PhonePe, the digital payments arm of Flipkart, has received an investment commitment of $500 million from its parent company as it looks to battle giants Google, Facebook and WhatsApp in country’s fast growing mobile payments space.
Flipkart’s commitment to invest in PhonePe comes soon after the company infused $38.7 million into the firm to take care of capital expenses apart from investments in technology and growth.
Overall, Flipkart has so far ploughed $75 million into PhonePe since it acquired the company in 2015.
“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,” said Binny Bansal, Group CEO at Flipkart, in a statement.
The company says the investments will be utilised to scale up technology and grow the base of merchants and customers on its platform. At present, PhonePe claims it’s the largest Unified Payments Interface (UPI) app for merchants, with over 25,000 offline merchants accepting payments through it.
In September, the company said it registered 16 million transactions on its platform on the back of parent Flipkart’s festive sales. By offering extra incentives to customers who paid through PhonePe, the e-commerce firm is leveraging its massive customer base to grow usage on the payment platform.
PhonePe claims its success in September puts it on an annual run rate of $3.5 billion in Total Payments Volume (TPV).
“The investment will be used to scale up our technology platforms, and expand our merchant network and consumer base rapidly. 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,” said Sameer Nigam, CEO of PhonePe.
While PhonePe’s biggest competitor so far has been the National Payment Corporation of India’s (NPCI) BHIM app, competition in the space is heating up quickly. Not only is India’s largest digital payment firm Paytm planning to integrate with UPI, global giants such as Google, Facebook and WhatsApp are getting in on the game as well.
Last month Google launched Tez, its payment app for India that runs on UPI. The app, which is very similar in functionality to BHIM, today largely caters to peer to peer payments, but Google says it is working on introducing many more features in the near future. Bill payments and recharge will be chief among those additions, apart from growing its base of merchants that accept payments through Tez.
WhatsApp and parent company Facebook are also working with the NPCI to integrate UPI within their platforms. Chat app WhatsApp, which has begun testing its service for businesses to communicate with customers, is looking at payments as a way for people to buy products and services right within its platform.
Moreover, Google, Facebook and WhatsApp already have hundreds of millions of users in India. These firms are looking at tapping their existing user bases in order to grow their play in the digital payments space, making them formidable opponents to local firms such as PhonePe and Paytm.
Flipkart’s backers such as Tencent have vast knowledge in digital payments which can help PhonePe. Tencent owns WeChat which is the largest digital payment service in China, which dwarfs any similar type of service globally.