PhonePe, backed by retail giant Walmart, is aggressively targeting merchant revenue growth through its payment gateway business. With a recent in-principle approval from the Reserve Bank of India (RBI) for its payment aggregator business, PhonePe is seizing the opportunity created by regulatory restrictions on established players, aiming to scale up its presence in the online commerce sector.
Seizing Regulatory Opportunity
PhonePe, with approximately 500 million registered users leveraging Unified Payments Interface (UPI) transactions and 37 million offline merchants using QR codes, is expanding beyond its traditional stronghold. Established players like Razorpay, PayU, Paytm, and Cashfree face restrictions from onboarding new customers in the online space, creating a substantial opening for PhonePe.
Strategic Focus on E-commerce
The company is strategically shifting its focus to large e-commerce players, gaming startups, and direct-to-consumer brands. Notable collaborations with gaming platforms such as Dream11 and MPL, hotel chain Oyo, and railways ticket booking platform IRCTC underscore PhonePe’s intention to become a major player in the online commerce segment.
Diversification of Payment Options
Initially known for offering UPI-based checkouts, PhonePe has expanded its services to include all forms of payments, including cards, UPI, wallets, and net banking. The company is running discount offers to entice large online merchants, even offering standard services for free to accelerate merchant adoption of its payment gateway.
Innovative Tools for Enhanced Services
PhonePe is not just expanding its offerings; it is also incorporating innovative tools such as the fraud-detection tool, Guardian, for its enterprise merchants. Additionally, the introduction of Express, a quick check-out experience for verified online shoppers, aims to streamline and enhance the overall payment process.
ONDC Integration for Holistic Approach
Beyond large e-commerce applications, PhonePe is actively building solutions on the Open Network for Digital Commerce (ONDC) platform. Going live on the seller side of the ONDC ecosystem by January, the company aims to onboard retail stores and enrich the selection on the Pincode platform. This strategic move positions PhonePe to empower merchants not only in accepting payments but also in selling products online.
Financial Services Integration for Growth
Valued at around $12 billion, PhonePe reported revenue of Rs 2,914 crore in the last fiscal year. To sustain and accelerate this growth, the company recognizes the significance of integrating financial services quickly. The emphasis on full-stack merchant payments becomes crucial, as revenue in the current fiscal year needs to see a substantial increase, mirroring the success of its closest rival, Paytm.
Organizational Restructuring for Distinct Revenue Streams
PhonePe recently underwent organizational restructuring, splitting its business into different verticals, each with its own chief executive. This move reflects the company’s commitment to establishing distinct revenue lines for each subsidiary as it seeks profitability and robust financial performance.
Industry Dynamics and Future Outlook
In a competitive landscape where startups are pushed to become profitable and create strong revenue lines, PhonePe’s fresh merchant focus positions it to leverage the regulatory vacuum created by restrictions on its rivals. A senior payment industry executive highlights that the embargo on competitors has provided PhonePe with a significant opportunity to scale up rapidly.
As PhonePe navigates the dynamic landscape of online commerce, its strategic initiatives, spanning payment gateways, fraud detection tools, and ONDC integration, signify its ambition to become a comprehensive player in India’s digital payments ecosystem. The success of PhonePe in the ever-evolving market will not only rely on innovative solutions but also on its ability to capture and capitalize on emerging opportunities.
