PhonePe eyes top slot in digital payments

Last month, Bengaluru-based digital payments service company PhonePe became the single largest player on the UPI (Unified Payments Interface) with a market share of 40%. National Payments Corporation of India (NPCI) has reported that its UPI platform witnessed 236 million total transactions in July, thus PhonePe with 94 million transactions, is now ahead of payment apps like Paytm and Tez.

“The numbers on our platform are growing. We are waiting for UPI 2.0, which has been much anticipated. There is a discussion about UPI opening up for international remittances, bunch of features coming in, so we’re looking forward to it,” says CEO and co-founder of PhonePe Sameer Nigam.

PhonePe, founded in December 2015, was acquired by Flipkart in the following year. With 111 million transactions in July, and with $20 billion annualised total payment volume (TPV) run rate, the company is growing aggressively. Today, it powers a large number of merchant transactions on the UPI network. This led to it winning the award for “Outstanding Merchant UPI Player” from the NPCI earlier this year.

It’s growing the base and acceptance of UPI or any payment method. PhonePe also supports other forms of digital payments. It crossed the 100 million user mark in June.

“We started out in the post wallet era where the wallet started getting bust. Prior to that everyone was building large closed ecosystems, load money in the wallet and therefore you are captain to my wallet. In our case, we opened up the wallets but then you can also link your Airtel wallet, Jio wallet or Freecharge wallet. Whether it’s a bank, UPI, Visa, MasterCard, RuPay or third party wallet, ultimately it’s a source of funds,” says Nigam.

He adds that they are indifferent to where the consumer source of funds comes from. “Our job is to make sure that we make it extremely easy for people to spend the money at as many touch points as possible. We are trying to be the country’s largest transaction platform and the way we want to do that is to actually provide the best payment experience,” Nigam informs.

According to Nasscom, the global payments market is likely to cross the $2 trillion mark by 2020. A recent report by Credit Suisse said that the digital payments market in India is expected to reach $1 trillion by 2023.

Building up offline business

The digital payment company last month acquired Zopper Retail, a hyper local Point of Sale (POS) platform for small and medium businesses.

PhonePe wants to leverage Zopper Retail’s domain expertise to rapidly expand its offline merchant network across the country. “Zopper has a very strong technology and innovation DNA. It is specifically designed to meet the needs of millions of small retailers in India, and its strategy ties in very well with our overall vision of making digital payments universally accepted across the country,” he says.

The payments company has been rapidly expanding merchant base, and is now accepted as a payment option across 3 lakh offline and online merchant outlets spanning food, travel, groceries, taxi cabs, and movie ticketing, among others. PhonePe believes offline presence is going to be the game changer for the company in the next quarter.

By the end of the year, its target is to reach over a million small outlets in select cities which include Bengaluru, Andhra Pradesh, Telangana, Maharashtra, Goa, Delhi, Punjab, Haryana, Kolkata, Ahmedabad and Chennai.

With 400 people on its rolls, the company in the last quarter started working on the marketing and the branding side.

“We have made a lot of progress on both- the app and online presence of big merchants as well as offline national accounts. So last year when we started out, our first offering was B2B, and there was no easy way to send money between us. We had to use NEFT or RTGS, which we won’t do. So we disrupted that, then recharge and bill payment started, and now the focus is on merchants. 2018-19 is all about merchant use cases. In the first quarter, we went live with big players like MakeMyTrip, Ola, Swiggy and Goibibo. In offline side, we have gone online with all the big national chains,” he says, adding that they will start rolling out in other cities towards the end of the year.

POS device

In October 2017, PhonePe launched an indigenously designed Point of Sale (POS) device powered by Bluetooth technology to make payments easier and hassle-free. It is live with 10,000 units of the POS device in Bengaluru, and by the end of this year, PhonePe aims to go live with 1 million POS devices across 50 cities.

The company ran a pilot in 30-35 IOCL (Indian Oil Corporation Limited) outlets in Bengaluru.

As a part of the pilot, PhonePe was clocking approximately 20% of non-cash transactions and close to 7-7.5% of overall transactions in many of these outlets. Seeing the success of the pilot, this has been rolled out to IOCL outlets nation-wide.

Gold purchase

PhonePe has become the biggest destination for online gold sale with over 400% growth, since its launch in December 2017. The platform registered 200% growth in gold purchased via UPI. Since launch, PhonePe has sold more than 250 kg of gold.

It witnessed transactions from as low as Rs 100 to as high as Rs 50,000 across the platform. With the power of the bank account in their hands, customers can instantly purchase gold, and the largest section of users purchasing gold on PhonePe belong to the 25-40 age group.

The transactions vary across top metros and Tier 2 and 3 locations across Andhra Pradesh, West Bengal, Gaya and Hisaar.

“On a steady state basis we have the largest amount of gold right now in the country. We didn’t go on the digi gold model of Paytm, we tied up with players who keep the physical gold with a trustee. So IDBI trustee puts it in the vault, and if you want it physically, it will be delivered as well. People are saving up to the grams that they want and then we deliver coins,” Nigam explains.