To reduce its dependency on cash transactions and penetrate the growing market for online payments, Flipkart is planning to invest Rs 670 crore ($100 million) over the next three years to build an independent digital payment business. Flipkart will launch a new product, which will work like a digital wallet while also allowing consumers to pay online in coming weeks.
The business will be led by PhonePe, a startup acquired by Flipkart in April’16. PhonePe will also use the new “Unified Payments Interface,” a platform launched by the Reserve Bank of India recently that will let users make instant bank transfers using their phones without the need of credit cards or net banking accounts, which typically require lengthy beneficiary details.
Flipkart’s PhonePe will be available on the parent site and Myntra, as well as for the logistics service eKart. It will then be rolled out for use across other digital sites and the ultimate aim of positioning it as an offline payment mechanism, even within kirana stores.
Out of four identified key drivers of business by Bansal earlier for the company, digital payment solution is planned to be addressed through PhonePe. Commerce and logistics have already been developed and already making Flipkart ahead over its rivals. Advertisement business has started to take off this year.
Though Binny Bansal, CEO of the company stated it as “Long-term Strategic Bet”, building a payment business is not choice but a need today for large online businesses, well supported by facts and figures.
Other players of same domain are already trying to capture the market volume of digital payment. Amazon India acquired Emvantage, Snapdeal acquired payments company Freecharge last year and Paytm owns a strong digital payment franchise, while others include Mobikwik. As per the report of research provider PwC, payments volume through prepaid payment instruments jumped 77% till July this year to Rs 24,124 crore, mobile banking transactions tripled between 2012 and 2014, reaching 150 million in 2014 and by 2019 about 800 million people will have access to online payment options in India.
Though the competition is tough for Flipkart as the market is overcrowded with digital payment providers, the registered user base of 75 million consumers may give advantage to Flipkart.