by Credit Suisse, India’s digital payments industy, which is currently worth around $200 Bn, is expected to grow five-fold to reach $1 Tn by 2023.

As per the report, within the said period, the value of digital payments will likely jump from the current 10% to over 25%.

Attributing the growth to the increasing popularity of UPI enabled apps like Google Tez, Credit Suisse analysts Ashish Gupta, Kush Shah, and Sunil Tirumalai stated, “In just four months of launching its payments app, Google is already processing the same number of digital transactions as Axis Bank (fourth highest among banks) and has resulted in Unified Payments Interface (UPI) transactions increasing about eight times.”

With WhatsApp currently testing its UPI-based payments feature in India, the digital payments market would receive a major boost, especially since the instant messaging app has more than 200 Mn monthly active users in the country.

The latest capital infusion from Flipkart will, therefore, allow PhonePe to get ahead of competitors like Paytm, Google Tez, Amazon Pay, among others.

(The development was reported by ET)