Flipkart acquires payments start-up PhonePe

E-commerce marketplace Flipkart Ltd has acquired Payments start-up PhonePe Internet Pvt. Ltd. which was launched last December by former Flipkart executives. Flipkart was in talks to acquire a majority stake in the company for an amount between $10 Million and $20 Million. The PhonePe team will join Flipkart but will function as an independent business unit.

Payments have been one of the biggest hurdles for mass adoption of online shopping in India. UPI has the potential of transforming the entire payments ecosystem in the country. The acquisition of PhonePe is in line with Flipkart focus on driving innovation on the payments front. PhonePe is Flipkart third acquisition in payments, after it bought payments start-up NGPay in 2014 and FX Mart Pvt. Ltd which owns a prepaid wallet license.

PhonePe hasn’t launched a product but is working on a payments solution around the Unified Payments Interface an initiative of the National Payments Corp. of India, which will allow fund transfer between banks and will make inter-operability between banks and instant payments possible by using a single identifier like the Aadhaar number or a virtual address.

The UPI is part of a set of government programmes and technologies, together called India Stack that companies use to slash costs in offline authentication and provide services legally approved by the government to anyone with a mobile phone. The UPI is set to be formally launched in April. PhonePe mission is to significantly improve the online and offline digital payments experience for Millions of Indian customers.

Flipkart acquires FX Mart

India’s largest e-commerce firm Flipkart has bought payment services start-up FX Mart Pvt. Ltd, which holds a prepaid wallet license, so as to add a payment service on its platform and on that of its unit Myntra. Singapore registered Flipkart Payments Pvt. Ltd, paid Rs. 45.4 crore for a majority stake in FX Mart and two senior Flipkart executives also joined the board of FX Mart.

FX Mart owns a coveted prepaid license issued by Reserve Bank of India. The license will allow Flipkart to offer a digital wallet on its app and avoid paying a cut to external wallet providers. The license can also potentially help Flipkart increase the proportion of cashless transactions. A majority of shoppers still prefer paying cash for online purchases, which creates operational headaches for e-commerce companies.

With FX Mart License, Flipkart which has been a laggard in payments plans to launch a payment service on its app as well as Myntra within the next three months. The company also plans to offer the payment service on third party sites and apps later. The current market leader is Paytm followed by a host of smaller firms such as Oxigen Services India Pvt. Ltd and One MobiKwik Systems Pvt. Ltd.

India has several others payment services start-ups including Citrus Payments Solutions Pvt. Ltd, PayU Payments Pvt. Ltd, CCAvenue and Zaakpay. FX Mart offers electronic payments, foreign exchange and travel services. FX Mart is Flipkart second acquisition in digital payments. It bought another payments start-up NGPay last year.