With a 70% share of merchant Unified Payments Interface (UPI) transactions, PhonePe is working to expand its offline presence beginning with nationally prominent consumer brands, Rahul Chari, co-founder and CTO, tells Shritama Bose. It is targeting five million transactions a day by the end of 2018, up from two million now, he added. Excerpts:
Much of the growth you have seen has been fuelled by UPI. Could you give us a sense of the volume of transactions you are seeing and your market share in both peer to peer (P2P) and merchant transactions?
Right now, in the P2M (peer to merchant) space, we are the leader. Seventy percent of all P2M transactions on the UPI network are driven by PhonePe. In the last month, we recorded 45 million transactions of the total transactions in the UPI space. In terms of the mix, we have 55% merchant transactions and 45% P2P transactions in UPI.
Most of your merchant transactions come from the online space. What is the plan for expanding among offline merchants?
In the offline space, we’ve been growing rapidly and UPI is the primary driver in that space. We have taken a strategy that is top-down. We’ve focused a lot on the national players, like KFC, McDonald’s and pharmacy chains (such as) Apollo and MedPlus. We have also successfully concluded a pilot on IOCL (Indian Oil Corporation) and are now going to be rolling it out across a whole bunch of IOCL outlets across the country. So we are taking an approach of going with the nationally strong players who have a much broader footprint in the offline space. We are testing it out with a few stores and where there is success, we roll it out nationally. That strategy has been working very well for us. We recently launched Mother Dairy and we’ve seen extremely good traction there. So while it’s true that online is leading the way, offline is definitely catching up quite fast.
So how many outlets have you acquired in the offline space?
About three lakh outlets.
Are small unorganised merchants on your radar?
They certainly are. Our POS (point of sale) device was specifically designed for the unorganised and small merchant space. We believe that was the right way to get these stores to move to digital transactions . The reason we haven’t moved very aggressively there is that we are waiting for our manufacturing pipeline to kick in. We plan to build one lakh devices, which will get deployed in the next couple of months and we want to have between three lakh and four lakh devices in the market by the end of the year.
Offline merchant acquisition for UPI has been sluggish and one of the reasons is that the MDR structure was such that banks favoured card-based acquisition over UPI. With a re-alignment in card MDRs, do you see more interest from banks in acquiring offline merchants for UPI?
Ultimately, the market will decide what is the right instrument. It is very difficult to push for a particular form of payments where both the merchant and the consumer are not seeing value. From that perspective, UPI has seen a lot of traction and, therefore, it will be one of the primary instruments that merchants would want.
Are banks enthusiastic enough about acquiring small merchants for UPI?
It’s less about enthusiasm and other factors, such as the feet on street you need to acquire small merchants. That has been a limiting factor.
So when you go out to acquire them, will you be looking to build your own network of people or will you rely on banks’ branch networks?
I think it will be a combination of multiple strategies. There is opportunity to partner with banks and other players in terms of an acquisition strategy. We will definitely have our own team also.
You have acquired 100 million users. Considering UPI growth has now plateaued, do you think you have got all the consumers you could have or is there still room for growth?
There is a lot of room for growth. It is up to players like us, along with NPCI, to create more awareness. The number of bank accounts in the country is the number denoting the market opportunity. We have to see some of these account-holders become remitters of money from receivers of money. UPI itself will continue to see good growth.
What would your growth target for transaction volumes be for this year?
By the end of this calendar year, we are looking to do five million transactions a day.