India Payments Research
Assessing PhonePe’s IPO prospects
Walmart-backed PhonePe is one of the most prominent payment firms in India. It holds the largest share of India’s paramount UPI payments platform of any company, with 47% of the market compared to Google Pay’s 34%. PhonePe says it has 380 million registered users, which means that one in four Indians use its services. The company also serves 30 million offline merchants. With pressure to achieve profitability increasing and investors eager for a successful exit, speculation is mounting about when PhonePe will decide to go public.
India’s UPI is enjoying record-breaking growth
India’s United Payments Interface (UPI) is a bit of an anomaly in the world of fintech, which is typically dominated by high-flying startups and deep-pocketed venture capitalists. UPI was launched in 2016 by a specialized division of the Reserve Bank of India, the National Payments Corporation of India (NPCI), to create a unified real-time payments platform for the subcontinent’s retail payments. Governments are usually not seen as leading fintech innovators, but in this case, UPI has been so successful that other countries are keen to learn from its success; it is expanding internationally and India’s leading e-wallets compete for the largest share of UPI payments.
Will Paytm reach profitability by 2023?
It is important to take what Paytm founder Vijay Shekhar Sharma says with a grain of salt. For many years, he has talked up Paytm’s potential and deep-pocketed backers like SoftBank and Alibaba have bought it. Yet Sharma’s bullishness has not been borne out by Paytm’s stock performance. Though Paytm’s IPO was India’s largest of all time, it nonetheless plummeted on the first day of trading in November 2021 and has since lost about 60% of its value.
Razorpay’s B2B focus is paying off
In December 2021, Razorpay became India’s most valuable private fintech as it reached a valuation of US$7.5 billion, more than double the US$3 billion milestone it hit last April. Razorpay’s US$375 million Series F financing round raised more than all of its previous rounds combined. By eschewing India’s hyper-competitive retail payments market – dominated by the likes of Google Pay and PhonePe, with Paytm a distant third – Razorpay can best capitalize on opportunities in the fast-growing merchant payments segment.
India’s BNPL boom shows no signs of slowing
India’s buy now, pay later (BNPL) market had a cracking 2021 and is charging full speed ahead into 2022. According to RazorPay’s The Covid Era of Rising Fintech report, the India BNPL market grew more than 637% in 2021, even better than 2020’s 569% growth. For its part, India BNPL firm ZestMoney found in a recent survey that BNPL is the top payment option for Indian consumers across all age groups – though most users of the service in subcontinent are ages 23-26. ZestMoney said that its BNPL transactions rose 300% annually in 2021.
Could regulation slow down India’s booming BNPL sector?
India’s buy now, pay later (BNPL) sector is red hot and expected to grow exponentially over the next few years. India is certainly not the first country to experience a BNPL surge and it is tempting to say that we have seen this movie before, and that tough regulation is on the way that will curb BNPL’s growth as in Australia and the UK. But that may not be the case in India given the subcontinent’s low level of credit card penetration and the ability for BNPL to play a genuine financial inclusion role in the economy.
The sky still looks like the limit for UPI in India
United Payments Interface (UPI), the National Payments Corporation of India’s (NPCI) flagship payments platform, had another stellar month in July. According to NPCI data, UPI processed a record 3.24 billion transactions in July, up 15.7% from June, while in terms of value the payments platform processed transactions worth Rs 6.06 trillion, up 10.76% from a month earlier.
India’s remittances market defies pandemic
India’s remittances market was supposed to contract 9% in 2020 per a World Bank forecast. It was a reasonable prediction given the turmoil wrought by the coronavirus pandemic on public health and the global economy. Yet the market was much more resilient than expected. Data from the World Bank show that remittances to India fell just 0.2% in 2020 to US$83 billion.
Who is winning India’s UPI payments race?
The United Payments Interface (UPI) has become a kingmaker in India fintech. The real-time payment system owned by the National Payments Corporation of India (NPCI) has grown exponentially since its inception in 2016, with varying estimates of its overall share of India’s payments market. PwC reckons that UPI could reach a 59% share of Indian digital payments by 2024-25, while Indian tech media site Inc42 says that UPI already has a 73% share of the market, up from just 9% in 2018.
What is the outlook for Revolut in India?
If there is one thing Revolut excels at, it is growth. It would be hard to find another neobank with as many accounts in as many different markets. All that growth is expensive, as seen in the £107 million Revolut lost in FY 2019, which it attributed to a hiring spree. Whether the UK’s most valuable fintech startup is any closer to profitability is an open question. What we do know is that it is eyeing expansion across Asia in 2021-22, with India the first stop.
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Amazon steps up its India fintech play
Amazon may be the world's biggest e-commerce firm and a major player in India's online shopping market, but that has not translated into digital payments dominance in the subcontinent. In fact, Amazon's share of the Indian payments market is paltry compared to Google Pay, Walmart backed-Phone Pe and Alibaba-backed Paytm. But with India's payments market expected to grow more than 300% to Rs 7,092 lakh crore by 2025, Amazon sees plenty of room to boost its market share and eventually expand into more lucrative fintech segments.
Paytm eyes the exit ramp
Paytm is India's most valuable tech startup and largest fintech. The company says it processed 1.2 billion transactions in January, more than its rivals Google and PhonePe that are dominant on the UPI platform. It claims to serve more than 17 million merchants. Yet Paytm is still losing money after more than a decade, burning cash faster than it can earn revenue. That must change soon if the SoftBank-backed firm expects a successful IPO in 2022.
WhatsApp Pay trips up again in India
India's payments market is more competitive than ever. While Walmart-backed PhonePe and Google Pay remain dominant for now, WhatsApp Pay may eventually chip away at their market share. With 400 million users of its messaging app in India, the Facebook-owned company could potentially channel the network effect to its advantage. But WhatsApp could be tripped up by fallout over its updated data privacy policy.
How is BNPL developing in India?
Buy now, pay later (BNPL) is taking the payments world by storm, from the advanced economies to emerging markets. There seems to be a universal appeal for consumers - whether they are accustomed to using credit cards or not - to interest-free installment payments. That holds particularly true during the pandemic, when lenders control credit tightly. In India, some of the largest BNPL players include the unicorn Pine Labs, Vivifi (which operates Flexpay), Simpl and ZestMoney. All of these firms saw growth in their BNPL products in 2020.