Flipkart infuses Rs 5.18 billion of fresh capital into payments app PhonePe

This is its first investment in PhonePe since the e-commerce giant announced it would pump in $500 million into the digital payment app last October

Flipkart-owned payments app PhonePe has received a fresh funding of Rs 5.18 billion (approx $79.6 million) from its parent company as it looks to take on Google and WhatsApp in the fast-growing digital payments space in India.

The fund infusion is the first one since Flipkart announced that it would invest $500 million in PhonePe in October last year. At the time, Flipkart had already invested around Rs 4.4 billion in the digital payments company since its acquisition in April 2016.

The infusion in PhonePe was made by Singapore-based Flipkart Payments Pvt. Ltd. through the allocation of 2.4 million equity shares on March 19, according to documents filed with the Registrar of Companies which was sourced through Paper.vc.

PhonePe claims that it is India’s leading app for making payments through the Unified Payment Interface (UPI), with little over a quarter of all UPI transactions by value being processed by it. The company also claims that the average transaction value on its platform is Rs 1,820.

While India’s digital payments space saw a boom post the government’s demonetisation exercise in November 2016, more recently, the space has seen the entry of global giants such as Google and WhatsApp. Both companies have build payment solution on top of the UPI platform.

The entry of cash-flush rivals from the US has put Indian payment firms on the defensive. Most vocal has been Vijay Shekhar Sharma of Paytm, who has alleged that Facebook, which owns WhatsApp, is arm twisting the government to receive favourable treatment over their Indian counterparts.

But the National Payments Corporation of India, which owns the UPI platform, seems to be going after players who can quickly grow the scale of UPI payments. Nandan Nilekani, one of the chief architects of UPI and a big backer of the technology, has time and again said that the number of UPI transactions will touch 1 billion by the end of 2018.

It is this growth that is driving more global players to get into the game of digital payments in India. Flipkart’s planned investment in PhonePe will help keep the company ahead of rivals, while the parent firm’s growing e-commerce business will also direct more transactions to PhonePe which gives it an edge.

Earlier this month, PhonePe had hit back at rival Paytm, India’s largest digital payments company, who staked claim to be the largest UPI app in the country. Paytm had cited NPCI public data to show that users on its platform had made 68 million UPI transactions during the month of February, compared to just 28 million transactions done by PhonePe.

The Flipkart company had called Paytm’s claim “uni-dimensional and misleading” as it found that the average value of UPI transactions done by Paytm users was under Rs 40.