PhonePe launches hyperlocal shopping app with ONDC

The Walmart-owned digital payments platform that recently separated from Flipkart has partnered with ONDC to mark its entry in the ecommerce space, also giving the government-backed protocol a big boost with a dedicated platform.

PhonePe launches hyperlocal shopping app with ONDC

Tuesday April 04, 2023,

4 min Read

Making its much-awaited entry into online commerce, digital payments company PhonePe has launched a dedicated hyperlocal consumer app linked to the Open Network For Digital Commerce (ONDC) protocol.

Tagged as ‘India’s Infinity store’, PhonePe is launching the app in its homeground Bengaluru with six categories to begin with—fashion, home decor, electronics, pharmacy, food, and grocery—giving the government-backed ONDC the big stage it had been seeking in its quest to democratise ecommerce.

With 440 million registered users and as many as 35 million offline merchants on PhonePe, the integration with ONDC fuels the Walmart-owned company’s ambitious plan to enter the online commerce segment, especially since its separation from ecommerce giant Flipkart in December.

“We need(ed) a whole new shopping app, and hence we announced our new hyperlocal consumer app, Pincode,” PhonePe CEO Sameer Nigam said at the launch event in Bengaluru on Tuesday.

While the company did not divulge the investment into or the budget set aside for the project, PhonePe executives said it is targeting over 100,000 orders per day on the new app by December. Additionally, the fintech firm is in the middle of raising $1 billion in external funds, of which $650 million has been closed in tranches, to date.  

For context, across multiple buyer apps, including Paytm, ONDC receives only a few hundred daily orders on average. The protocol was officially launched in Bengaluru in September.

“ONDC is the next big thing. We are going to democratise ecommerce and not have it restricted to a few players,” former Infosys Chairman Nandan Nilekani, one of the key architects behind ONDC, said at the launch event.

“It needs some market person to put their weight behind the technology; someone has to take the ball and run… A company like PhonePe is now putting its weight behind ONDC and rolling out something exciting,” he said.

On the Pincode app, users can “multitask” and have multiple carts with separate checkouts while shopping across different categories.

“We would not be touching the prices. All the sellers will be listed democratically, and they would come via seller platforms. We are not here to decide who the winner is, and just want people to have way more choices,” CEO Sameer Nigam said.


What holds for PhonePe & ONDC

Pincode, which is noted as the first dedicated app by a company for ONDC, is expected to give a booster shot to the latter’s growth, which is yet to see its adoption by big names like Amazon, Flipkart, Google, and Microsoft. 

Apart from PhonePe, the ONDC network has Paytm, IDFC, Mystore, Craftsvilla and Spice Money on buyer-side applications.

On the other hand, for PhonePe—which commands a major share in the Unified Payments Interface (UPI) ecosystem with a user base of 440 million—the new app has come as an additional revenue stream, monetising its large user base. 

The company looks to turn its core business profitable in 2023, betting big on lending, cross-sell opportunities, gateway business, and now ecommerce. India's ecommerce market is projected to grow from $83 billion in 2022 to $150 billion in 2026, suggests a report from global financial technology leader FIS. 

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One of the sellers said launching a separate/native app on ONDC by the fintech was the right call, as it would generate the much-needed uptick for the initiative. 

“PhonePe is efficient in terms of pricing (take rate) for retailers. They have a huge user base and do not need to pay a penny to acquire new customers. This would be a volume game for them, and the revenues would depend on the take rate they negotiate with sellers' apps for different categories,” he said. 

As more buyer apps come onboard ONDC, sellers would ultimately become indifferent as to where their orders are generated from. “The differentiator for such apps would then be based on their ability to attract more users via better deals, understanding customer preferences, journeys, and addressing complaints better,” the seller said, adding that PhonePe has been accommodating and flexible in terms of addressing stakeholders' issues. 

Cover image and infographics by Chetan Singh.

(The story was updated with an infographic and additional details)

Edited by Feroze Jamal