Flipkart acquires payment services firm FX Mart

FX Mart owns a coveted prepaid licence issued by RBI which will allow Flipkart to offer its own digital wallet on its app

FX Mart owns a coveted prepaid licence issued by Reserve Bank of India (RBI)
FX Mart owns a coveted prepaid licence issued by Reserve Bank of India (RBI)

Bengaluru: India’s largest e-commerce firm Flipkart has bought payments services start-up FX Mart Pvt. Ltd, which holds a prepaid wallet licence, so as to add a payment service on its platform and on that of its unit Myntra.

Singapore-registered Flipkart Payments Pvt. Ltd paid Rs.45.4 crore for a majority stake in FX Mart, according to documents available with the Registrar of Companies (RoC). Two senior Flipkart executives also joined the board of FX Mart, the documents show.

FX Mart owns a coveted prepaid licence issued by Reserve Bank of India (RBI). The licence will allow Flipkart to offer a digital wallet on its app and avoid paying a cut to external wallet providers.

The licence can also potentially help Flipkart increase the proportion of cashless transactions.

A majority of shoppers still prefer paying cash for online purchases, which creates operational headaches for e-commerce companies.

With FX Mart’s licence, Flipkart, which has been a laggard in payments, plans to launch a payment service on its app as well as Myntra’s within the next three months, four people familiar with the matter said, speaking on condition of anonymity.

The company also plans to offer the payment service on third-party sites and apps later, they added.

A Flipkart spokesperson declined to comment. FX Mart managing director Amit Narang declined to comment.

Payment technology is a key function in e-commerce. Yet, because of a combination of lack of focus by e-commerce companies, limited utility for shoppers, unreliable Internet connectivity and regulatory hurdles, there are few large payment companies.

The current market leader is Paytm (run by One97 Communications Ltd), followed by a host of smaller firms such as Oxigen Services India Pvt. Ltd and One MobiKwik Systems Pvt Ltd. India has several other payment services start-ups, including Citrus Payment Solutions Pvt. Ltd, PayU Payments Pvt. Ltd, CCAvenue and Zaakpay.

“Payment has been one of the most difficult problems to solve in e-commerce,” said Harish H.V., partner at Grant Thornton. “But it is an essential part of the user experience and it’s important for an e-commerce company to have a reliable payment and convenient payment service in order to offer an end-to-end solution to customers.”

Paytm potentially got a vital break earlier this month, when its founder Vijay Shekhar Sharma became one of the 11 recipients of an in-principle approval for a payment bank licence issued by RBI. The licence will allow recipients to provide basic savings, deposit, payment and remittance services to shoppers, significantly increasing the utility value of owning a digital wallet.

Other large e-commerce companies have also been trying to build payment products. Cab-hailing service Ola (ANI Technologies Pvt. Ltd) said last Monday that it would offer Ola Money, a personal wallet, on other e-commerce platforms. Snapdeal (run by Jasper Infotech Pvt. Ltd) is also working on a payments product of its own and plans to launch it this year, people familiar with the matter said.

FX Mart, too, had applied for a payment bank licence but didn’t get one in the first lot of licences issued by RBI. Started in 2013 by entrepreneur Amit Narang, the company offers electronic payments, foreign exchange and travel services.

FX Mart is Flipkart’s second acquisition in digital payments. It bought another payments start-up NGPay (Jigrahak Mobility Solutions Pvt. Ltd) last year, although no new payment technology or service has come out of that company so far.