Flipkart’s PhonePe to launch UPI-based app this week

The launch of PhonePe’s UPI mobile app will help Flipkart take on Paytm, Freecharge for a piece of India’s fast-growing digital payments business


If PhonePe works out as planned, it may help Flipkart slash the number of cash transactions, lower costs and make its supply chain more efficient.
If PhonePe works out as planned, it may help Flipkart slash the number of cash transactions, lower costs and make its supply chain more efficient.

Bengaluru: Mobile payments start-up PhonePe Internet Pvt. Ltd, which is owned by Flipkart, will launch its app based on the unified payment interface (UPI) platform this week, as it seeks to take on the likes of Paytm and Freecharge for a piece of India’s fast-growing digital payments business, two people familiar with the matter said.

PhonePe has partnered with Yes Bank Ltd to offer its app, which will first be launched on Google Inc.’s Android platform early this week, the two people cited above said. The iOS version will be available later this year, the people said, on condition of anonymity.

Flipkart, which is scrambling to save its No.1 position in e-commerce against an onslaught by arch-rival Amazon India, is attempting to become a diversified Internet company. The company offers logistics services through Ekart; it runs a fast-growing online advertising business; and, PhonePe is its big bet on payments, which is a key but largely unsolved problem in both online and offline commerce.

Flipkart said in July it will invest $100 million in PhonePe over the next few years. If PhonePe works out as planned, it may help Flipkart slash the number of cash transactions, lower costs and make its supply chain more efficient.

PhonePe will first offer mobile recharges, bill payment services and peer-to-peer money transfers, the people cited above said. The service will also be available to customers on Flipkart and one of its units, Myntra. Flipkart Money, the company’s wallet service, and Myntra’s wallet will be rebranded to PhonePe, which will process customer refunds on the two sites. PhonePe plans to begin its offline push next year, the people cited above said.

Flipkart claims it has more than 75 million registered users while Myntra has more than 10 million active monthly users (there’s some overlap between the user base of the two sites). PhonePe is riding on this combined user base to attract its first wave of customers.

“Our goal is to convert cash payments into cashless both online and offline. So (the captive) user base is a very good starting point. Within the next two months, PhonePe will also be available on Jabong (which is also owned by Flipkart) and a few other online platforms,” said one of the two persons, a Flipkart executive.

Flipkart declined to comment.

PhonePe was launched in December by Sameer Nigam and Rahul Chari, former senior leaders who left Flipkart last year, and Burzin Engineer, another former Flipkart executive. Flipkart bought PhonePe for an undisclosed sum in April. Nigam, Chari and Engineer had previously founded digital content start-up Mallers Inc., which was also bought by Flipkart in late 2011.

Last week, 21 banks including some of the largest lenders in India such as ICICI Bank, Bank of Baroda, Canara Bank and Punjab National Bank went live on the UPI platform. Two other large banks, State Bank of India and HDFC Bank are expected to launch their offerings later this year.

The National Payments Corporation of India (NPCI) started working on UPI in February 2015 and announced its launch in April this year.

UPI has the same infrastructure as the Immediate Payment Service (IMPS), which is used by banks for real-time transfer of cash. IMPS has a limit of Rs.200,000 per transaction, while UPI allows transfers of up to Rs.100,000.

Many analysts expect UPI to transform India’s payments business. Unlike a digital wallet that needs to be refilled with money frequently, UPI does away with this step by connecting payments directly with the bank accounts of a user. Hence, a UPI-based product can be more convenient than a digital wallet.

While digital wallet providers such as Paytm, MobiKwik and Freecharge (owned by Snapdeal) have built large businesses in mobile recharge, cable and electricity bill payments, a majority of e-commerce transactions and offline transactions still happen via cash.

To be sure, it’s not yet clear how digital wallet providers plan to combat the threat from UPI-based payment start-ups. Plus, the likes of Paytm, Freecharge and MobiKwik have a huge head start over their UPI-based rivals. Paytm has secured a payments bank licence and the company is expected to integrate its wallet solution with its banking efforts.

Yet, given the number of banks that have signed up for UPI, the potential ease of use provided by the platform and the high number of use cases that UPI-based start-ups will offer, digital payments may finally be adopted in a big way in India.

“Choosing among payments solutions will come down to ease of use of the product. Our goal is to remove the need of going to your bank’s site or app and doing all your payments through PhonePe,” the first person cited above said.

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