How PhonePe is striving to change the face of Indian kiranas

At a time when Walmart-owned Flipkart is on-boarding thousands of kiranas across India, its fintech arm PhonePe is helping kirana store owners adapt to the new-age style of doing business.

The kirana pie in the Indian retail industry is worth salivating over. With 15 million kiranas (as these neighbourhood stores are referred to), a majority percentage of which are unorganised, there is a huge opportunity for internet companies.

Even as Walmart-owned Flipkart is on-boarding thousands of kirana shops across India, its fintech arm PhonePe is helping kirana store owners adapt to the new-age style of doing business. 

According to Assocham, the size of Indian retail is $700 billion and is projected to be $ 1 trillion by 2020. In this context, PhonePe’s focus on kirana stores to help them compete with large retailers is worth taking note of.


In an exclusive interaction with YourStory Founder and CEO Shradha Sharma, PhonePe Founder and CEO Sameer Nigam says PhonePe is creating a level playing field and enabling lakhs of small kirana owners to compete with bigger and larger retailers.  

What does a kirana want? A kirana wants footfalls. They don’t have any CRM tools, they don’t have any local marketing capability, the best they can do is put pamphlets in your newspaper,” says Sameer, adding that because PhonePe has the tab for stores in its app, one can drive lakhs of customers into any shop in specific neighbourhoods should they choose to market right.


“Similarly, the merchant always wants a higher size basket. If you go into a big shop, they always have inventory-based offers, SKUs-based offers, big promotions happening during festivals like Diwali and Holi. The equivalent of that doesn’t happen in the small shops. Now you can create that environment,” he adds. 

Speaking about how fintech players have been helping the unorganised sector, he says, “The formal economy in the past 25 years has never really taken the time to actually cater to the needs of the small shops. It has always been about the organised sector.”

He adds that fintech has penetrated into this market. According to Assocham, 90 percent of the retail market is unorganised.

YourStory Founder and CEO Shradha Sharma in conversation with Phone Pe CEO Sameer Nigam.

Spearheading growth

Delving into the genesis of PhonePe, Sameer says, “We always thought of using technology and data to transform economies, and there was nothing bigger than financial services: easy loans, insurance, and digital payments. The data footprint that you actually get with payments can be used both to improve the merchants’ lives and consumers’ lives as well as really push financial services.”  

 Phone Pe has a large consumer base, and Sameer says, “We have a sticky base and we are proud of it. I am humbled by the scale at which things have opened up.”

Sameer feels working on improving the lives of kirana shop owners has been motivating. “They are just so hungry for growth. So hungry for people to even just cater to them. Similarly, we are also working with the BFSI industry and telling them that we are here as one fintech company that will partner with you, not disrupt you.” 

The inroads into the unorganised sector are helping the firm’s growth. Walmart, in its Q3 earnings call, said, “We also 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.” 

PhonePe has other plans to spearhead its growth at a time when the fintech sector is witnessing other startups in the space backed by deep-pocket investors. Last year, in December, the Flipkart-owned digital payments firm made headlines when it registered its wealth management division, PhonePe Wealth Services Pvt. Ltd., marking its entry into financial services. 

Nigam says, “So we have launched gold. We had also launched the first of several mutual fund categories, which are tax saver funds in April. We will soon be launching liquid funds and some other categories in mutual funds. After that we will look at equity and debt etc. We will soon bring the full mutual funds portfolio. Insurance is next for us.”

An ecosystem around wealth management

As far as lending is concerned, Sameer says, “I had said this in January 2019, we are giving it a pass this year. We felt that there is too much regulatory flux in the environment with NPS and it was not very conducive for us to enter the lending space. We wanted to understand from the mistakes of others and tread cautiously. Plus, we were shoring up our data capabilities and building our refineries.” 

However, the idea of creating an ecosystem around wealth management is a larger goal for the company. According to Sameer, “In the unorganised sector, the interest rates are insanely high and they are high because you don’t actually have floor-based lending in India. You also don’t have credit bureaus that actually cater to every Indian. Jan Dhan made sure every Indian has a bank account. DBD transfers are happening there. They are using Aadhaar and other methods."

"So, the government has done a smart thing there. They have created the infrastructure. What we as industry players can do is to create a good experience and then open up a big ecosystem of partnerships. We can’t possibly service every kirana in the right way with all the use cases. So we will have to find the right partners who can provide these use cases to the merchants.”

Sameer also spoke of the ground work done by PhonePe to tap into the market. He says, “The ability to be able to put thousands of people on the ground and deal with millions of kirana shops, deal with their motivations, their aspirations - you can’t do it with just API and codes. You have to invest in people on the ground and train them. And I think that’s something that’s setting us apart. We are actively investing in the heartland. About 70-75 percent of all our transactions and customers are from Tier II and III cities. In fact, a majority is now from Tier III towns and that is a testament to the fact that digital payments is penetrating very rapidly in India.”


(Edited by Dipti Nair)


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