Flipkart invests $250 mn in PhonePe, out of $500 mn it has promised: Rahul Chari

Payments firm PhonePe was acquired by domestic e-tailer Flipkart in April 2016 and was seen as Flipkart's move to foray into the payments segment. However, two years down the line, PhonePe has managed to establish itself as a 360 degree payments service provider. Instead of restricting itself to being a payments facilitator for Flipkart, it claims that barely 5-10 percent of the business comes from the e-tailer.

The company, which competes with SoftBank-funded Paytm and Bajaj Finance-backed MobiKwik, recently launched a micro-app strategy under which it will allow customers to book cabs and bus rides on Ola and RedBus, respectively. Going forward, PhonePe plans to venture into similar such tie-ups.

In an interaction with Moneycontrol, co-founder Rahul Chari and Rituraj Rautela, head of in-app business spoke about the company's ongoing strategy and synergy with Flipkart Group. Edited Excerpts:

Q. Last year, Flipkart announced it will invest $500 million in PhonePe. How much of that has already come in? What are the future plans?

A. It was basically a two-year plan. We had effectively almost half of that amount come into the company. Most of it has largely (gone into) expanding the team and building technology. Over the last one year, we have almost tripled in size as an organisation. We are more than 300 people right now. Secondly, the number of launches, partnerships and capability that we have built over the year has really been prolific.

We actually had a two-year plan. With the Walmart investment coming in, we believe there would be more investments in PhonePe as well as all other group companies.

Q. Has PhonePe spent the entire $250 million invested?

 A. No, the money that has come in as an investment is not all spent. For us, once it is earmarked, it is a drawdown based on the need. The number is already there, it is based on how much we need to drawdown based on that spent.

Q. So how much of that has been deployed so far?

 A. We don't share that information.

Q. Although PhonePe is owned by Flipkart, the e-commerce firm has its own fin-tech business, through which it offers EMIs to customers. Why does Flipkart need to have a separate fin-tech business? 

A. We are an independent company in the group and want to ensure that we genuinely work with Flipkart maintain the merchant and payments provider relationship.

EMIs have been in play at Flipkart even before PhonePe was part of the group. So from what we believe is that we should build for the market and we are completely independent in choosing that. 

Q. How much of PhonePe's business currently comes from Flipkart? And what are the plans going forward?

A. While Flipkart is a strategically important merchant for us, from an overall transaction volume the group does not drive more than 5-10 percent of transaction with us.

A lot of our in app features like recharge, bill payment and other online merchants continue to be a large part of the overall transaction portfolio at PhonePe.

Q . Do you see that line narrowing further with new launches?

A. Of course, and that itself would be testimony to the success of the horizontal payments platform.

Q. Inter-operability has long been debated. PhonePe has always advocated for it. Now with numerous payment firms launching UPI, has it become a reality. What are your thoughts on it?

A. So from day one, one of the clear differentiation that PhonePe has from the rest of the consumer payment market has been our focus on being interoperable in every aspect.

PhonePe has never been a wallet or just a UPI player or credit card or debit card firm. We do have a payments container. We held that PhonePe should be reflection of a consumer's wallet. Any such instrument which has a digital version should be available in the PhonePe container.

Q. Last month, Walmart announced it will acquire 77 percent of Flipkart Group. What plans do you have for PhonePe once the deal gets concluded?

A. Walmart has been fairly vocal about how excited they are with the approach that we have taken. Going back to your point of inter-operability and open ecosystem, these are the aspects they are most excited about. They would like to actually look at PhonePe and learn about how payments can be won in a market like India. From the perspective of synergy definitely with Walmart's offline presence in the B2B space, we would like to see how we can possibly enable PhonePe payment as a very strong option in the Walmart cash and carry network. Again that is something that is a opportunity whether we will  use it in the near term is something that has not been discussed yet.

Q. Tell us about your micro-app strategy.

A. We launched this platform with RedBus in January and post that Ola is our first merchant. In rapid succession, you will see other merchant partners that will go live, this month itself. This is not just a payments app but a transaction ecosystem.

So what we are really building out is a platform that allows other merchants, small and large to build our their experiences and push it out without an app release on the PhonePe app itself. The consumer can then take advantage of that and we will bring in very specific payment related experience to the play.

What makes the Ola integration with PhonePe special is unlike any other partner we are taking an approach of going with what we call standing instruction as the entry point into Ola. So anybody who is using Ola on PhonePe has to set up an auto pay. What we mean by that is that it is a one time of regulation, to be able to bill credit or a debit card for the Ola ride. Once you do that ... will be no OTP (asked for) and there will be no transactional authorization that you will ever have to do.

Our monthly transacting consumer base is probably one of the largest in the country. We got 100 million users recently. We have very large number of saved debit cards and credit cards and we have the largest numbers of UPI bank account. Now when you look at various businesses, small and large, we become a platform of choice.

Q. How many merchants are you tying up with?

A. We already have RedBus, post that we got Ola and we would be having with a bunch of travel firms. So you have hotels, flights, food and movie ticketing coming in.  So the pipeline is pretty heavy right now. But the focus area is two things -- how do we work with our partners to enhance the user experience and secondly what is the value add that we are bringing to our customers and merchants.

From the priority perspective we are foccussed on all the use cases that are of high frequency and largely where the consumers typically knows what he or she wants and the ease and security of the payment plays a primary role.

By the year end, you will see 15-20 merchant stores on the PhonePe app.

Q. What amount of your overall revenue will be coming from this specific business?

A. At this point specifically for the micro app platform, we are looking more in terms of the number of use cases that we will enable by the end of this year. I think the transaction value or volumes will be an output metric. The target for ourselves will be based on the kind of transaction and the learning that we take over the next six months.

Q. Is there any acquisition plan?

A. We will definitely be looking at acquisitions. It won't be for acquiring merchants or consumers bases. That is something that we have under our control but for any new exciting technology or capability that are complimentary to what we offer.

Q. Are you already in talks?

A. We have been in talks with quite a few small players who are building a lot of niche ... as well as players who are focused on very specific segment. Enabling solutions for offline merchants is one of the example of an area where we have spoken to quite a few players.

Q. What sort of an appetite do you have in terms of deal size?

A. Really difficult to put a number. It depends on the level of excitement that we have with what the team and company are bringing to the table. I don't think the cheque size is a concern.