Demonetisation anniversary: CTO Rahul Chari explains how PhonePe grew from 10,000 transactions a day to a million
According to Rahul Chari, the company's transactions are almost doubling every two months. He does not see that changing in the near future despite cash returning into the system
Demonetisation, which gets divergent reactions depending on which side of the fence the people are in, has one unequivocal group of supporters -- digital wallet companies. Going by data complied by HDFC, the volume of retail electronic transactions peaked to 130 crore in December 2016, after demonetisation was announced by the government on 8 November 2016 as part of its drive to counter black money menance as well as promote cash-less culture, according to a PTI report.
PhonePe, a digital payments company founded as an UPI-based payments system was launched in August 2016, a couple of months before the high value currencies were banned. Since then, it has achieved Rs 16,150 crore total payment volume (TPV) annual run rate in 10 months, according to the company. Its monthly transactions have grown 800 percent since December last year, fueled largely by exponential growth in online merchant, mobile recharge and bill payment transactions. In the first article in a series on demonetisation, Rahul Chari, co-founder and chief technological officer spoke to Firstpost on how demonetisation has helped charge the company to new heights though the demand has now been sloped off.
Excerpts from the conversation:
Demonetisation has been a growth driver for digital payments.
While most articles talk of demonetisation as a driver of digital payments, it was only a catalyst. The government has been doing a great job in getting the building blocks for India’s digital transformation ready with Aadhaar, Jan Dhan Yojna, UPI etc. Demonetisation was a very effective catalyst in driving wide spread awareness of various digital payment methods available to the consumer and also the value and convenience of going digital wherever possible.
PhonePe was launched as an app for UPI. Did that help you to get traction quickly?
PhonePe’s app was launched for customers only in September 2016. Demonetisation did give us a fillip by increasing the number of users for PhonePe given that we were the best UPI app in the market at that point. Since then we have continued to add more and more use cases for the consumer in the PhonePe app which has helped us maintain our leadership in UPI. We have seen a tremendous amount of growth since our launch last year and have crossed the milestone of a million transactions a day. Before demonetisation, we had 10,000 transactions a day.
PhonePe is a digital payments container in which a consumer can choose any instrument they prefer, be it UPI, credit and debit cards, wallets, including third-party wallets like JioMoney, and use it for money transfers, salary payment, recharges, paying utility bills, shopping online and offline etc. Customers can also set monthly payment reminders and check their bank account balance.
You recently launched a POS device. What took you so long to come out with a device for merchant payments?
We were working on developing this device for more than a year now. The device has been built keeping Indian merchants and customers in mind. It does not require an internet connection and runs on a regular battery. The use of Bluetooth as the underlying technology makes the protocol used for the transaction robust and widely compatible. The solution provides several layers of security to ensure merchant and customer transaction safety. We will pilot it in Bengaluru with about 5,000 devices shortly before rolling it out across the country.
The POS device is a new addition which is a simple calculator for small merchants who are still uncomfortable with the concept of digital payments. We chose to model it in the form of a simple calculator as it is ubiquitous and anyone can use. All that the merchant has to do is enter the amount, and press the ‘PhonePe’ button. The customer brings the phone close to the POS device to receive the transaction details. The customer selects the payment mode of his choice on the PhonePe app and completes the payment. The green LED lights up on the device to confirm the payment to the merchant.
Haven't the effects of demonetisation waning with easing of the liquidity crunch?
Our transactions have been almost doubling every two months and we do not see that changing in the near future. By all measures we are the fastest growing payments app in the country. We have over 50 million app installs in the span of 10 months and have very high customer retention at 85 percent. The focus is obviously to create more brand awareness but we are very happy with our retention. We are constantly also working on giving a great experience to our users by creating more use cases in-app and also increasing the number of acceptance points at online and offline merchants. When we launched last year, the initial traction was from urban centres but with more coverage on localisation and by converting cash use cases such as Cash on Delivery (COD) payments into PhonePe payments for e-commerce players like Flipkart and others, we have been seeing more and more transactions from Tier 1 and 2 cities. Our addressable audience is large because of direct transfer from account through UPI.
What have been the challenges for you with demonetisation?
When we launched PhonePe, we started with our core offering of Person-to-Person (P2) money transfers using UPI. UPI makes sending money to anyone very easy. However, UPI itself was very new when demonetisation happened. A lot of people were trying UPI for the first time and there were many questions. what does UPI mean? How to use it? what is a UPI PIN? We helped customers by increasing the number of languages they could use from four to six and now the PhonePe app is available in over 12 languages. We built easy FAQs on how to set a UPI account, how to use the PIN and how to transact using UPI. We changed the FAQs (frequently asked questions) and worked on educating customers since there was a rush of people using UPI through PhonePe.
UPI was to our advantage when we started but besides that wallet, credit and debit card transactions have also seen traction at our end. Though we have a lot of instruments for payments, the demand continues to be the highest for UPI payments.
Are regulations in favour? If a customer loses money there are strong laws abroad for protecting them but it is not so in India. Your take on it?
The Reserve Bank of India (RBI) has always put the customer first and continues to ensure that the customer is not impacted in non-cash transactions. Because of the two-factor identification rule, the number of fraudulent usages of digital money instruments is very low in India. Besides that the RBI also focusses on regular audits of systems and processes of all companies providing digital payment solutions through which they ensure that the consumer continues to be protected.
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