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With Walmart aid, PhonePe wants to grow offline business, says CEO Sameer Nigam


With Walmart announcing the acquisition of Flipkart earlier this month, the company now looks to leverage the experience of the global retail giant to make significant inroads into offline business in FY19.

With Walmart aid, PhonePe wants to grow offline business, says CEO Sameer Nigam
Flipkart-owned digital payments company, PhonePe, crossed $20 billion TVP (Total Payments value) and 100 million users in May.
With Walmart announcing the acquisition of Flipkart earlier this month, the company now looks to leverage the experience of the global retail giant to make significant inroads into offline business in FY19.
CNBC-TV18's Rukmini Rao caught up with Sameer Nigam, co-founder and Chief Executive Officer of the company and here is the excepts from that interview.
Edited Excepts:
Sameer, now being a Walmart company, what has changed for you in the last few days?  
Nothing at all. It’s great to have them as a strategic investor, but besides sort of grandparent level company, nothing has changed for us operationally.
Walmart’s management has been pretty bullish on all the Flipkart companies after the acquisition. What are the synergies that you are expecting for PhonePe from this acquisition?
I think there are synergies at multiple levels. Walmart is obviously a  global retail juggernaut. They also have a lot of understanding of the merchant needs and consumer needs offline. So, we are hoping to get a lot of learnings from them on how the offline ecosystem needs to be opened up in India as well. I think there will be information sharing that will happen there. I think the stability that Walmart would bring in as a long term strategic investor in PhonePe, also gives us the ability to sort of take our time and plan out our product road map. And that like, I mentioned the prospect of going international at some point of time also opens up.
Now that you have spoken of international markets, are you looking at any timeline for this. I’m sure you would be eager to take this to the us market ?
Realistically, the Indian market is so exciting and so nascent right now. If you ask me realistically, I can't even think of going abroad for the next three-five years at least. This market is very very young. Until demonetisation, digital payments was not even on the minds of the most Indian consumers. Having said that, Unified Payments Interface (UPI) has only 50 million users right now, wallets is about 150–200 million people, whereas, internet penetration has already reached half a billion people, which means that digital payments is at a lag, which means that either there is a product – market mismatch, which us as an industry collectively need to solve for or there is some other sort of Phillip that the industry needs. Right now, squarely focus is on making payments in India very very easy, and adding tons and tons of used case in the app itself for Indian consumer now.
Walmart has said it's looking at a fresh equity infusion of about $2 billion into Flipkart , how much is PhonePe expecting ?
I think as with life, we will get out fair share for sure . So PhonePe will be getting a lot more infusion that has been discussed. To be fair, that was also in play with our existing board as well.
Talk to us about the phenomenal growth that you have seen in the last 2 months, in  March you had a total TVP of $13 billion and now you stand at $20 billion
It has been staggering and some of it, I cannot even explain. The amount that people spend on a platform is an outcome metric. You can’t really ask someone to spend a lot of money, but it reflects the sort of trust that has been put in early in PhonePe. The network has also matured over time, so the success rate of UPI, the card networks, are consistently improving quarter after quarter. We also launched our first national brand campaign, so the numbers have exploded. We were doing about 12.5–13 billion dollars of TPV process annualised in the month of March and in May. We crossed the $20 billion mark in TVP run rate, which I believe puts us in the leadership position in the market.
By the end of this financial year, how many of your point of sale (POS) machines do you see hitting the market?
Our target is by March 2019, we will have 1 million devices out in the market.
Your transaction value still remains high as compared to some of your peers. So in terms of the payments market size and you’re your transaction size , where do you put yourself and will smaller transactions be something that will be out of the window going forward ?
No. Interesting for us the smaller transactions will be at a bit of a lag, so unlike wallet players, where transaction goes up the value chain, we started with UPI, where there was unmet need of large transactions from bank to bank. So, transaction size or ticket size is little more than Rs 2,000. We did about 60 million transactions last month, about 2 million a day, which is what adds up basically for us. As we expand on the offline side, we expect the average ticket size to be going down. I think there are certain acceptance gaps there and UPI acceptance in the offline is very very low right now.
What is FY19 looking like for PhonePe, especially with you being a Walmart company and what are plans as far as dealing with completion goes this year  ?
I will answer the second one first. We are still a pretty small team and we remain focused on solving for the consumers, merchants, payments partners, the banking industry and the financial services industry. We don’t really look at competition, since this industry will attract the biggest and best competitors world wide. We have seen last year as well and I think it will only get fierce. And, in terms of what we expect in FY19, it's going to be about mass scale increase in our merchant penetration, it will be about introduction of some financial services categories, it's going to be about spending a lot of time, maniacal effort, in fact, improving customer experience, especially when the payment doesn’t go through well. I think, just that focus on making payment experience in India as seamless as cash. I think, there is a big gap to be solved in the markets and I think as an industry, we need to sort of focus on making digital payments as seamless and easy as cash, that is the opportunity.
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