BENGALURU: A few years ago, Founder and CEO of PhonePe, Sameer Nigam, and his team sat with the corporate development team at Flipkart to identify all the payment players and financial service providers in the market. They tracked this for 3-4 months and came up with 350-400 names but realised they can’t compete with everyone. Consequently, they dropped the idea of becoming a financial services manufacturer or a standalone banking app.
PhonePe has now become one of the top payment apps, competing with Paytm. In a conversation with Mint, Nigam talks about where PhonePe stands after the Walmart acquisition, plans for this year and likely expansion to international waters. This comes at a time when the company has received board approval to be hived off from its parent company Flipkart and is in the process of raising funds independently, which Mint reported on 11 February .
It’s going to be a year since the Walmart acquisition. Could you please talk about the changes that have come in to place as a result of this?
Firstly, it’s a sigh of relief that we now have a long-term strategic partner who has a major offline expertise. Initially we didn’t quite think of the cross-leverage, but now the dots have connected very well. Moreover, earlier, we had multiple investors on the cap-table who were also backing some of the competitors. But now with Walmart, there’s no potential conflict of interest.
Second thing that has improved for the entire group and not just PhonePe is that compliance is a dominant theme, which not only helps the group companies grow faster--it is also an important factor for an eventual IPO.
Does Walmart’s presence mean PhonePe would be looking to expand internationally?
It has definitely opened up the opportunity of going abroad in a big way. Sometime early next year, we may just carve out a team to look at the potential opportunities outside India to educate ourselves on the opportunity. But we will first need to understand what it means to for a four-year-old company to look at different geographies. That said, India is an extremely interesting market with massive opportunity and we won’t shift focus from India.
So what are PhonePe’s plans for India during 2019?
Plans are to ramp up offline payments this year by expanding the merchant base. We were late to the game compared to some other players but we have tried different solutions and spent a year understanding what the merchants really want -- deployed several thousand people on the ground for this.
Last June, we were at the 100 million mark with users but barely 68,000 merchants. But in the last nine months, we have covered over 100 cities, crossed the 4 million merchant mark and are adding almost one million merchants a month right now. Target is to cross 300 cities by the end of 2019.
We are exploring a couple of tie-ups in the telecom and FMCG industry that have deep penetration. We are also exploring some tie-ups with the government to see if we can go beyond tier 3 towns.
Can you tell a little about the PhonePe for business app?
We have also been increasing our focus on the PhonePe for business app, which was launched in November. This allows merchants to sign up by themselves including the onboarding journey. This helps them see their transaction details on a daily basis. It will also help them manage their entire store page on the PhonePe consumer app. We are giving them a digital identity and presence for the first time. They never had a curated experience. Now they can take pictures of their storefront and display details about the services they provide to be discovered by users on the PhonePe consumer app. It has been installed by almost 1.5 million merchants so far.
Hasn’t Google already done this?
With Google, everything was user generated. As a business, one would want to control the page. Google ends at discovery--our platform is transactional as well. The vision is that two years from now, for instance during Diwali, the user should be able to find a hardware shop, a lights store, pay online and get the task done. The idea is to turn every offline business into a viable online entity.
While there may not be 350-400 competitors to PhonePe, the market is populated with competitors such as Paytm, Google Pay and most recently BharatPe. Moreover, with newer entrants such as Jio, where do you think PhonePe stands?
Paytm is definitely the most-recognised name as far as the wallet story goes but with UPI, we have a clear edge. While BharatPe is doing the same interoperable QR bit and acquiring merchants, they do not have a consumer presence and are considerably smaller. With respect to Jio’s POS (point of sale) plans, I think the competition is more for the other POS players and not a PhonePe per se.
I keep telling my teams that we are not a ‘fintech’ company but a ‘techfin’ company, which means we are building technology with a view to transforming financial services including payments as opposed to a fintech company which uses technology to manufacture financial products.
We have different categories and offerings. We will ramp up offline presence, continue enabling financials services on our platform and grow the in-apps vertical as well.
Is profitability in sight for PhonePe?
First we want to see if we can build the right products for merchants and users to communicate and transact and make that profitable. What we have managed to do in the first few years is breakaway from the clutter -- with 400 apps -- banks, wallets, offline aggregators. We have managed to a product-market match and experience. Now with scale, we can distribute various kinds of solutions.