Flush with funds from its recent big-ticket funding rounds, e-commerce major Flipkart has committed investment of $500 million into its UPI-based digital payments platform PhonePe.
Flush with funds from its recent big-ticket funding rounds, e-commerce major Flipkart has committed investment of $500 million into its UPI-based digital payments platform PhonePe. The commitment is in addition to $75 million that Flipkart had already invested in PhonePe since acquiring it in 2015.
PhonePe said it will use the fund for scaling up technology platforms and expanding its merchant network and the consumer base. The fund infusion also comes days after PhonePe secured fresh funding of `254 crore from its Singapore-based group entity Flipkart Payment.
Binny Bansal, Group CEO, Flipkart, said: “We’re fully committed to making PhonePe the most preferred digital payments app in India”.
However, this may not be easy as PhonePe has larger rivals that are backed by big investors. Paytm claims to have over 250 million users, while PhonePe has over 45 million subscribers. Paytm reported about 1.5 billion transactions last year.
Flipkart didn’t reveal any time line over which it will infuse this $500 million into PhonePe, but Paytm after receiving investment of $1.4 billion from Softbank in May this year had said it plans to invest about $1.6 billion over the next three-five years.
Flipkart’s increased aggressiveness in the digital payment sector sits well, with a growing number of Indians using various digital payment platforms. A Google-BCG report shows India’s digital payments sector is estimated to grow to $500 billion by 2020, up from around $50 billion last year.
The World Payment Report 2017, jointly commissioned by Capgemini and BNP Paribas, also said India could potentially make its way into the top 10 markets globally in terms of non-cash transaction volumes. It added that non-cash transactions may grow at a CAGR of 26.2% during 2016-2020.
According to the National Payments Corporation of India, the country is expected to witness a six-fold growth in digital transactions to reach 25 billion during 2017-18, up from 4 billion in 2015-16.
The funding commitment also comes at a time when the RBI is paving the way for achieving interoperability between mobile wallets and bank accounts.
The digital payment space in India has become crowded and has consequently seen some large deals such as Freecharge being bought by Axis and PayU buying Citrus Pay last year.
Sameer Nigam, Co-founder and CEO of PhonePe, said: “We have been growing at over 100% every two months this year, and this investment will help us maintain the same aggressive growth rate for the next two years.”