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Walmart lifts lid on good, ugly of India payments

Walmart lifts lid on good, ugly of India payments


A mobile phone showing an image of Indian online retailer Flipkart is seen in front of a Walmart Inc logo displayed in this illustration picture taken July 14, 2021.

MUMBAI, Sept 2 (Reuters Breakingviews) – Achieving scale is only half the battle for Walmart (WMT.N) in India. A report by the U.S. giant’s PhonePe app provides a detailed look at the hot retail payments market. That includes peer-to-peer and peer-to-merchant transactions worth $560 billion in the year to March, all conducted on government-backed digital infrastructure. It underscores its edge as a financial technology super-app while raising key questions on the industry’s path to profit.

PhonePe’s near-50% market share of the Unified Payments Interface makes it well-placed to provide a Google Trends-style granular breakdown, the first of its kind. Small towns are leading the way in embracing new financial technologies: about 80% of PhonePe’s monthly active users come from smaller cities and beyond. Users in Punjab’s Patiala invest 2.5 times more into mutual funds than users in the financial capital Mumbai. Gold addicts are going digital too, as the value of online purchases soar.

Those trends are key because selling wealth-management products, insurance and services to merchants is where apps like PhonePe and similar-sized rivals like the money-losing Ant-backed Paytm will have to make their profits. Most of the transactions PhonePe handles are routed through UPI where payments between peers and to merchants are not chargeable. That’s a tougher reality than in China, where Ant and Tencent (0700.HK) had a race to the bottom but were able to charge merchants processing fees.

PhonePe has a head start with its lead in payments. The app boasts some 314 million registered users making transfers across 99% of the country’s districts. During the June quarter, it processed 3.9 billion transactions through UPI and other means worth an average $26 each. Peer-to-peer volumes on the app rose 158% in March year-on-year.

Maintaining that pace of growth without being able to collect fees on most of its payments will be costly, though. Of the more than 600 million smartphone users in the country, PhonePe estimates less than 30% use digital payments in a month. So there’s plenty of room to grow but onboarding merchants in far-flung cities and towns can be a painstaking process requiring on-the-ground manpower. The difficult environment is one reason non-bank companies facilitating UPI payments have fallen and adoption by customers is slowing down. There’s both good and ugly in India’s fintech’s future.

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– Walmart’s PhonePe on Sept. 2 released a 49-page report detailing payment trends in India, accompanied by an interactive website.

– PhonePe’s app has processed digital transactions in 99% of the country’s districts by pin code, and about 80% of its 133 million monthly active users come from smaller so-called “tier 2, tier 3, tier 4 cities and beyond”.

– The company recorded 3.94 billion transactions with a total value of 74.8 trillion rupees ($102 billion) during the quarter to the end of June. Average transaction value was 1,897 rupees, about $26.

– PhonePe was acquired as part of the U.S. giant’s acquisition of Indian e-commerce company Flipkart in 2018 in a deal valuing the group at $21 billion. Flipkart announced in December that it was partially spinning out PhonePe. Walmart directly owns about 10% of PhonePe, while Flipkart owns 87%.

Editing by Robyn Mak and Katrina Hamlin

Reuters Breakingviews is the world’s leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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