SoftBank-backed Flipkart today said it will invest USD 500 million in PhonePe to scale up operations of its payments arm.
The commitment is in addition to the USD 75 million infused by Flipkart in PhonePe since the acquisition in 2015, Flipkart said in a statement.
It added that this is one of the largest single investment commitments in the Indian fintech payments space and "is reflective of the opportunities" in the segment.
The announcement comes a day after the Reserve Bank of India said inter-operability of e-wallets will be enabled in phases. Also, in subsequent phases, inter-operability will kick in between wallets and bank accounts through the UPI (Unified Payments Interface), the central bank added.
While Flipkart did not specify the time period over which the funds will be infused, PhonePe co-founder and CEO Sameer Nigam said "this investment will help us maintain the same aggressive growth rate for the next two years".
He added that the investment will be used to scale up PhonePe's technology platforms and expand merchant network and consumer base rapidly.
He also noted that PhonePe has been growing at over 100 percent every two months this year.
"Fintech and e-commerce are among the most visible faces of a new digital India that is powered by the youth and technology, and both are set for outstanding growth. PhonePe is a critical part of our overall strategy at Flipkart to build a comprehensive ecosystem for our customers," Flipkart Group CEO Binny Bansal said.
Flipkart is keen to rapidly scale up the technology, reach and offerings of PhonePe. Formerly known as FX Mart Private Ltd, PhonePe competes with the likes of Amazon Pay, Paytm, and Mobikwik.
Payments could play a critical role for e-commerce companies that are aggressively expanding their operations in the country.
Flipkarts rival, Amazon, has also been ramping up efforts to strengthen its digital payments platform, Amazon Pay.
Earlier this month, it increased the authorised share capital of the company by five times to Rs 2,000 crore.
Also, earlier in the year, Amazon Corporate Holdings and Amazon.com Inc's had pumped in Rs 130 crore into Amazon Pay India.
The fintech ecosystem in India, especially payments, is undergoing a paradigm shift with booming mobile Internet usage and increasing adoption of digital platforms by people.
Estimates suggest that India's digital payment sector is estimated to grow to USD 500 billion by 2020, representing around 15 percent of GDP, up from around USD 50 billion last year.
PhonePe, which claims to be a leader in UPI payments space, said it registered over 16 million transactions in September this year.
PhonePe's annual run rate touched a new high of USD 3.5 billion in terms of Total Payments Volume (TPV) in September.