US-based retail giant Walmart could join Facebook, Google and Amazon in securing a part ownership in one of the upcoming new umbrella entities (NUEs) vying to become the country’s next big retail payment network.
People close to the situation said that at least two consortium players preparing to apply for the coveted NUE license have approached Walmart’s PhonePe to become a strategic investor in their respective ventures.
The Bengaluru-based fintech major is learnt to be studying the guidelines before deciding on its participation. Sameer Nigam, the co-founder and CEO of PhonePe, in an interview with ET confirmed that the startup has been approached by several prospective participants, even as he downplayed the interest.
“We are being approached by a whole bunch of players and we may take a small stake like we did with NPCI in their open tender,” said Nigam. PhonePe along with 19 non-bank investors recently became minority stakeholders of India’s retail payment entity National Payments Corp of India (NPCI).
“Being a small investor in the network adjacent to our core business is not a bad idea. But we are not in the business of building B2B networks and may also sit this one out,” Nigam added. As per RBI stipulations, the NUE has to be widely held and a single company can own more than 40% in the initial stages.
When approached separately by ET for comments, a PhonePe spokesperson said that the company is “not pursuing any strategic partnerships for NUE at this stage.” Walmart didn’t respond to ET’s queries.
Three sources aware of the talks told ET that leading consortiums in the race to set up a rival to NPCI have approached PhonePe and discussed potential synergies a tie-up opportunity can bring to the table in a bid to secure PhonePe’s signature.
“Walmart has deep pockets, which is why several prospective NUE applicants have made a beeline for tie-ups with them. This is being handled through PhonePe in India,” said a person involved in the matter.
Another applicant said that unlike immediate rivals Paytm, and Walmart’s US-counterparts Facebook, Amazon and Google, the company does not have plans to “own a significant stake in any NUE venture.”
“…their strategy is to just keep one foot in the boat so that they get to see how this business unfolds,” another source, who is a prospective NUE applicant, said requesting anonymity.
“This is quite difficult from the strategy that other large foreign players have adopted who want to capture growth in India’s retail payments market,” the source added.
A third person said that the widespread interest to onboard a specialized payments participant such as PhonePe backed by an international giant like Walmart is “understandable” as they can bring a lot of value to the table.
As reported first by ET over the last few months, the main consortiums taking shape to apply before the February 2021 deadline, include those led by State Bank of India, So Hum Bharat along with Yes Bank, Reliance Jio who are in talks with Google and Facebook, and another group led by the Tatas.
RBI earlier this year allowed Indian and foreign firms to set up for-profit NUEs to “de-risk” India’s burgeoning payments ecosystem which in recent weeks have been subject to increased downtimes and mass-outages due to system vulnerabilities.
These NUEs can also set up payment systems to rival UPI and roll out new products in digital payments. NPCI is a not-for-profit undertaking, controlled largely by banks and regulated by RBI.
PhonePe, founded in 2015, and soon wholly acquired by e-commerce giant Flipkart in 2016, was recently hived off as a separate entity. Under the new ownership structure, around 10% stake in the startup is with Walmart, while a majority 87% is held by Flipkart – which is owned primarily by Walmart.
The company is the second most-used UPI app in India – behind Google Pay — having processed over 868 million transactions in November with a market share of 39.2%. Last week, it raised $700 million in primary capital from Walmart ascribing a valuation of $5.5 billion to its business.
