Even as some of the big banks in the country adopt the financial technology (fintech) approach, companies and start-ups offering digital payments services will continue to be on the top of developing products for the end consumer. RAHUL CHARI, chief technology officer and co-founder of Flipkart-owned digital payments company PhonePe tells PRANAV MUKUL in an interview that while banks will continue to be the gatekeepers of funds, there is an opportunity for fintech companies and the banks to jointly bring new products to market. He also talks about the opportunities PhonePe plans to leverage from Walmart’s investment in Flipkart. Edited excerpts:
With banks building digital payment products, where do you see growth coming from for fintech players?
For us, the definition of fintech from day one has basically been that we bring in the tech — meaning not just the systems and the platform but also the consumer DNA and the thought process of how to build products for the consumer — and the financial institutions actually bring in the ‘fin’ in fintech. So we have a partnership approach. That’s why even today, we call ourselves a payments container and not a wallet. As a payments container, we support every financial instrument of the consumer’s choice and, therefore, you also see third-party wallets there like Freecharge, Jio and Airtel Money. You’ll see more wallets in the future. Debit cards and credit cards are directly being used and we don’t force the user to top up the wallet and we are big on UPI which was introduced by NPCI along with the banks. That’s how I think it will continue to evolve. Banks will continue to play the role of being the gatekeeper of the funds. Banking is an age-old industry and the knowledge of processes involved in keeping money, storing money and making money grow is with them. For us, there is an opportunity to build partnerships and products and jointly take these products to market.
What kind of opportunities does PhonePe hope to leverage from Walmart’s investment in Flipkart?
Walmart team has been fairly explicit in terms of the strategic value and the praise that they have for both the platform and the interoperable approach that we have taken. They believe that this should be one of the key ecosystem drivers in the country when it comes to digital transactions. For us, at this point, it is for us to see what we can leverage. There aren’t any immediate plans but definitely in terms of Walmart’s own cash-and-carry business in the offline segment, there is an opportunity to participate there and increase the number of transactions and the penetration of digital payments itself in the whole B2B payments space. It is for us to decide when we actually want to get into it and explore those synergies.
How much of a role Flipkart plays in driving the numbers for PhonePe?
Strategically, Flipkart being a captive use-case for us is extremely important. It helps us have a very strong in-house player to take any of our new payment products to market. We are able to identify the new use-cases that are needed in the e-commerce space, try them out with the users, improve them and take it to the market. Secondly, it becomes an anchor merchant in the sense that if Flipkart is able to use a particular product successfully, it will be right for a lot of other merchants also because of the scale Flipkart operates at. From a transaction perspective, Flipkart is a very small part of the transactions that PhonePe drives. In the overall scheme of things in the merchant transactions, Flipkart would be contributing 5 per cent to the maximum.
Acquisitions of fintech companies have generally been by e-commerce players. Why consolidation not happening among payments platform themselves?
It is early days for any consolidation in the fintech space. From a penetration perspective and the opportunities ahead, most of the players have only started exploring a lot of opportunities and there are few big players but apart from that there are a lot of players experimenting with different things. I don’t think there’s any one area in fintech outside of payments that has been completely dominated by any one player right now. The reason you’re seeing acquisitions of fintech companies by e-commerce companies is because it has been generally proven that it is good to have a commerce platform, which has a strong adjacency to payments because it helps both the commerce play and the payments play grow faster.
How do you perceive WhatsApp’s entry into payments space given the advantage it has by already having a large user base and not having to invest heavily in customer acquisition?