A month after it surpassed Google Pay in India in terms of the number of UPI transactions on its platform, Flipkart-owned PhonePe has announced that it has raised $700 million in funding from existing investors. Flipkart will remain the majority shareholder.
"Recognising the momentum that has been achieved, as well as PhonePe's significant growth potential, Flipkart's Board determined that this was the right time to partially spin-off PhonePe so it can access dedicated capital to fund its long-term ambitions over the next three to four years," the company said in a statement.
As it carves out a separate business from the Walmart-owned Flipkart Group, PhonePe will now have a post-money valuation of $5.5 billion. In addition, Flipkart co-founder Binny Bansa will be joining PhonePe’s co-founders Sameer Nigam, Rahul Chari and Rohit Bhagat on the company’s board of directors, Livemint reported.
"Flipkart and PhonePe are already among the more prominent Indian digital platforms with over 250 million users each. This partial spin-off gives PhonePe access to dedicated long-term capital to pursue our vision of providing financial inclusion to a billion Indians," PhonePe founder and CEO Sameer Nigam said.
As the UPI payments infrastructure set up in 2016 saw over 2 billion transactions in October, 835 million of those were by PhonePe—the first time that Google Pay, with 820 million transactions, was displaced from the top position in a year. As COVID-19 forced social distancing and shuttered physical spaces in 2020, digital payments saw a boom—and the UPI platform has benefitted most.
However, the National Payments Corporation of India (NPCI) has said that UPI players will have to operate under a cap, with each only to handle 30 per cent of overall UPI transactions from January 1, 2021. Existing players will have two years to ensure compliance to this. The move has been criticised by Google Pay, which said it will adversely affect adoption of digital payments in India.
While Paytm is the most-used app among merchants, PhonePe has become the number one UPI payments app with an over 40 per cent market share.
However, the market remains highly competitive with many different elements to it: Many players also offer insurance, for example, including Paytm and PhonePe. Whatsapp, which already has a ‘captive’ 400 million userbase in India, is also testing its UPI payments feature—but has been limited by India’s regulators to rollout the feature only to 20 per cent of its existing users.
PhonePe recently launched the PharmEasy feature allowing users to order medicines online using the platform.
In 2018, Walmart acquired Flipkart in a deal valued at $16 billion. With Facebook-owned Whatsapp Pay, Ant Group’s 30 per cent stake in Paytm, and Google, India’s digital payments space has become a battleground for the world’s biggest tech players—but the unifying platform, UPI, remains an Indian creation.