Flipkart newly-committed $500 million is in addition to the $75 million that Flipkart has injected into PhonePe since its acquisition.
Ecommerce marketplace Flipkart announced plans to invest $500 million in its payment arm PhonePe, in a bid to take on archrival Paytm, which is currently India’s largest mobile wallet provider.
The first tranche would comprise $180-$200 million, expected to be invested by January 2018. The newly-committed $500 million is in addition to the $75 million that Flipkart has injected into PhonePe since its acquisition.
Flipkart Forging into Payments
Over time, Flipkart has made a number of purchases in the payments space, including NGPay and FX Mart.
Flipkart had acquired UPI-based payment startup PhonePe Internet Pvt. Ltd. in April 2016. PhonePe was founded in December 2015 by former Flipkart executives Burzin Engineer, Rahul Chari and Sameer Nigam, the current PhonePe chief.
The Changing Face of Payments
With these acquisitions, the ecommerce major aimed at “driving innovation on the payments front,” Binny Bansal, the then CEO of Flipkart, had said in a statement, adding that UPI had the potential to transform the “entire payments ecosystem in the country.”
UPI (Unified Payment Interface) is a mobile-first payment mode launched by the National Payments Corporation of India (NPCI). The system uses a “single identifier” (could be a cellphone number, email ID or Aadhaar number) to transfer money using a smartphone, eliminating the need for bank or credit card details.
Earlier in August, PhonePe had overtaken the BHIM app (the Government of India’s Bharat Interface for Mobile app), with a 45% share of the total UPI-based transactions.
Although PhonePe had accounted for as much as 50% of Flipkart’s total digital transactions during this year’s Big Billion Days sale held in September, it intends to focus on P2P (peer-to-peer) transactions. PhonePe’s CEO mentioned that P2P transactions tend to surge during certain festivals like Raksha Bandhan and Diwali. Nigam added that the latest funding would be used, apart from other things, to foray into “the offline space for the mid to small merchant’s segment.”