Walmart-backed fintech giant PhonePe makes e-commerce push

Image credit: Dhiraj Singh/Bloomberg/Getty Images

In a move reminiscent of the successful early forays into the state-backed UPI network seven years ago, PhonePe, India’s leading mobile payments app, is now setting its sights on the e-commerce sector.

The Bengaluru-based startup, backed by retail giant Walmart, launched an e-commerce app on Pincode, powered by the Open Network for Digital Commerce (ONDC), an Indian government initiative that strives to democratize the e-commerce landscape by offering a zero-commission platform.

Pincode will work with local stores and is initially in Bengaluru. The startup plans to slowly expand across India, city by city.

ONDC, a non-profit company established by India’s Ministry of Commerce in 2021, is an “interoperable” network, where buyers and sellers can do business regardless of the app or service they use, disrupting consumers’ reliance on using proprietary services powered by Amazon and Flipkart.

“This is the UPI moment for e-commerce,” said Sameer Nigam, co-founder and CEO of PhonePe. “I think there’s legitimate friction in the e-commerce industry. Consumers don’t care about where the food is coming from, where the next phone is coming from. They care about convenience.”

Scores of industry players, including 48-year-old retailer Sangeetha Mobiles, and restaurants are hoping that the ONDC makes a dent in the market and forces incumbents to lower their fees, their executives said at a conference on Tuesday.

PhonePe, valued at $12 billion, registering with the ONDC is notable in several ways.

1. In the Walmart-backed app, ONDC is courting a major player. The network has so far been largely ignored by the big giants such as Amazon, Google and Facebook
2. Although PhonePe captures over 50% of all transaction value on the UPI network, the company has been hunting for other avenues to generate revenue. PhonePe has recently said in recent quarters that it will use its large platform to cross-sell insurance and other services
3. PhonePe, which was acquired by Flipkart in 2016, was separated from the e-commerce giant last year. Although Flipkart does not plan to enter mobile payments, TechCrunch previously reported, it is interesting that PhonePe wants a piece of the e-commerce market

India’s e-commerce market, currently dominated by Flipkart and Amazon, is estimated to be worth $133 billion by 2025, according to wealth manager Sanford C. Bernstein. ONDC poses a major disruption to the e-commerce sector, according to Morgan Stanley, but it still has a few things to iron out.

“We see execution challenges … such as in the ability to bridge the trust deficit between sellers and buyers, and provide real-time availability data for inventory management,” they wrote in a recent report.