E-commerce major Flipkart, which launched its unified payments interface (UPI) handle in March, is off to a flying start with the company registering more than five million transactions worth Rs 200 crore in the month through the platform.
To be sure @fkaxis handle was available to limited users a couple of months before launch to test stability as per the National Payments Corporation of India (NPCI) regulations.
March was the first full month of Flipkart’s UPI offering being available to all Android users. The iOS version is set to be launched in a couple of months.
Flipkart did not say how many users signed up for its UPI handles. The Bengaluru-based e-commerce major is offering minor rewards for using its UPI and it is not clear whether the good start is because of the cashbacks. However, once a customer signs up for the Flipkart handle, the payment option is likely to be displayed prominently on the checkout page for further transactions. Most merchant platforms love UPI because there is no merchant discount rate (MDR) or payment commission for UPI, unlike card transactions.
To put the numbers in context, mobile payments firm Mobikwik did around eight million transactions in March, while other fintech apps such as Groww and Jupiter did less than seven and six million transactions. These companies' UPI products have been around for a lot longer.
Amazon Pay, which has been around for five years, notches up somewhere between 50 million to 65 million transactions a month. To reach around 10 percent of that in the first month of full-scale launch seems like a decent outcome.
Flipkart’s UPI usage is likely to be much higher than that of Amazon Pay UPI in the long run, said an industry executive, who did not wish to be identified.
“Amazon targets the premium customers where the credit card penetration is high. Flipkart is more popular among tier 2 cities, towns and villages and will likely see a lot more UPI usage,” the executive added.
Flipkart has around 500 million users and the company does around five million orders a day. Even if a third of these orders start using Flipkart’s UPI, it is likely to do 50 million transactions in a month.
The role and rise of UPI
UPI is the most popular digital payments system in the country, with around 75 percent of all online transactions executed through the platform. It makes sense for an e-commerce company with billions in sales every year to have its own UPI platform. For instance, Amazon Pay UPI is used for around 50 percent of all transactions made on the e-commerce platform.
Going to a third-party payment app increases the chances of failure. Having its own UPI handle will reduce payment failures for the vast majority of such transactions.
“We are seeing an encouraging response from our customers. UPI as an instrument has improved accessibility and convenience for both commerce and non-commerce transactions, and Flipkart's goal is to ensure we provide the same convenience on our platform as well,” Flipkart said in a statement to Moneycontrol.
For in-house payments
Flipkart’s main purpose in launching UPI is to cater to in-house UPI payment requirements rather than being used as a third-party payment app.
“We are not trying to be the largest payments company in India. Again, no such ambition or don't even have the bandwidth or appetite to do anything close to that,” Kalyan Krishnamurthy told Moneycontrol in an exclusive interaction a few months ago.
An e-commerce app being used as a pure-play payment app is likely to be clunky and heavy for payment purposes. This has been one of the biggest reasons why Amazon Pay UPI did not scale despite hefty cashbacks and offers.
Flipkart’s rise comes at a time when there are concerns that UPI is an entrenched duopoly, with Walmart-owned PhonePe and Google Pay cornering more than 85 percent of the market. Meanwhile, another large player, Paytm, has seen its market share drop from around 13 percent last year to around 9 percent in March because of regulatory action against its associate company, Paytm Payments Bank.
Incidentally, PhonePe, which is the market leader in UPI with around 50 percent market share, was incubated in Flipkart and hived off in 2020. Flipkart always wanted a payment platform of its own but did not launch any separate product because of PhonePe. But with the latter being hived off, it has re-entered the space.
Interestingly, Flipkart cofounder Sachin Bansal’s fintech app Navi is also offering rewards and cashbacks for using UPI.
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