Flipkart To Invest USD 500 Mn In Its Payments Arm PhonePe
The fintech revolution in India is growing at an accelerating pace. Recently, e-commerce major Flipkart said it will invest USD 500 million into its payments arm PhonePe to scale up its operations. The commitment is in addition to the $75 million infused by Flipkart in PhonePe since the acquisition in 2015, Flipkart said in a statement.
It added that this is one of the largest single investment commitments in the Indian fintech payments space and “is reflective of the opportunities” in the segment.
The announcement comes a day after the Reserve Bank of India said interoperability of ewallets will be enabled in phases. Also, in subsequent phases, interoperability will kick in between wallets and bank accounts through the UPI (Unified Payments Interface), the central bank added.
While Flipkart did not specify the time period over which the funds will be infused, PhonePe co-founder and chief executive officer (CEO) Sameer Nigam said “this investment will help us maintain the same aggressive growth rate for the next two years”.
He added that the investment will be used to scale up PhonePe’s technology platforms and expand merchant network and consumer base rapidly. He also noted that PhonePe has been growing at over 100 per cent every two months this year.
“Fintech and e-commerce 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,” Flipkart Group CEO Binny Bansal said in a statement.
Flipkart is keen to rapidly scale up the technology, reach and offerings of PhonePe. Formerly known as FX Mart Private Ltd, PhonePe competes with the likes of Amazon Pay, Paytm and Mobikwik. Payments could play a critical role for e-commerce companies that are aggressively expanding their operations in the country.
Flipkart’s rival, Amazon, has also been ramping up efforts to strengthen its digital payments platform, Amazon Pay. Earlier this month, it increased the authorised share capital of the company by five times to Rs 2,000 crore. Also, earlier in the year, Amazon Corporate Holdings and Amazon.com.inc had pumped in Rs 130 crore into Amazon Pay India.
The fintech ecosystem in India, especially payments, is undergoing a paradigm shift with increased mobile Internet usage and increasing adoption of digital platforms by people. Estimates suggest that India’s digital payment sector is estimated to grow to $500 billion by 2020, representing around 15% of GDP, up from around $50 billion last year.
PhonePe, which claims to be a leader in UPI payments space, said it registered over 16 million transactions in September this year. PhonePe’s annual run rate touched a new high of $3.5 billion in terms of Total Payments Volume (TPV) in September.
IDC Financial Insights believes that newer categories of fintechs are gaining traction, including those focused on digital identity and authentication, blockchain, cryptocurrencies, robo-advisory, credit analytics and scoring, and usage-based insurance.
Arpita Mitra, Senior Research Manager for IDC Financial Insights, says, “The demonetization policy was an important push towards creating a cashless society and concurrently, resulting in a thriving mobile payments market, including remittance, money transfers, and peer-to-peer payments. We are also seeing these payment players expanding into m-commerce as a viable growth strategy. The disruption is also visible in lending, wealth management, and marketplace and aggregators.”
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