Inside PhonePe ambitious shot to become ‘Super App’: Candid chat with Sameer Nigam

Digital payments in India have been growing quickly on the back of Unified Payment Interface (UPI) ecosystem. Within 30 months of its launch, the NPCI-owned payment system had surpassed the 400 million transaction mark in September this year.

The phenomenal rise of UPI has fueled a fierce competition amongst Paytm, PhonePe and Google Pay for dominating a larger market share. As a result, they are incentivising users to execute the transaction on their respective apps.

However, instead of throwing away money to transact users, PhonePe has been relying on organic growth and seems to be harboring a dream of becoming something which so far is proved to be a mirage - one app for all.

“We began incentivising users in July this year for peer to peer fund transfer, and the volume went through the roof overnight. However, soon we realised that this kind of growth doesn’t fit with our strategy,” said Sameer Nigam, co-founder, and CEO, PhonePe in a telephonic interaction with Entrackr.

According to Nigam, instant fund transfer is such a value proposition in itself that it doesn't require to be incentivised. His assertion seems true and reflects in PhonePe’s consistent growth. At the beginning of this year, it used to process about 1 million transactions in a day.

Presently, the firm processes over 4 million total transactions a day. It’s a 4X growth in volume within 10 months for PhonePe. And, that's too without offering cash back and subsidy (except first-time users). Organic growth of fund transfer, online transaction (shopping, bill payments etc.) have been propelling its growth.

“Pure play e-commerce transaction is growing really fast for us. It has grown over 10 times if we compare September volume to January this year,” said Nigam.

The company claimed roughly 1 million transactions a month with e-commerce partners (Ola, Myntra, redBus etc.) at the beginning of this year. Now, it does 10 million a month. So, what factors triggered such exponential growth?

“It has largely been steered because of high-quality partners who have frequent use cases and well-rounded coverage in organised retail that includes thousands of petrol pumps, major retail and food chains et al. Besides, advertising campaign on television also helped us in creating a strong brand recall that encourages first time usages,” explained Nigam.

The number of offline merchants using PhonePe also has gone up significantly. At present, it has about 4.5 lakh merchants who use QR code and PoS machines for accepting payments.

Answering about reports of the firm rolling back Bluetooth-enabled PoS machine, Nigam said, “We had some supply issue that later got resolved. In fact, we will have stock of about 50,000 such devices soon.”

PhonePe ambition to become Super App

Of late, PhonePe has devised a strategy of becoming one app for many through creating an ecosystem of mini apps. Over the past couple of months, it has been partnering online firms to evolve itself as the super app. So far, it counts 10 partners including Ola, goibibo, Treebo, redBus, Oyo and Myntra.

But, why PhonePe is placing a big bet on mini app strategy? And, particularly when past attempts by Snapdeal and Tapzo to become WeChat (super app) failed miserably.

It’s a gospel truth. Indian (unlike the US and the West) Internet story has factually been growing or will grow on the back of smartphones. Thus, every e-commerce company is in the race to woo users from app stores.

Amidst high uninstall rate, they spend a major pie of marketing budget on driving install, creating awareness and incentivise users to make them transact.

“Since we have 25 million monthly transacting user base who are interested in discovering more use cases, we identified opportunity in bridging the gap for companies looking for tapping on already transacting funnel,” explained Nigam.

Given that acquiring the customer (that actually transact) is getting expensive for companies, mini-app ecosystem opens access to 10 million users who are firing (and, likely to transact) the app every day.

“We felt that we’re well positioned to open our mass transacting customers base for mini app partners to target them with meaningful events and location-specific offers in a sort of native app experience,” outlined Nigam.

Nevertheless, decoding super app concept had backfired for Sequoia-backed Tapzo. Even after raising over $33 million in risk capital, it fumbled and recently acquired by Amazon in a fire sale.

How PhonePe’s approach towards one app for all is different?

“When Tapzo entered the market, it was hoping that one app for all story would drive customers to them. Whereas, we waited a long time until we had 50 million user base. The reason for users on PhonePe is not mini apps. It’s another way around,” emphasised Nigam.

Tapzo was controlling the experience and trying to create comparison across players in each category. It was pivoting the experience that requires a lot of work on the backend while integrating each partner.

On contrary, PhonePe approach is more of a platform play without the minimal involvement of itself at partner side. Citing a fundamental difference in its strategy from the likes of Tapzo, Nigam said, “Mini app is a part of the strategy not the only reason for existence.”

PhonePe’s ambitious bet on mini-apps by opening the platform for developers could be a critical factor in its success in a long haul. If the one app for all strategy pays off, there are big winnings to take home. Will PhonePe be able to crack the super app theory that no one fathomed until now? Only, time would tell.