When Walmart acquired 77 per cent stake in Indian e-commerce company Flipkart for a whopping $16 billion last year, perhaps the company had still not fully realised the opportunity that one of its subsidiaries would bring to India's booming digital payment market. Even Morgan Stanley in a report said that PhonePe could be worth over $7 billion with the potential of going up to $20 billion. Business Today met PhonePe's CEO Sameer Nigam to know about what lies ahead for the company:
Business Today: How is PhonePe looking to leverage UPI with multiple players in the market?
Sameer Nigam: As long as we are able to breakeven on a transaction and make some money, we are good. I still look at UPI as an opportunity to build a consumer company with a billion people. It's not going to be a high margin and low volume game. UPI is on the other end of the spectrum compared to players such as American Express. UPI is utilitarian, focussing on mass purpose by design. Margins will always be a sliver of what you can get against a niche play but the sheer volume should make up for it.
Is there any scope for consolidation on the payments side today?
Nigam: I will take a contrarian view. There is no scope for consolidation on the consumer side. I say that because payment gateways can consolidate and pool together on the merchants' side and on operations. On the consumer side, the biggest intellectual property is the database and the consumer connect. You cannot take two consumer bases and merge their app usages. We have seen a bunch of wallets become irrelevant over the last 18 months after the introduction of KYC, but no mergers have happened. That's one of the harsh realities of the consumer internet space. That is why it's a winner-takes-it-all kind of a market.
Recently Morgan Stanley valued you at $7 billion. Is this a validation of PhonePe doing things the right way?
Nigam: We are definitely excited about the size of our company. We were 1/10th of it when the acquisition happened. Walmart has been very generous with the continued capitalisation and more than generous in acknowledging that they are excited about us. Each of such report gives us more validation.
How is Walmart looking at PhonePe in terms of focus?
Nigam: Walmart is now looking at us differently in terms of our potential size and opportunities as to how we may work with them across different markets. All our functions are internal and we receive a lot of support from the board in terms of strategic reviews. Besides, the great thing about having Walmart is that they have a long-term view. We had never really taken a short-term view even earlier, as being under the Flipkart umbrealla shielded us from fund-raising and other distractions. We keep our blinders on and execute.
What are the big changes that you are anticipating in the payments ecosystem and how are you gearing up for it?
Nigam: Over the next 24 months, two big things may happen. Today nearly 300 million people are consuming internet. By 2020, we are going to see the e-commerce (not just product shopping) explode. Digital payments will lead the volumes behind which a lot of commerce will open up. Second, it's going to be a lot more inclusive and 'bharat' will genuinely be in play. It will become part of the economy. I see that inflection point within next two years.