PhonePe adopts FMCG approach for tie-ups with local merchants

Sangeetha Chengappa Bengaluru | Updated on February 20, 2018

Sameer Nigam, CEO, PhonePe

Targets installing 1 million PoS devices across 50 cities this year

Payments platform PhonePe, a Flipkart Group company, is taking an FMCG-like approach to activate and grow the digital payments market in India.

The company prefers to activate a particular State or region, increase its density in that region, one pincode at a time and then expand to another region, a top executive of the company told BusinessLine.

The company launched its indigenously designed point of sale (PoS) device powered by Bluetooth technology last November for petrol pumps, kirana stores, restaurants and others to accept digital payments in the offline retail space, starting with 5,000 installations in Bengaluru.

Achieve density

“While over 800 million people have credit/debit cards, there is hardly any acceptance for debit cards in the offline market therefore, just issuing cards doesn’t solve the problem. We decided to put out the PoS devices first and then build scale. And have taken an FMCG-like approach to activate one State and region, then expanding from there, much like Hindustan Unilever, Procter & Gamble or ITC,” said Chief Executive Officer, Sameer Nigam.

“For customers to adopt digital payments offline, it needs to work everywhere in their neighbourhood, that’s why we need to achieve density in a region, instead of spreading ourselves lightly across cities,” added Nigam.

The company has installed over 20,000 PoS units in Bengaluru to date and says it is well on course to meet its target of installing 1 million PoS devices across 50 cities this year.

Going live

Besides Bengaluru, PhonePe has gone live with its PoS in Mumbai, Pune, Hyderabad and Delhi and will be installed in the top 10 cities, including Chennai, Jaipur and Kolkata, by March-end.

The company has absorbed the cost (₹699) of the PoS and is giving it out for free to small merchants against a nominal refundable deposit, which it hopes to recover from transaction volumes.

Last week, PhonePe entered into a partnership with Indian Oil Corporation (IOCL) for the use of its PoS device at 30 IOCL petrol pumps in Bengaluru, which will be scaled across its 25,000 petrol pumps pan-India. Customers can pay using UPI, Credit/Debit cards, PhonePe wallet and other wallets like Jio Money and Freecharge for their fuel purchases through the PoS device in IOCL outlets.

The company has also forged partnerships with 16 large organised sector retailers such as McDonalds, KFC, Metro Cash and Carry, Barista, Café Coffee Day and so on, and will have 35 such partnerships with national retail chains by March.

Since these retailers have their own established PoS, billing and reconciliation systems, PhonePe has to integrate its payment solutions with their systems.

In January, PhonePe, recorded an annual run rate of ₹58,000 crore in transaction value and 45 million transactions.

Published on February 19, 2018

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