In a move reminiscent of its successful early bet on the government-backed UPI network seven years ago, PhonePe, India’s leading mobile payment app, is now turning its sights on the e-commerce sector.
The Bengaluru-based startup, backed by retail giant Walmart, launched a hyper-local commerce app called Pincode on Tuesday, which is powered by the Open Network for Digital Commerce (ONDC), an Indian government initiative that aims to democratize the e-commerce landscape by offering a commission-free platform.
PIN works with local stores and will initially go live in Bengaluru, PhonePe executives said at a news conference Tuesday. The startup, which also counts General Atlantic and Tiger Global among its backers, plans to slowly expand to more cities by the end of the year, accumulating 100,000 orders a day.
Pincode currently focuses on categories such as groceries, medicines, food, electronics and home accessories.
ONDC, a non-profit company set up in 2021 by India’s Ministry of Commerce, is an “interoperable” network where buyers and sellers can conduct business regardless of the service they use, eliminating consumer dependence on using proprietary services of Amazon is disrupted and Flipkart.
“This is the UPI moment for e-commerce,” said Sameer Nigam, co-founder and CEO of PhonePe. “I think there is legitimate friction in the e-commerce industry. Would we have entered the e-commerce industry if it weren’t for ONDC? Absolutely not.”
Dozens of industry players, including 48-year-old retailer Sangeetha Mobiles, and restaurants are hoping ONDC will put a dent in the market and force incumbents to cut fees, their executives said.
PhonePe’s PIN code app. Pin Code is a popular English word for postal code in India. Image Credits: PhonePe
“Pincode is a brand new shopping app and offers a revolutionary new approach to e-commerce, putting all local stores and merchants at the center of the digital shopping growth story. Pincode is built on the ONDC network, enabling us to generate merchant demand digitized by various merchant platforms in an inclusive manner, while creating new growth opportunities and driving innovation at scale,” he added.
PhonePe, valued at $12 billion, its filing with ONDC is remarkable in a number of ways.
- ONDC is looking for a major player in the app supported by Walmart. The network has so far been largely ignored by the big giants like Amazon, Google and Facebook
- Even with PhonePe controlling more than 50% of all value on the UPI network, the company is looking for other ways to generate revenue. PhonePe has recently said in recent quarters that it will use its large platform to cross-sell insurance and other services
- PhonePe, which was acquired by Flipkart in 2016, split from the e-commerce giant last year. Even if Flipkart doesn’t plan to do mobile payments, AapkaDost previously reported, it’s interesting that PhonePe wants a slice of the ecommerce market
PhonePe said it will invest “considerable efforts” in PIN code and in “enabling every Indian retailer to spread to every nook and cranny for years to come”.
According to asset manager Sanford C. Bernstein, India’s e-commerce market, currently dominated by Flipkart and Amazon, is estimated to reach $133 billion by 2025. ONDC is causing major disruption to the e-commerce industry, according to Morgan Stanley, but there are still couple of things that need to be ironed out.
“We see implementation challenges… such as the ability to bridge the trust gap between sellers and buyers and provide real-time availability data for inventory management,” they wrote in a recent report.