Fintech company PhonePe has received a fresh funding of ₹518 crore from its parent, e-commerce major Flipkart, to strengthen its operations in an increasingly competitive market.

The PhonePe app is based on the Unified Payment Interface platform.

The investment was made by Singapore-based Flipkart Payments through the allocation of 24.56 lakh equity shares on March 19, as per filings with the Registrar of Companies and sourced by business intelligence platform paper.vc.

Flipkart said last year that it had committed $500 million in investments in PhonePe. The mobile wallet firm’s top executives said early this year that it had an annual run rate of ₹58,000 crore in transaction value.

According to National Payments Corporation of India, an umbrella organisation for all retail payments in India, UPI-based payment devices have outpaced other forms of digital payments. Google’s Tez and the Centre’s BHIM (Bharat Interface for Money) are few of PhonePe’s competitors. According to a KPMG report, after the entry of payments banks, e-wallets and launch of UPI services, the rate of adoption of digital payments in semi-urban and rural areas have been steep. Mobile phone-based payment transactions have outnumbered all other digital medium, and is the fastest-growing payment mode. The transactions done through the UPI channel have been valued at ₹13,174 crore as of December 2017, while other PPI-based (payment protection insurance) transactions have been valued at ₹3,270 crore.

Out of the overall transactions, a majority of the transactions were related to remittances and shopping, while some of the other popular transactions were mobile bill payments, DTH bill payments, data-card bill payments, utility bill payments and movie/travel ticket purchases, the report said.

PhonePe has adopted the FMCG model for its growth, and plans to activate one State at a time and increase the business there before going to the next State. In November last year, it launched its indigenously designed Bluetooth-powered point of sale (PoS) device for retail stores, petrol pumps and restaurants to accept digital payments. In Bengaluru, it has about 20,000 units. Its model is based on putting PoS devices first and then building scale rather than spreading itself thin across regions. It expects to install 1 million PoS devices across 50 cities this year. The company has absorbed the entire cost of ₹699 of the PoS and offers it free to merchants at a nominal refundable deposit which will be recovered from transaction volumes.

The Bengaluru-based company has been tying up with several companies such as Indian Oil Corporation for the use of its PoS devices across petrol stations. It has also entered into partnerships with retailers such as McDonald’s, METRO Cash & Carry, Café Coffee Day and Barista.

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