If data is the new oil, PhonePe is building massive refineries of its own

According to research firm Kalagato’s data on app installations, Paytm had 43 percent market share in July 2019, followed by PhonePe at 33.4 percent. For these companies, penetrating deep into the Indian market would not have happened without the new-age fuel that is data. 

Speaking about the role of data and machine learning (ML), PhonePe CEO Sameer Nigam tells YourStory, “Given the sheer number of people online now and the billion-plus transactions a month just on UPI plus on Visa and MasterCard, we are talking about several billion data points being generated every month just on our site. I am talking about full sessions right so there are these tens of billions of signals now.”

Stating that India is very data-rich, but still far behind the West or China in terms of harnessing the power of that data, Sameer says, “Every startup is talking about how data is the new oil, but we have not been able to build our refineries yet.” 

He adds that the process, though, has begun. “I will give you examples of places where we have really sort of improved. One clear area was customer service. Now about 80 percent of interactions start with a chatbot, and again here we are powered by Freshdesk. We didn’t build a bot but what we built is a ML- based response system based on the date and the last transaction or patterns when the customer came in and filed a complaint. Here is the likelihood of the issue she is having. And then you start engaging so that the customer doesn’t have to type in every little detail. You can actually guide them along the way. Today, more than 80 percent of all our tickets get closed automatically with a higher customer NPS (Net Promoter Score).”

ML and data are also helping the company in cutting down risks and frauds.

“At present, we process 14-15 million transactions a day. But, we also reject close to three quarters of a million transactions every single day. We don’t allow them to go through. You have to intervene because you know that there is likely fraud happening. For example, if you are constantly transacting in Bangalore and suddenly, we see a pattern of transactions happening in Delhi, Jharkhand, and Bengal, you know that something is wrong. So, we will prompt you to enter your password again for the app.”

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Sameer adds that the company can use data for doing different things, for example, to target what kind of rewards to give customers.

“I think the sky is the limit on what you can do with data. Indian startups, including us, have a long way to go in terms of sophistication there. I think the Googles and the Facebooks have a massive advantage today.” 

Speaking about monetisation, he adds, “I will break it down into three broad buckets. One, obviously, is our core business in digital payments today. So, we make small amounts of money but we make them at large volumes. If you go on Flipkart to make a transaction, then we are the payment gateway. So, we make the equivalent of MDR (merchant discount rate) or some money there. But if a customer comes to the PhonePe app and starts their Myntra transaction by logging in using their PhonePe login, then the full funnel is Myntra. But it cuts right back to us. We are playing the distributor role. So there, the margins are slightly more attractive. We are issuing millions of merchant coupons to our customers so that they get value in every transaction. We should be able to monetise those.”

The second bucket Sameer speaks about is the advertising stream.

He explains, “It is a way to monetise the high traffic and number of app events. So, advertising becomes attractive. And the third stream is certainly going to be financial services.” 

The massive monetisation opportunity from PhonePe also got a mention during the third quarter earnings call of FY20, where Walmart said, “We continue to see tremendous growth with 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 offering financial services.” 

(Edited by Dipti Nair)

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