Flipkart has had a really busy fortnight. First, in a restructuring move last week, it reportedly shut down its grocery delivery division ‘Nearby’. Just a day after, Morgan Stanley marked down Flipkart shares by 27%, thus bringing down its valuation to about $11 Bn from the earlier valuation of $15.2 Bn. Then days later it launched an advertising platform, Brand Story Ads, on the mobile app, pitching the platform as a new form of advertising called ‘Commerce Advertising’. And now, 18 months after it shut down its payment gateway PayZippy, it is re-entering the payments space with the launch of its mobile wallet Flipkart Money.
While this directly implies that the temperatures in the payments sector are expected to rise up by notches, what it implicitly reiterates is that India’s ecommerce poster boy will now be majorly focusing on the four identified pillars of its business, namely ecommerce, logistics, payments and advertising. Flipkart Money has been launched on Android. It will help the ecommerce giant increase the proportion of cashless transactions as well as cut down operational costs involved in cash on delivery payments.
The relaunch comes within six months of its acquisition of payments services startup FX Mart Pvt. Ltd, which holds a prepaid wallet licence issued by RBI, for about $6.8 Mn. At the time of the acquisition, Flipkart had hoped to launch a payment service on its app as well as on Myntra app within the next three months, and offer payment services on third party sites and apps. The launch was apparently delayed as RBI sought more details of the acquisition, followed by technical issues.
As of now, Flipkart Money users can hold a balance of INR 10K ($148) at a time and top it with a maximum of INR 25K ($371) a month using their credit cards, debit cards or via net banking. They can also withdraw cash from the wallet to the cards or the bank account. The digital wallet can presently be used only for payments on Flipkart and it’s still not clear if the company will open up Flipkart Money to other sites.
Flipkart Money is expected to aid in quick refunds, especially in case of cash on delivery payments. This means, it would also result in significantly boosting the number of transactions on Flipkart, as the company aims to sell goods worth $12 Bn in the fiscal year ending March 31 – a three-fold increase compared with the prior fiscal year. That is an ambitious target, given the intense competition from Amazon, which is breathing down its neck. Amazon has been on a major investment spree to compete in the Indian market. According to filings with the Registrar of Companies, in February it has invested about $300 Mn in Amazon Seller Services. The latest infusion comes right after Amazon infused $250 Mn through a rights issue into the Indian unit in late December last year. The funds are being used to improve warehousing, logistics and marketing services.
The Rising Tribe Of Wallet Warriors
Flipkart had shut PayZippy in August 2014, after the product failed to sell to as many customers as the company expected. But since then, the payments space has undergone a sea change. The number of mobile wallet users has been steadily growing, and has reached about 140-150 Mn, thanks to alluring offers and discounts. Interestingly, Alibaba backed Paytm, the biggest player in the market today, has over 100 Mn wallet users, registering over 75 Mn transactions every month. As per a February Nielson report, Paytm is used by 3 out of every 10 smartphone users. This just goes to show how far up the game Paytm already is, compared to rivals in the wallet space, such as Mobikwik, Oxigen, PayU, Citrus Pay and Novopay.