PhonePe, India’s leading mobile payments app, is making a significant move into the e-commerce sector. The company has launched Pincode, a hyperlocal commerce app that is powered by the Open Network for Digital Commerce (ONDC), an Indian government initiative striving to democratize the e-commerce landscape by offering a zero-commission platform.
PhonePe is backed by retail giant Walmart and also counts General Atlantic and Tiger Global among its investors. The company plans to expand slowly to more cities and aims to amass 100,000 orders a day by the end of the year.
Pincode is built on the ONDC network, which is an interoperable platform allowing buyers and sellers to do business regardless of the service they use. PhonePe hopes that this move will make a dent in the market and force incumbents to lower their fees. The app currently focuses on categories such as grocery, medicines, food, electronics, and home decor. The Indian e-commerce market is currently dominated by Flipkart and Amazon and is estimated to be worth $133 billion by 2025.
PhonePe’s entry into the e-commerce market is significant for several reasons. As the Walmart-backed app, ONDC is courting a major player. The network has so far largely been ignored by major giants such as Amazon, Google, and Facebook. PhonePe also commands over 50% of all value on the UPI network, and the company has been searching for other avenues to generate revenue, with the recent quarters seeing PhonePe use its large platform to cross-sell insurance and other services.
PhonePe and ONDC
PhonePe’s foray into e-commerce also highlights the potential of ONDC to disrupt the sector. Morgan Stanley has predicted that ONDC poses a significant challenge to the established e-commerce players, but they also noted several challenges that need to be overcome. These include the ability to bridge the trust deficit between sellers and buyers and provide real-time availability data for inventory management.
Sameer Nigam, co-founder and chief executive of PhonePe, sees this move as the UPI moment for e-commerce. He says that there is legitimate friction in the e-commerce industry and that PhonePe would not have entered the sector had ONDC not happened.
PhonePe plans to invest significant effort in Pincode and enable every Indian shopkeeper spread across every nook and corner over the next few years.
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