Walmart's PhonePe dives deeper into Indian financial services market

The start-up says Liquid Fund will allow its users to earn higher returns on savings with the ability to withdraw their money instantly 24x7

Walmart-owned digital payments firm PhonePe has started going deeper into the Indian financial services market, whose size could touch around $340 billion in the next few years. PhonePe said it had launched a new savings product “Liquid Fund” on its app. 

The company said the all-digital product would help its over 175 million users grow their savings by earning higher short-term fixed deposit like returns with the ease and liquidity of a savings account. The Bengaluru-based firm is competing with rivals Alibaba-backed Paytm, Google Pay and Amazon Pay that are also eyeing the sector.

“Our strategy around financial services is figuring out (different) segments where we want to drive penetration, educating customers and investing deeply into products that are simple and easy for customers to understand and are (customised) for them,” said Hemant Gala, head of payments, banking and financial services at PhonePe. “We are also creating a simple onboarding procedure. Customers find it intimidating if there are too many processes and forms.”

Liquid Fund is PhonePe’s second product in the mutual funds space after “Tax Saving Funds”. “Liquid Fund will allow millions of our users to earn higher returns on their savings with the ability to withdraw their money instantly 24x7,” said Terence Lucien, head of mutual funds, PhonePe. “We will continue to add more such solutions for our users to manage their money and fulfil their aspirations.”

Liquid Fund is targeted at users across India, including those from smaller towns and cities, who have never experienced solutions beyond savings accounts. PhonePe already sees over 56 per cent of its transactions from tier-2 and tier-3 cities.

According to the firm, users can begin saving with as low as Rs 500 in a completely secure and paperless process in less than five minutes. The company said the platform is the best way for new users to experience mutual funds as the money is invested in safer instruments, such as bank and government securities. There is no lock-in period and the customer does not have to maintain minimum balance.

PhonePe was a part of Walmart’s $16 billion acquisition deal of e-commerce firm Flipkart in 2018. Doug McMillon, president and chief executive officer of Walmart, had said in November said they were seeing “tremendous growth” in PhonePe.  “The company is acquiring more than three million new customers per month. With over 55 million monthly active users, we’re quickly looking for ways to monetise the customer base, including an offering of financial services,” McMillon had said.

Since then, the company said it achieved an annual total payment volume (TPV) run rate of over $150 billion, while clocking 540 million transactions in December 2019.

In December, PhonePe crossed five billion transactions on its app, and has grown 5x in the past year. The company said it is accepted as a payment option across 87 lakh micro, small and medium enterprises in over 215 cities in India. Over 56 per cent of its transactions are now driven by users in tier-2 and tier-3 cities.