Sameer Nigam

With the advent of Unified Payments Interface (UPI), there is little motivation for consumers to load a wallet, Sameer Nigam, co-founder and chief executive officer of PhonePe, told Shritama Bose. The payments player is manufacturing one million calculator-based point of sale (POS) devices, which will be deployed at physical stores across the country by July 2018, he added. Edited excerpts:

UPI has seen good growth in 2017. What is the expectation for 2018?

UPI’s growth is nothing short of spectacular. I think UPI will continue to see exponential growth for the next few years, and by 2020, I expect over 300 million Indians will be using UPI for different types of transactions. 2018 will also see exponential growth in UPI-based merchant transactions since the UPI acceptance network is growing very fast.

PhonePe was among the first dedicated UPI apps, but new entrants are eating into the pie. How are you fending them off?

Our transaction numbers continue to grow exponentially regardless of new entrants in the space. We processed over a million transactions a day in November and achieved a TPV (total payment value) annual run rate of `40,000 crore within 14 months of market launch. This is the fastest ramp-up seen in India’s digital payments space to date, and our growth curve has not been affected by new entrants at all.

We don’t bother much about market share today. For what it’s worth, though, we had over 70% market share of all merchant transactions on UPI in November. Even in P2P (peer to peer) transactions, our

growth rate is very strong. But our P2P market share has dipped slightly because new entrants like Tez and PayTm are offering aggressive lotteries, rewards and cashback incentives to consumers to simply move money back and forth among themselves. We are consciously staying away from such gamification because we don’t want to chase vanity targets.

You have leveraged the traffic on Flipkart. Are you looking beyond now?

This is a market myth. Flipkart contributes to less than 3% of our overall transactions. We recently introduced new categories like gold buying, credit card bill payments and gift cards on our app, and have integrated over 60,000 online and offline merchants already. PhonePe is already live with merchants like Spencer’s, FoodWorld, KFC, Barista, Cafe Coffee Day, Apollo Pharmacy, Box8, PVR, Cleartrip, etc. and we will continue onboarding lots more top-tier online and offline partners in 2018.

What is your strategy around the calculator-based POS device?

Our POS device is designed specifically for the mass market. It is very cheap, easy to use and highly durable. In Bengaluru, 5,000 units have been deployed within a few weeks of our market launch. We have started manufacturing another one million POS devices, which will be deployed at offline shops across India by July 2018.

Has the complimentary nature of UPI driven usage so far? Will it become a chargeable service in the near future?

I think UPI is the future of digital payments for two reasons. Banking has become truly interoperable, and P2P payments has become truly democratised. As far as MDR (merchant discount rate) is concerned, merchant transactions are chargeable even today. We charge a fair market fee to our merchants, and have never heard complaints from them. Newer players are focused only on UPI P2P payments right now. So perhaps they feel there is no revenue stream.

What will interoperability between all wallets and, eventually, between wallets and bank accounts, mean for players in the payments system?

Wallet to wallet interoperability is quite pointless, really. Interoperability between wallets and bank accounts is the need of the hour. Consolidation amongst wallet players is also inevitable. Most wallet players don’t have a business model today. Pre-UPI, the belief was that wallets were more convenient for the consumer. Post-UPI, there is hardly any motivation left for consumers to load a wallet.