Barely six months into its November 2016 launch, Pune-based payments startup Phi Commerce Pvt. Ltd is eyeing a big slice of the estimated $20 billion e-pay-on-delivery opportunity.

The payments startup, which focusses on digitising cash-on-delivery payments, is looking to aggressively expand its footprint through external funding rounds, acquisitions, tie-ups with e-commerce logistics firms and payment gateways, besides marketing initiatives.

To further its plans it recently raised an angel round from a clutch of unnamed individual investors. “A few payments industry veterans as well as a director of a global private equity firm invested about $1 million (Rs 6.45 crore) in the startup,” the company’s co-founder Jose Thattil told VCCircle.

“Consumers are still not transacting digitally. That was one of the reasons we felt that last-mile payments solutions was a key area, and this was behind the whole idea of setting up Phi Commerce,” Thattil said, adding that 70-80% of the transactions in the e-commerce sector still happened in cash, despite the order having been placed electronically.

It plans to use the new capital to expand its market presence, hire talent and launch new products. “The company is planning to launch a new product that will make transaction affordable even to the smallest merchants,” Thattil added.

The company was founded in 2016 by payments industry veterans Thattil, Tushar Shankar, Rajesh Londhe, Anil Sharma and Ramkumar Subbaraj.

While Thattil, Shankar and Subbaraj had earlier worked with MasterCard, Londhe was with Euronet Worldwide, and Sharma had previously served at Opus Consulting.

Initially, the company scouted for a variety of use areas. “After a few surveys, we found out that there was a huge segment of people who would not mind paying electronically, but were comfortable to make a payment after the order was shipped, or preferred to see and feel the product before making the payment. This set of people were tech-savvy and usually transacted digitally for railways, airlines and movie tickets.”

Phi Commerce aimed at offering a similar environment but at the time of delivery. “We thought of building a completely new ecosystem, wherein we brought together e-tailers, logistic companies, delivery companies, banks and payments gateways to the consumer’s doorstep.”

How it works?

The company tracks and updates the status of a shipment starting right from the point when the order was placed to the point of delivery, including real-time processing of payments.

The digital payments platform offers UPI, BharatQR and Aadhar-based payments, besides transactions through credit and debit cards and net banking. Phi Commerce projects itself as the B2B2C business, wherein consumers get to make payments through retailers and logistics companies.

The company also claims that a customer need not be physically present to make a payment during the delivery of a shipment.

For instance, if, say, a brother wants to present a mobile phone to his sister on the occasion of Raksha Bandhan, but prefers to make the payment on delivery, Phi Commerce would raise a payment request the moment the delivery boy hands over the merchandise to the lady, allowing the customer to pay from a remote location through digital means, including card payments or net banking. The payment status will be updated real-time to both the retailer and the customer.

The company has developed an app-based service, besides having a browser-based payment option. It also offers software development kits that the e-tailers could install on their platforms.

Partnerships, business model

The company has already tied up with e-commerce logistics companies such as Aramex and Wow Express, among others, and is running a pilot with one of the largest e-commerce players in the country.

The startup, which went live in November 2016, have already reached out to 5,000-plus pin codes, and processed payments of over Rs 10 crore for 190 e-tailers, claimed Thattil.

Phi Commerce works on a pay-per-click model and charges a minimum of 0.1% of the transaction amount. It currently employs 20 people, and is looking to hire marketing professionals to expand its footprint further.

Market

“Indian e-commerce is a $30-billion market. Considering that 70% of the transactions still happens in cash, it is a $20 billion opportunity. Here, we are not even talking of online education or any other internet-based services,” said Thattil.

Phi Commerce, in fact, is in talks with many online portals across sectors to take its business forward. “We are soon going live with one school in Pune, wherein the fee processing will happen through UPI. We want to be a merchant-neutral, bank-neutral, payment mode-neutral, payment mechanism focused on last-mile payments,” he added.

Targets

The company’s strategy is to grow both organically and through acquisitions. “We were in serious talks with one startup, but demonetisation slowed us down. Starting July, we will be back to the table and have already engaged consultants in that area. We are looking at any aggregator of transactions,” Thattil revealed. The company said it is ready to invest $8-10 million for an acquisition.

“This funding round is not enough to fund this kind of acquisition, but we have enough approvals. If we get a suitable target, capital will be less of a worry,” he said.

Besides, the company aims to expand its presence across 12,000 pin codes by the end of this financial year. “We are evaluating ourselves through pin codes because it gives us a clear geographic reach. This apart, these pin codes constitute 70-75% of total digital transactions volume in the country.”