phonepe: PhonePe targets D2C route, more merchant revenue

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PhonePe has built a full-stack payments solution for ecommerce platforms and, armed with an in-principle approval from the Reserve Bank of India for the payment aggregator business, is scaling up its presence in online commerce.

For the Walmart-backed company, which has around 500 million registered users availing of Unified Payments Interface payments and 37 million offline merchants using QR codes, ecommerce is the next target.

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Gaming platforms like Dream11 and MPL, hotel chain Oyo and railways ticket booking platform IRCTC have already started working with PhonePe. It is generally going after large ecommerce players, gaming startups and direct-to-consumer brands (or new generation ecommerce players as it calls internally).

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With established players like Razorpay, PayU, Paytm and Cashfree not being allowed to onboard new customers in the online space by the RBI, a large opportunity has opened up for PhonePe.

Also read | PhonePe among top fintech companies with $1.3 trillion total payment value: Walmart

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Initially PhonePe offered UPI-based checkout for its own users on select ecommerce platforms, but now the idea is to offer all forms of payments across cards, UPI, wallets and net banking.

Additionally, the company offers a fraud-detection tool, named Guardian, for its enterprise merchants and a quick check-out experience for verified online shoppers, named Express.

“PhonePe is running discount offers to get large online merchants to start using its own payment gateway, even offering standard services for free,” said a senior payment industry executive in the know.

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While the entire merchant payments piece is headed by its chief business officer for merchant business, Yuvraj Singh Shekhawat, Ankit Gaur is the head of the payment gateway business.

“PhonePe was always consumer and offline payments focused, but now there is a golden opportunity in online payments with all the major players out of the market, hence it is seriously looking to build for online commerce,” the industry executive said.

Responding to ET’s queries, a PhonePe spokesperson said the company’s key focus area is to build revenue streams from merchant payments. The company did not comment on the number of new merchants onboarded, but said it is going after both gaming and large ecommerce players.

Expand on ONDC

Besides the large ecommerce applications, PhonePe is also building solutions on top of the Open Network for Digital Commerce (ONDC) platform.

It is looking to go live on the seller side of the ecosystem by January, as it looks to onboard retail stores on the ONDC network and add to the selection on the Pincode platform, two people aware of the discussion told ET.

The PhonePe spokesperson confirmed this.

“At present, PhonePe offers some local outlets on the Pincode app which is via other seller platforms on ONDC. However, with its entry on the ‘seller side’, it will start onboarding its own merchant and kirana network on ONDC,” one of the people cited earlier said.

The company went live on the ONDC network in April this year, with its buyer app, Pincode.

ONDC is an open-source platform on which ‘buyer apps’ connect consumers to sellers while ‘seller apps’ take on the role of onboarding merchants on the network.

PhonePe has always been strong in the offline payments space targeting retail merchants. Now with ONDC, it will enable them to sell online too, beyond just accepting payments.

The move holds significance as arch-rival Paytm is eyeing to onboard 10 million merchants on ONDC by 2025.

New businesses, new revenue lines

PhonePe, which was last valued at around $12 billion, reported Rs 2,914 crore in revenue last fiscal year. For the current fiscal year, if PhonePe wants this to go up by another 70-80% as last year, it needs financial services to kick in quickly.

“While consumer payments bring the volumes, revenues lie in merchant payments and credit, now as PhonePe looks to strengthen its revenue channels, a full-stack merchant payments is its primary focus,” said one of the people quoted earlier.

Its closest rival, Paytm, has built a full-stack online-offline merchant payments and credit business. In the last fiscal year, Paytm had reported Rs 7,990 crore of consolidated revenue.

Last month, PhonePe split its business into different business verticals with their own chief executives. Now it needs to set business targets and get distinct revenue lines from each of these subsidiaries.

“Every startup is being pushed to get profitable and create strong revenue lines. With its fresh merchant focus, PhonePe wants to strengthen its own and the embargo on its rivals has given it a big opportunity to scale up fast,” said the senior payment industry executive in the know.

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