SUMMARY
In July, NPCI had mandated retail investors to use UPI for IPO applications under ASBA
ASBA in simple terms is an escrow-like mechanism
PhonePe claims to have over 150 Mn users
Bengaluru-headquartered digital payments player PhonePe on Tuesday announced a new service which enables users to participate in initial public offerings (IPO) using their BHIM UPI Id created on the PhonePe App.
The development comes in lieu of National Payments Corporation of India’s (NPCI) order which mandated retail investors to invest in the IPO via Unified Payments Interface (UPI) based Applications Supported by Blocked Amount (ASBA).
ASBA, in simple terms, is an escrow-like mechanism where the user enables the bank to restrict the payment till the allotment. The UPI mechanism in ASBA will allow the investor to permit a debit from a bank account through BHIM UPI app or other support bank applications. Then the payment will be restricted to the issuer and be credited only when the securities are allotted. At present, the time being given for allotment of securities is 6 days, after which the amount will be refunded to the investor.
The plan is applicable to retail investors who invest via syndicate member, registered stockbrokers, registrar, and transfer agents or depository participants. The second phase of implementation started from July 1, 2019, under which UPI payment for IPO has been made mandatory for retail investors applying through brokers, DPs and RTAs. The existing timeline of T+6 days post-issue closure will continue till the final phase is implemented.
Along the same lines, PhonePe has enabled the process of filing for IPO in three steps:
- Put their UPI ID in the IPO form and submit it.
- Approve the notification in the PhonePe app to block the amount for the IPO. On allotment of the shares, the money is automatically debited from this blocked amount.
- Get the IPO application process completed in three days from the current six days.
Praveena Rai, chief operating officer, NPCI said, “The new process has made applying for IPO extremely convenient for retail investors by increasing efficiency, eliminating the need for manual intervention and logistics at various stages. We look forward to similar collaborations in the future, with a goal to make the process completely digitized.”
Hemant Gala, head of payments and financial services at PhonePe said, “PhonePe and NPCI are collaborating to drive retail participation of millions of users of PhonePe in capital markets through this initiative.”
PhonePe claims to have over 150 Mn users and provides them with its “super-app”, which integrates 50 digital apps including Goibibo and OYO. Recently, Morgan Stanley has predicted three different scenarios for PhonePe for 2029. The data outlines that PhonePe could generate revenues of $70 Mn from payments vertical in bull case, $690 Mn from the distribution of financial services, and $2.5 Bn from consumer lending by 2029.
The company had recently said that it drove over 380 Mn UPI transactions in August, with more than 90 Mn offline transactions. PhonePe earlier said that growth has come riding on the back of the exponential expansion of PhonePe’s merchant network, both online and offline.
With the scheduled entry of WhatsApp Payments and Paytm’s troublesome times, PhonePe is trying to leverage growth across segments. This lead in enabling IPO application payments is expected to help the company achieve larger market share in UPI transactions going forward, at least, until other players enable the similar service.
