Bengaluru: Amazon Pay, the online payments service owned by the world’s biggest online retailer, is planning to introduce “scan and pay" service at neighbourhood stores, said three people familiar with the matter, requesting anonymity.
Amazon has already introduced the payments service in department store chain Shoppers Stop, in which the online retailer owns a 5% stake, and will soon set up the necessary infrastructure at grocery chain More.
“Since it (Amazon) has a stake in these two chains, it is starting offline payments with these stores," said one of three people cited above.
“Subsequently, it will start reaching out to merchants, which would take more time as it is in the unorganized sector."
Amazon confirmed the development. “We have begun introducing Amazon smile code, a new way for our customers to shop and pay at physical stores like Shoppers Stop, among others," said an Amazon spokesperson.
“Customers will soon find Amazon smile codes in neighbourhood retail stores, where they can scan and pay for their purchases seamlessly."
Apart from the fact that offline transactions account for 90% of overall transactions in India, tapping into the space brings in more advantages. Analysts said that targeting the user base through offline payments is a way to not only bring them online, but also make them loyal users. Most online payments are driven by cashback offers.
“In online transactions, there is no customer loyalty," said an industry executive, requesting anonymity. “The idea behind offline payments is to also bring a customer online and, through this, they may also build user loyalty and create a moat, which is why all players are turning to offline."
While until a year ago, Alibaba-backed Paytm was ubiquitous with its QR codes across offline stores, payment platforms such as PhonePe and Google Pay have been expanding their offline presence aggressively.
According to industry estimates, there are around 300,000 offline, QR-based mobile transactions daily, most of which are enabled by Paytm, followed by PhonePe and Google Pay. Paytm, which was the first to install QR codes at offline stores, claimed in November that over 6 million of its 9.5 million offline merchant base accept Paytm UPI, and they form 80% of all offline merchant transactions conducted on UPI. PhonePe claims to have its merchant acceptance network across 100 cities. It has plans to increase to 500 by the end of 2019.
“The pace at which we are growing, we will catch up soon and also give tough competition to any other players that are coming into this space," said Vivek Lohcheb, head of unorganized business at PhonePe. “We have been acquiring close to 700,000 merchants/stores per month."
In contrast, Amazon Pay UPI was recently added to the Android platform, following concerns that it might find it difficult to compete with the incumbents, despite having a deep-pocketed parent.
“It’s everyone’s dream to own the customer and the merchant, but the way UPI has panned out, one has to take a call if it wants to work on the merchant side or the customer side," said Ashneer Grover, chief executive of payments firm BharatPe.
“While Amazon Pay can work with Shoppers Stop and More because of the stake it has, I am not sure about how it will capture the long-tail merchants—as there is no additional value proposition for the merchant."