Bengaluru-based digital wallet PhonePe had made waves in October 2017 when its parent Flipkart had announced a $500 million funding commitment to scale up its operations. Incidentally, PhonePe is ranked among the largest single investment commitments in the Indian fintech payments space and was over and above the $75 million infused in the payments arm since its acquisition in 2015. The buzz is that yet another tranche of this promised amount has recently beefed up PhonePe’s war chest amid intensifying competition in India’s $200 billion digital payment market, expected to mushroom to $1 trillion in the next five years.
PhonePe, which is now a step-down subsidiary of US retailer Walmart, has received Rs 763 crore (approximately $111 million) from its parent entity in Singapore, as reported by Business Standard. According to the company filings, PhonePe Singapore, previously known as Flipkart Payments, has infused the funds in the India entity by subscribing to 2,915,964 shares in the latter at Rs 2,450 apiece. This is the company’s first fund infusion in 2019.
Experts told the daily that PhonePe is key to Walmart’s e-commerce strategy in India. Vivek Durai, founder of Paper.vcPayment apps, said that there are both a proxy and a revenue driver for the key e-commerce players in India, adding that players offering a seamless UPI-backed payment experience have seen a huge spurt in growth, including PhonePe and Google. He added that Xiaomi’s impending entry may encourage more FDI into India in the payments space in 2019. PhonePe’s infusion is one such infusion, he said.
The new set of rules by the Department of Industrial Policy and Promotion, among other things, mandates the e-commerce marketplace to not influence the pricing of the goods sold on their platforms, which technically means throwing discounts out of the window. But as Durai points out, e-commerce companies are still allowed to incentivise buyers to make payments via their respective platforms, eg. with scratch cards”. Basically, given the inherent nature of the business, users quickly switch to services offering better discounts on transactions, and hence the growing focus on payments apps to attract users.
In the past year, PhonePe, for one, rapidly expanded its user base through discounts, promotional offers and deeper merchant integrations – at the cost of Paytm and Mobikwik. In FY18, the company’s total expenditure reportedly stood at Rs 840 crore, of which Rs 701 crore was categorised under ‘other expenditure’, including discounts, cash-back offers, and marketing expense.
The move has paid off. Last December, the company announced that it had crossed a billion transactions on the PhonePe app within 26 months of its inception, making it the fastest pace at which any Fintech-Payments company in India has achieved this milestone. In addition, it claims a 750,000-strong merchant base using its service.
Moreover, in February, Walmart India’s 23 Best Price Modern Wholesale “B2B Cash & Carry” stores went live with PhonePe as a payment option. PhonePe, in a blog post said that with over one million Best Price members, mainly kiranas, now being introduced to digital payment options, this would accelerate the push to drive offline transaction traffic for the adoption of digital payments in India.
