The leading mobile payment app in India, PhonePe, is now focusing on the e-commerce market in a move reminiscent of its successful early bet on the government-backed UPI network seven years ago.
Launching an e-commerce app which is powered by Open Network for Digital Commerce (ONDC): an Indian government initiative aiming to democratize the e-commerce marketplace by offering a zero-commission platform. Which was launched by the Bengaluru-based startup with support from retail giant Walmart on Pincode.
Pincode will function with local shops and will launch in Bengaluru. City by city, the startup intends to gradually spread throughout India.
The India’s commerce ministry established the non-profit organisation ONDC in 2021 as a “interoperable” network where buyers and sellers can do business regardless of the app or service they use, disrupting consumers’ reliance on using exclusive services provided by Amazon and Flipkart.
Sameer Nigam, co-founder and chief executive of PhonePe stated, “This is the UPI moment for e-commerce,” he added “I think there is legitimate friction in the e-commerce industry. The consumers don’t care where their food comes from, where they next phone comes from. They care about convenience.”
Several market players, including restaurants and 48-year-old store Sangeetha Mobiles, are hopeful that ONDC makes a dent in the market and pushes incumbents to drop their costs, according to their executives, who spoke at a conference on Tuesday.
The $12 billion PhonePe joining ONDC is notable in a number of respects.
ONDC is courting a significant player in the app powered by Walmart. The big giants such as Amazon, Google, and Facebook have so far largely neglected the network.
Although, PhonePe accounts for over 50% of the value of all transactions on the UPI network, the firm has been seeking new revenue sources. Recently, PhonePe announced that it would use its substantial platform to cross-sell insurance and other services.
The 2016 acquisition of PhonePe by Flipkart ended with the e-commerce giant’s separation from it in 2017. It’s interesting to note that PhonePe wants a piece of the e-commerce business even if Flipkart doesn’t intend to enter the mobile payments space, as TechCrunch previously reported.
According to wealth manager Sanford C. Bernstein, the value of India’s e-commerce business, which is now dominated by Flipkart and Amazon, is expected to reach $133 billion by 2025. Morgan Stanley claims that ONDC would significantly disrupt the e-commerce sector, but there are a few issues that need to be worked out.
“We see execution challenges… such as in the ability to bridge the trust deficit between sellers and buyers, and provide real- time availability data for inventory management,” they sated in a recent report.