[The Big Fight] Has PhonePe finally beaten Paytm with $20 B in annual transaction value?

[The Big Fight] Has PhonePe finally beaten Paytm with $20 B in annual transaction value?

Friday June 01, 2018,

4 min Read

Bengaluru-based payments company PhonePe announced its total users had crossed the 100-million mark and the platform had clocked $20 billion in annual total payment value (TPV) run rate.

TPV is the value of payments, net of payment reversals, successfully completed through a payments platform.

PhonePe vs Paytm

The company said that in February this year, its annual total payment value crossed $20 billion (about Rs 1.3 lakh crore), a fourfold increase from March 2017, as it beefed up its categories across travel and movie ticketing. In April, competitor Paytm said it had nearly 100 million KYC-compliant wallets on its platform.

When contacted, Paytm said its annual TPV stood at $29 billion.

However, industry estimates say the wallet industry was hit with KYC-compliance levied by the Reserve Bank of India, resulting in slowing down of transactions and creating a challenge for user retention.

PhonePe claims it has 33 million UPI users on its platform, with 20 million users paying through cards, with a slight overlap between these users. Further, two to three percent of the 100 million user base are third-party wallet users, with the rest having wallets with PhonePe.

Surprisingly, NPCI in its annual report, stated there are only 46 million UPI users in the country.

Earlier this month, PhonePe had entered into a partnership with Airtel Money, allowing users to utilise their Airtel Money wallets at all merchant outlets that accept the PhonePe payments. Phone Pe has similar partnerships with Freecharge and Jio Money.

Sameer Nigam
Sameer Nigam - Founder of Phone Pe

Speaking to YourStory, Phone Pe Founder and CEO Sameer Nigam claimed that the firm had managed to double the payment volumes in the last three months.

The company stated that in April, it had reached close to 60 million transactions, with a daily transaction run rate of more than 2 million transactions. Of this, close to 1 million transactions were made at offline stores and touch points.

PhonePe plans to take this daily run rate to 5 million by December end. At present, the average transaction value on the platform ranges from Rs 1800 to Rs 2000, depending on the seasonality.

What’s next?

Sameer recalls that the first six months were the toughest and involved many product improvements. He adds:

“We are at a stage where the overall (UPI) networks', and underlying and partner banks' success rates have improved significantly. The robustness of the platform has also improved. Therefore, we have the confidence to aggressively go mass market.”

At present, PhonePe sees close to 93 percent transaction success rates on its platform, and is looking forward to aggressively expand its presence in Tier II and Tier III geographies. But the way forward for PhonePe lies in activating more merchants on the ground. At present, the company claims 70 percent of total transactions on the platform are made to merchants, while the rest constitute to be P2P.

However, the transaction value is higher for P2P transactions, says Sameer.

Focusing on the food delivery ecosystem, PhonePe partnered with Swiggy to enable payments, and Sameer states it is exploring a similar partnership with Zomato.

On the online front, PhonePe is looking to bolster its strength and looking to partner with players like MedPlus to make online medicine delivery even more convenient. The payment major is also looking at transportation as a huge category to double its payment numbers.

With some partnerships likely to be announced next month, the company is looking at toll and transit and is in talks with the National Highways Authority of India. It is also looking to partner with Mumbai Metro.

Sameer also hints PhonePe has roped in a major player in the cab aggregation space, and will go live with its payment solution in the next four to six weeks. In the online ticketing space, the company is in talks with a leading player, he adds.

“While focussing on complete online and offline coverage, 2018 will be the year when we really focus on our merchants with ambitions to see more offline activations,” says Sameer.

In February, PhonePe announced a partnership with Indian Oil Corporation for its Point of Sale (POS) device at IOCL retail outlets. The company had then said that within three months of launch, over 10,000 POS units have already been installed at Indian Oil outlets in Bengaluru. Now, Sameer claims the company plans to activate its payment solution across 14,000 Hindustan Petroleum Corporation outlets in the next 90 days, and is in also in talks with BPCL.

To further, bolster its offline growth, PhonePe claims to install close to 1.5 lakh PoS devices this quarter. Earlier this month, PhonePe had claimed it was live in more than 550 cities across India.

However, as its strong rivalry with Paytm continues, the real market opportunity for payment companies in India continues to be Tier II and Tier III geographies, with offline still being a major opportunity.