Flipkart-owned digital payments platform PhonePe announced last week that it now accounts for maximum UPI transactions in the country. With a 45 percent share of 16.6 million UPI transactions, it is ahead of the government-backed BHIM app, and a host of other UPI-based banking apps. PhonePe, of course, is driving usage through cashbacks, offers, and more — a ploy that seems to be working for all mobile wallet operators in India — but it is a part of an industry segment that is getting more cluttered by the day.
The newest entrant, Google Tez, has got the industry talking. WhatsApp is about to launch payments too. And PayPal has also secured a permit to operate a mobile wallet in India. Then there are already-established players such as Paytm (that has 225 million users), Mobikwik (the number two for now), Freecharge (that recently got acquired by Axis Bank), and more. While demonetization led to a pronounced spike in PhonePe transaction volumes, the sheer number of options available to consumers makes it difficult for a clear leader to emerge. Yet.
What then furthers a company’s growth? And how do digital payments companies sustain in the post-demonetization phase? What is leading the charge? Sameer Nigam, Founder-CEO of PhonePe, shares all that and more with BGR India. Edited excerpts from an interview:
Demonetization was a major event for all digital payments services in the country. Now that the effects are wearing off and most of the cash is returning into the system, how is growth likely to be impacted?
We have not seen a decline in our growth rates and have only seen an acceleration in value and volume of transactions post demonetization. We hit a $2.5 billion total payment volume annual run rate in July. This was the fastest ramp up seen in India’s digital payments market till date. In fact demonetization gave us a major fillip and UPI itself was a new network that has come of age. If you look at our transaction value and volume there has been no slowdown for us and we have seen an unprecedented 100 percent month-over-month growth.
If demonetization drove the first phase of growth, what is driving the next phase?
Our focus on UPI based P2P (peer-to-peer) payments drove the first phase of growth; demonetization gave it a further boost. Over the last nine months we have also added hundreds of billers and a lot of acceptance points. P2P Payments lead followed by recharges, bill payments, offline merchant payments, and online shopping are leading our growth now.
What is PhonePe’s average transaction size?
We have a much higher ticket size than [mobile] wallets because most of our customers are transacting directly from their bank accounts using UPI. Our average ticket size is closer to Rs 1,500. The environment around e-payment services is very competitive now with several merchants having their own payment apps.
There have been past instances of banks blocking PhonePe. How do you see this scenario playing out in future?
Only one bank [ICICI] has ever blocked PhonePe and that was due to some confusion over new UPI standards. This has not happened before and won’t happen again because UPI standards have been much more clearly defined post that episode. ALSO READ: ICICI Bank blocks UPI-based transactions on PhonePe; security concerns over mobile wallets to blame?
Are there any plans to push QR codes-based payments as some of your competitors are doing?
We are integrating it with NPCI’s help on Bharat QR. The PhonePe app already reads all UPI QR codes. In terms of publishing our own QR codes in the market, we are running some pilots… but nothing concrete yet.
How are you expanding your tie-ups with offline merchants?
PhonePe has signed up over 25,000 merchants. It is live in all Apollo Pharmacy, Cafe Coffee Day, Barista and Spencer’s Outlets. PhonePe is planning to go live with 15 pan-India chains in the next quarter.
It wouldn’t be an exaggeration to say that PhonePe isn’t the default payment app on Indian smartphones. In that case, how difficult is customer acquisition?
By all measures we are the fastest growing payments app in the country. We have gone to 45 million installs in the span of 10 months and have very high customer retention at 85 percent. Focus is to obviously create more brand awareness but we are very happy with our retention. We are constantly working on giving a great experience to existing customers and believe that growth will come. ALSO READ: India is just scratching the surface of digital payments acceptance: Mastercard Country Officer Porush Singh
One of the things we saw playing out in online shopping was the rush to please the lowest common denominator with the biggest of discounts. And as it turned out, that model wasn’t sustainable. The payments industry runs a similar risk now with ‘cashbacks’ becoming the order of the day. Where do we see this going ahead?
While we run aggressive offers in some categories, our organic app installs and customer retention rates are very high. We are adding more and more use cases to our app giving users reason to come and transact. We are not competing in the market on mobile recharges like the wallets were doing three years ago. Hence, our marketing costs are considerably lower than the previous wave of payment players we saw.
There are several issues that PhonePe customers seem to be complaining about on social media. From recharges not being processed to bank accounts not being linked and so on… What really are the problem areas?
We process several lakh transactions and take customer feedback very seriously. Whenever we receive any feedback from customers regarding any issues with PhonePe, our customer service team contacts them and offers swift resolution. Our industry-leading repeat rate for customers is testimony to the great customer experience we offer.