India: PhonePe aims to be profitable by 2022, go public in 2023

PhonePe co-founder Sameer Nigam. Photo: Livemint

Since the start of 2020, the digital payments industry hasn’t had it easy. The slashing of transaction fees of payment firms for unified payments interface (UPI) and RuPay transactions, and then, the ongoing covid-19 crisis and lockdown has further put the brakes on the growth of digital payments.

Fintechs are now looking at alternatives to cover on lost revenues. Flipkart’s digital payments arm PhonePe is also seeing an impact, but believes that the bet on its O2O (Offline-to-Online) strategy is paying off. In a telephonic interview, PhonePe co-founder and CEO Sameer Nigam speaks about turning profitable, initial public offering (IPO) plans and synergies with Flipkart. Edited excerpts:

With the current lockdown, transaction fee being slashed to zero and the recent outage due to the Yes Bank moratorium, what has been the impact on PhonePe?

What are the new strategies PhonePe is eyeing to covid-19 crisis?

We took a bet on O2O (Offline-to-Online) strategy back in 2018, and are trying to help users discover products online, exactly like offline stores. We are also informing users on which shops are open and delivering, and working with delivery fleets like Swiggy Genie to meet our offline network stores and deliver goods to customers.

PhonePe takes a commission on the revenues on the business generated by a partner through the ‘Switch’ platform.

There were talks about PhonePe trying to secure external strategic investment and getting new investors on board. What’s the status?

Walmart has been a phenomenal investor, and, as far as the strategic investment is concerned, we have the necessary capital availability and don’t need external capital. Going international can open up our consideration for an external partner.

Tell us more about your profitability plan.

PhonePe has a line of sight to becoming profitable by 2022 and will file for an IPO in 2023. Currently, O2O contributes for less than 5% of our revenues; payment distribution will be 40% and 35% will be advertising, the rest is financial services.

Cost of acquiring users and need for capital is lower now than what we spent in 2018 and 2019, thanks to the ‘network effect’. But, we will spend on direct consumer marketing. We will exit this year with more than 275 million users using PhonePe, and gather another 220 million in the next 2 years.

Going forward, the Flipkart app could be listed on our ‘Switch’ platform or Ekart (Flipkart’s logistics arm) to help with hyperlocal deliveries of essentials from our offline network. These are just ideas for potential growth. Using Flipkart’s ‘Pay Later’ credit line, users can are already paying bills on PhonePe. It makes sense for us to look at more opportunities tactfully.

Will PhonePe look at inorganic growth through acquisitions?

We will not acquire to aggregate market share. We have always believed in organic growth, however if we might look from a pure innovation standpoint at the ‘adtech’ space or IP around ‘scoring’ and ‘risk modelling’ in the financial services space.

This article was first published on livemint.com.

Singapore Reporter/s

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Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.