Flipkart is furiously allocating funds to its logistics and digital payments subsidiaries in a race to the top spot against ecommerce major Amazon India. After the massive $460 Mn funding to Ekart, Flipkart has now committed $500 Mn to its group company, the UPI app PhonePe.
The revelation came in just after the recent investment of $38.7 Mn in the digital payments subsidiary in August 2017. The funding push seems to be in direction of the Flipkart’s keen interest in rapidly scaling up technology, reach and offerings of PhonePe. The commitment adds to the $75 Mn funds infusion Flipkart has made in the UPI app since acquiring it in 2015.
As shared by Sameer Nigam, the CEO of PhonePe, the newly raised funding will be used to scale up the technology platform of the UPI app, and expand their merchant network and consumer base rapidly.
PhonePe Funding: A Fuel To Race Ahead Of The Other UPI Apps
In July this year, PhonePe claimed to have partnered with 25,000 merchants across the country to promote UPI-driven payments. PhonePe is currently working with YES Bank to launch new features with UPI 2.0. “We have been growing at over 100% every two months this year, and this investment will help us maintain the same aggressive growth rate for the next two years,” added Sameer.
PhonePe has been continuously giving a tough battle to the government-owned UPI app BHIM since last year. It claims to have touched over 16 Mn transactions on the back of a successful Flipkart Big Billion Day Sale in September 2017. The annual run rate of the Flipkart owned UPI app, as a result, touched a new high of $3.5 Bn in terms of Total Payments Volume (TPV) in September, as claimed by the company.
Also, in August 2017, PhonePe raced ahead of BHIM scoring 45% share of total UPI transaction. Prior to that, BHIM app’s share of the total volume of UPI transactions dropped to 42% in May 2017 from 44% in April 2017.
Why Pushing PhonePe Is Critical For Flipkart?
The market research shows India’s digital payments sector is estimated to grow to $500 Bn by 2020 representing around 15% of GDP, up from around $50 Bn last year. “FinTech and ecommerce are among the most visible faces of a new digital India that is powered by the youth and technology, and both are set for outstanding growth. PhonePe is a critical part of our overall strategy at Flipkart to build a comprehensive ecosystem for our customers. We’re fully committed to making PhonePe the most preferred digital payments app in India,” said Binny Bansal, Group CEO, Flipkart.
After raising over $4 Bn within a few months, Flipkart is currently riding at breakneck speed in multiple directions. From launching Flipkart Global, entering the refurbished smartphones segment, foraying into online grocery, and launching multiple private labels as well as its one-stop hyperlocal mobile app, Flipkart is working aggressively to bolster its position in the Indian ecommerce space and its war chest against global ecommerce giant Amazon.
However, PhonePe is one bet that Flipkart cannot lose in the present scenario with its ambitious plans to enter the financial services segment. The efforts have to be more forceful with rivals like Amazon India ready to infuse more than five times the amount in its digital payment company Amazon Pay.
With the recent funding, will PhonePe be able to maintain its growth rate against other UPI apps especially BHIM? Will PhonePe with its offline foray be able to grow its merchants’ network to a large scale? Also, with the Indian government committed enough to position BHIM as a prominent UPI app, will the funding provided by the parent firm Flipkart be enough to boost for the digital payments firm? These are just a few questions, but the responses to these in the coming times will be strong reasons in shaping up the digital payment infrastructure of the country.