Flipkart and its payments arm PhonePe, which are both in the process of building out their fintech businesses, are undertaking different strategies to develop their respective units as part of a broader strategy to solve problems for online consumers and avoid cannibalizing each other’s businesses, according to two people directly aware of their strategies.
While Flipkart will look to offer its customers financial and payments solutions around the products its sells, such as insurance around products such as smartphones, PhonePe is adopting a different strategy where it is looking to build out a distinctive business unit around financial services, insurance and wealth, where it will look to co-create insurance and mutual fund products in partnership with large financial services firms.
The different approaches by Flipkart and its fully-owned, UPI-based payments arm PhonePe, highlights a broader strategy on Flipkart’s part to create large, independent, revenue-generating businesses inside the group—and much like it did with eKart, Flipkart is betting big on PhonePe, given its potential to dominate the booming digital payments and fintech space.
According to the people mentioned above, Flipkart is also in talks to invest in or acquire a number of fin-tech startups—much like the strategy being adopted by arch-rival Amazon India. Both of them requested anonymity.
Mint had first reported on 23 October that Flipkart was planning more start-up investments and acquisitions and had held talks to invest in consumer internet firms such as BookMyShow and Swiggy. The Times of Indianewspaper had reported earlier in January that Amazon India had held talks to invest in insurance start-up Acko.
In an interview in January, Flipkart chief executive Kalyan Krishnamurthy had said the firm would look to launch more financial services for consumers, akin to what it did last year with schemes such as equated monthly instalments (EMIs) on debit cards, without sharing further details on what the programmes would look like. Krishnamurthy also declined to comment on PhonePe’s strategy.
“Whatever we do in Flipkart is to enhance the customer experience of the retail customer. What Flipkart will look to do is offer extremely flexible and easy payments solutions for customers. We want to ensure that we get more customers and get them to transact more often—that will be the objective of any kind of a financing and affordability construct which Flipkart will get into. Flipkart’s fintech play will be heavily tied to retail,” said Krishnamurthy, who has now completed a year as Flipkart’s CEO.
Flipkart’s fintech push is currently being led by its former technology chief Ravi Garikipati.
“If you just look at just innovation, in addition to more operational innovation, we came out of 2017 with some industry-defining innovation, specially related to offering better affordability programs for customers. One such innovation was offering debit-card EMIs. We further enhanced our product exchange programme, by offering buyback guarantee,” said Krishnamurthy. Buyback guarantee refers to the programme where Flipkart offers customers favourable exchange prices on products, such as smartphones
In an interview, PhonePe co-founder and CEO Sameer Nigam said that the payments arm would take a partnership approach while building out a full-fledged financial services business, instead of directly investing in or acquiring fin-tech start-ups—different to the approach being taken by Flipkart.
“There are two classes of financial services. Let’s take insurance, for example. If Flipkart is the largest seller of smartphones, it makes sense for them to offer phone insurance. That product is not a horizontal payment or insurance product. So, they’ll work on that. They’ve worked on EMIs with Bajaj Finance and every other bank. They’ll work on insurance with every other insurance company out there on providing solutions specifically for that—for that instrument, for that product, for that consumer. PhonePe is not building out those products. Flipkart has its own fintech business,” said Nigam.
“Flipkart is building fintech in the commerce context. If we were building a credit solution, it would be with the banks and it would be a credit line for every customer like a credit card. If we offer mutual funds, it’ll be from a mutual fund house,” added Nigam. PhonePe, which claims to be a leader in the UPI payments space, said it registered 36 million transactions in December, with annual run rate set to touch Rs80,000 crore in terms of total payments volume.
“Both on financial services and wealth we see massive opportunity,” said Nigam. “(In insurance and mutual funds) We will work with, let’s say, an HDFC or with an LIC, and try and come up with products where the premiums can be paid in smaller satchet instalments, so that the mass market can afford it. The barriers to adopting insurance or mutual funds is matching what the consumer needs and what their appetite is with the products that these guys have…so, we want to solve for all that,” he added.