Flipkart and PhonePe are looking at 'different paths leading to different outcomes'

Flipkart fintech isn’t focussed on individual payments or UPI. It’s an affordability construct both for customers and sellers.


Flipkart, India’s largest e-commerce company, now owned by Walmart, is charting its own financial services journey outside of PhonePe. Sources close to both companies told Tech2 that the two companies, though owned by Walmart, have “different paths leading to different outcomes”.

“While PhonePe will focus on payments, Flipkart will focus on lending and making buying and selling on the e-commerce platform easier and affordable, and offer loyalty and cashback through Super Coins,” said one of the four sources Tech2 spoke to who have knowledge of the fintech developments at Flipkart.

Flipkart will offer credit to buyers and sellers: things like cardless credit with buy-now-pay-later features, checkout finance, and giving working capital loans to sellers, among other things. The company is also in the process of applying for an NBFC licence.

 Flipkart and PhonePe are looking at different paths leading to different outcomes

Flipkart will offer credit to buyers and sellers: things like cardless credit with buy-now-pay-later features, checkout finance, and giving working capital loans to sellers, among other things.

While PhonePe will continue to build more use cases around UPI-based payments, it has barely any role to play in Flipkart’s world, explained a second source. UPI stands for Unified Payment Interface. “There are a variety of [individual] payment options. That’s PhonePe’s charter,” the source said, explaining that one company’s strategy won’t work for the other.

“Flipkart fintech isn’t focussed on individual payments or UPI. It’s an affordability construct both for customers and sellers, and in the future, products will be in the same space,” the second source clarified.

“Sameer [Nigam, founder and CEO of PhonePe] is not of the opinion of getting into credit, which is important for an e-commerce company,” said a third source, who is not surprised that Flipkart is looking at a larger fintech play despite having PhonePe as a subsidiary organisation.

Flipkart acquired PhonePe in April of 2016, but PhonePe always functioned separately. It was always treated as a payments company that got “front row treatment” inside Flipkart, the third source explained. “Sameer reported to Binny [Bansal] before the Walmart acquisition and now reports to the Flipkart board,” the person explained.

PhonePe is already one of India’s leading digital payment companies and counts PayTM and Google Pay as its largest competitors. It has already crossed five bn UPI-transactions. Walmart analyst Edward Yruma of US-based firm KeyBanc Capital Markets estimated PhonePe to be worth $14–15 billion as a standalone business.

India’s fintech and payments business has burgeoned in the past three years, after demonetisation. More than 2,000 fintech companies — big and small, funded and bootstrapped — have raised more than $8 bn in India.

Many of these would never make it to the next level as they would struggle to raise capital and find customers. For Flipkart, things are different. It has a large funnel of customers shopping on its platform every day (200 mn monthly shoppers as recorded during the company’s famous Big Billion Day sale), and it has a large number of sellers selling their merchandise on the platform.

Flipkart also offers Super Coin, which is essentially a loyalty programme. Through Super Coin, Flipkart plans to offer customers faster delivery, better discounts and free entertainment. Unlike Amazon Prime, which is a paid membership, Super Coins get added up with every purchase, and can be used to make further purchases at Flipkart or any affiliate sites. “It is a loyalty programme that allows customers to use the benefits in other places too,” said the fourth source.

It is clear that both Flipkart and PhonePe have divergent paths to follow. “Flipkart will never start a personal loan business, and PhonePe will not lend to sellers,” said the second person quoted above.

“Flipkart and PhonePe have two different universes of users. For Flipkart, it is all about increasing transactions and growing GMV and revenue. For PhonePe, it is about digitising personal payments. Also, PhonePe has made the choice of not getting into credit, while for an e-commerce company like Flipkart, credit becomes very important,” said former head of India Stack developer ecosystem, Nikhil Kumar, who is also the Co-Founder and Chief Evangelist at Setu.

Menawhile, PhonePe is out there in the market to raise money, and has been talking to investors to raise a large round. It is still a startup inside the large Walmart family. “As a founder you make choices. Sameer has made that choice as PhonePe’s founder, and Walmart understands that,” the second source added.

“It is quite similar to what’s happening in Facebook. WhatsApp and Messenger, both might get into payments, but they will have different problems to solve and different users to go after, and the markets also might be different. This is perfectly normal,” said Setu’s Kumar.


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