PhonePe achieves $1T payment value run rate and obtains payment aggregator license

According to a statement released on Saturday, PhonePe, the digital payments platform, has achieved an annualized total payment value run rate of USD 1 trillion (equivalent to approximately Rs 84 lakh crore). This growth is largely due to the company’s dominance in UPI transactions.

PhonePe claims to have digitized over 35 million offline merchants across tier 2, 3, 4 cities, and beyond, covering 99 percent of pin codes in India. The company’s head of consumer business, Sonika Chandra, said that they are thrilled to have reached the USD 1 trillion annualized TPV run rate and are excited to continue growing UPI payments in India with new offerings like ‘UPI lite,’ ‘UPI international,’ and ‘credit on UPI,’ which will help promote greater financial inclusion for Indians.

The statement also notes that PhonePe holds over 50 percent market share by value in the UPI space and has received in-principle approval for its payment aggregator license from the RBI. The company is also making significant investments in ventures such as insurance and wealth management to drive the next phase of growth for UPI payments in India.

Reader’s Rundown:

A payment aggregator license is a permit that allows a company to serve as an intermediary between customers and merchants in processing payments for goods and services. It’s required to operate as a payment service provider (PSP) or payment facilitator (PF) and involves meeting various regulatory requirements such as obtaining appropriate licenses, implementing security measures, and complying with financial regulations. Payment aggregators simplify the payment process by consolidating payments from multiple customers into a single merchant account.

BharatPe acquires a controlling stake in Trillion Loans to strengthen its lending services

BharatPe has obtained all the requisite approvals from RBI to proceed with the agreement.

Through this agreement, BharatPe can provide loans and credit services with ease and reduce its dependence on other NBFCs.

The founders of Trillion Loans, Achal Mittal and Gautam Adukia, also run Liquiloans, which supports BharatPe’s P2P lending product.

According to sources familiar with the matter, the fintech giant BharatPe has acquired a controlling stake in Mumbai-based NBFC Trillion Loans Fintech. The deal, valued at around INR 300 Cr, has received all the required approvals from the Reserve Bank of India for BharatPe to obtain a 51% stake in the NBFC.

By acquiring an NBFC license through this move, BharatPe will have a significant advantage in the lending sector, as it will make it more convenient and less complicated for the platform to provide loans and credit facilities. This will also enable BharatPe to reduce its dependence on specific NBFCs and expand its offerings according to its own terms.

BharatPe has been pursuing an NBFC license for almost four years, and this development is a positive sign for the company. In 2019, BharatPe attempted to obtain the license but was unsuccessful, as the RBI declined the application.

Sequoia Capital, Ribbit Capital, and other prominent names support BharatPe, which has a valuation of $2.8 billion.

Demystifying FinTech Jargon:

An NBFC license refers to a license granted by the Reserve Bank of India (RBI) to a non-banking financial company (NBFC) to operate and provide financial services. NBFCs are financial institutions that provide banking services such as loans, credit facilities, investment advice, and asset management, among others, but do not hold a banking license.

An NBFC license allows the company to operate as a financial intermediary and engage in lending activities like a bank without needing a banking license. It is regulated by the RBI, and obtaining an NBFC license involves meeting specific regulatory requirements and complying with the rules and regulations set forth by the RBI.

Exploring the benefits of using DigiLocker services for fintech and SMEs

The banking and financial sectors have undergone a significant transformation in recent years due to technology, causing a rapid change in the way the industry operates. The industry constantly strives to offer a wide range of solutions to customers, making digital transactions more accessible. The Indian government, during its recent G20 presidency, has also emphasized the importance of digitalization and ensuring that everyone benefits from it.

According to the Ministry of Commerce and Industry, India accounts for 40% of all digital transactions. The widespread use of smartphones and high internet penetration has led to a proliferation of financial services. To fully harness the potential of digitalization and the internet, in the 2023-2024 budget, Nirmala Sitharaman, the Union Finance Minister, expanded the range of Digilocker services, making it a comprehensive solution for online document sharing.

By offering a new way to collect and use data, Digilocker will enable micro-small and medium enterprises to access more documents, extending innovative services to businesses. Fintech companies will be able to develop financial products and streamline the onboarding process, including KYC verification and system updates. This will also help to reduce operational costs, as it eliminates the need for extensive paperwork and endless queues, which were previously associated with banking.

The use of technology in the KYC process is helping to cater to the unbanked sections of society, who struggle to keep track of multiple documents. Furthermore, the implementation of digital transactions is essential to India’s growing fintech industry and rural areas where cash still dominates. These advancements in the industry have led to a reduction in labour needs, and fintech and NBFCs, which aim to improve access to financial products for underserved populations, have received a positive response from the government. By incentivizing the development of a strong and inclusive financial system, India is making progress towards achieving its goals. The growing demand for digital banking experiences is also driving fintech startups to create innovative solutions that meet the needs of underserved populations, thus helping to create a more inclusive financial system in the country.

According to Ram Shriram, CEO of Mahagram, the expansion of Digilocker services by the Indian government will enable fintech companies to develop innovative financial products and streamline customer onboarding, making it more accessible and efficient for underserved populations. These advancements are helping to create a more inclusive financial system, driving growth and development in the financial sector in India.

The banking industry has undergone a significant transformation due to technological advancements, with fintech companies playing a crucial role in changing the way people connect and conduct business. The growing demand for a digital banking experience among rural populations is also transforming the entire banking industry. Fintech startups are gradually bridging the gap between rural and urban areas, shaping the digital economy.

Demystifying FinTech Jargon:

Digilocker is a digital locker service provided by the Government of India, which enables citizens to store and access their important documents in a secure digital format. It aims to eliminate the need for physical documents by providing a digital alternative that can be accessed from anywhere using a computer or smartphone. Digilocker offers a unique username and password to access digital documents, which can be shared with government agencies and financial institutions. It streamlines processes such as KYC verification and document sharing, making it easier for individuals to access financial services.

PhonePe secures an extra $200 million investment from Walmart

As part of its ongoing fundraising campaign of up to $1 billion in capital after relocating to India in 2022, PhonePe has secured an additional $200 million in funding from Walmart. This brings the total amount raised by the company to $650 million from various global investors, with more investments expected to be announced soon.

The funds will be utilized by PhonePe to expand into new business areas such as insurance, wealth management, lending, stockbroking, ONDC-based shopping, and account aggregators. Additionally, the capital raise will aid the company in charting the next phase of growth for UPI payments in India, including UPI lite and Credit on UPI.

Commenting on the fundraising, PhonePe CEO and founder Sameer Nigam said: “We would like to thank Walmart, our majority investor, for their continued support of our long-term aspirations. We are excited about the next phase of our growth as we build new offerings for Indian consumers and merchants, along with enabling financial inclusion across the nation.”

Walmart International president and CEO Judith McKenna said: “We are excited about PhonePe’s future and have confidence in how it continues to expand its offerings and provide access to financial services for Indians at scale. India is one of the world’s most digital, dynamic and fastest-growing economies, and we are pleased to have the opportunity to continue to support PhonePe.”

PhonePe, an Indian digital payments company, raised $350 million in January and an additional $100 million in February at a pre-money valuation of $12 billion. Established in December 2015, the company boasts of over 450 million registered users, with more than one in three adult Indians now on the platform.

Interested in exploring collaboration with Indian IT, fintech sector: Singapore Trade Minister

Singapore’s Minister of Trade and Industry, Gan Kim Yong, praised India as a strong leader in the IT and fintech sectors and expressed interest in collaborating with India in this field. This statement came after the recent linking of India’s UPI and Singapore’s PayNow for seamless cross-border transactions between the two countries.

Last month, India and Singapore collaborated in a first-of-its-kind partnership by linking their online payment systems, Unified Payments Interface (UPI) of India and PayNow of Singapore, for seamless cross-border transactions. This partnership will enable residents of both countries to transfer cross-border remittances faster and more cost-efficiently. People in both countries can send money in real-time via QR-code based or simply by entering mobile numbers linked to their bank accounts.

“India has a very strong leadership, knowledge, skills, and innovation in IT and in Fintech as well. This is an area where we are very interested to explore opportunities and collaborate together. UPI and PayNow system, a great venture that we embarked together and this I hope will be the start of many partnerships with other countries as Singapore and India can lead the way in the integration of the payment system”, said the Minister in an interview to ANI.

The virtual launch of the cross-border real-time payment systems linkage between Singapore and India was attended by several high-profile officials, including Reserve Bank of India (RBI) governor Shaktikanta Das, Managing Director of the Monetary Authority of Singapore Ravi Menon, Indian Prime Minister Narendra Modi, and Singaporean Prime Minister Lee Hsien Loong. India has become a leading hub for fintech innovation, and the Modi-led government has played a crucial role in promoting the globalization of India’s digital payment infrastructure.

KreditBee and Digitap.AI partner to enhance credit underwriting process

Indian fintech KreditBee has joined forces with risk management solutions provider Digitap.AI to improve the credit underwriting process for its customers. By accessing customer bank statements through Digitap.AI’s account aggregator framework, KreditBee will be able to more accurately assess the risk of providing personal loans to its customers.

Digitap.AI will provide KreditBee with an analysis of unprocessed bank account statement data and the necessary variables required for the underwriting procedure. This will allow KreditBee to make more informed decisions about who to lend to and reduce the risk of default.

KreditBee currently provides personal loans of up to INR 400,000 ($4,866) to salaried customers in partnership with non-banking financial companies (NBFCs). The company has been growing rapidly, and the partnership with Digitap.AI is expected to help it continue to expand its offerings and improve its risk management capabilities.

During the trial period, Digitap.AI helped KreditBee access over 100,000 bank statements using the AA framework. KreditBee’s CEO, Madhusudan Ekambaram, said that the partnership would help the company to offer customers more options and better access to credit. He added that KreditBee is in the advanced stages of utilizing the full potential of the account aggregator framework, which will strengthen the entire loan disbursal process.

Digitap.AI’s founder, Nageen Kommu, expressed excitement about the partnership, saying that the company is committed to supporting the financial ecosystem and the country’s financial inclusion imperative. The announcement of the partnership comes just two months after KreditBee raised $120 million in funding, bringing the total funding raised in its Series D round to $200 million. The company is backed by a number of high-profile investors, including Advent International, MUFG Bank, and Premji Invest.

Reader’s Rundown:

Credit underwriting evaluates a borrower’s ability to repay a loan by analyzing their credit history, income, and other financial information. Lenders use this evaluation to decide whether to approve a loan and the loan terms, such as interest rate and repayment period. The goal is to make a sound lending decision and mitigate the risk of loan default.

Slice, an Indian fintech unicorn, acquires a stake in a bank

In a significant move, Indian fintech unicorn Slice has acquired a 5% stake in North East Small Finance Bank. The acquisition is seen as an important step for the startup amidst increasing challenges from the central bank, which has caused many young firms to collapse.

Slice invested $3.42 million for the 5% stake in September, as per regulatory filings. This investment is particularly significant as the Reserve Bank of India has recently mandated strict compliance with new guidelines, leading to constraints for many fintech startups in cards and lending categories.

While it’s a rare and noteworthy achievement for a startup to acquire a stake in a bank, it’s not immediately clear how this will benefit Slice, a $1.55 billion fintech unicorn with investors such as Tiger Global, Insight Partners, Blume Ventures, and Axis Bank.

PayTM’s Loan Portfolio grows 330%

PayTM has scaled its disbursals to Rs 3,665 crore in the month of December 2022, growing 330% y-o-y, as per our latest operating update for Q3FY23, reflecting the strong adoption of our lending products including Paytm Postpaid, Personal loans and Merchant loans. It said in its blogpost on its website (https://paytm.com/blog/investor-relations/a-peek-into-paytms-loan-distribution-business/)

The growing adoption of our lending products has led to a sharp increase in the amount of revenue we generate from financial services, which contributed to 18% of total revenues in Q2FY23.

Paytm is an Indian mobile payment and financial services company founded in 2010. It allows users to pay for utility bills, mobile recharges, movie tickets, and various other goods and services online. In addition, Paytm also offers financial products such as insurance, investment, and loans. The platform operates as a wallet-based system, where users can add money to their Paytm wallet and use it for transactions. The company also has a merchant platform that enables businesses to accept digital payments from their customers. The company makes money from transaction fees and through financial services such as insurance and loans.

Fintech companies are focused on lending as a revenue source because it offers several advantages:

  1. High Margins: Lending typically generates higher margins compared to other financial services.
  2. Scalability: Online lending platforms can reach a large number of borrowers, reducing operational costs and increasing the size of the market.
  3. Data-Driven Decision Making: Fintech companies use advanced data analytics and technology to assess the creditworthiness of borrowers, leading to more accurate risk assessments and lower default rates.
  4. Customer Acquisition: Offering loans can attract new customers to a fintech platform, increasing the potential customer base for other financial products.
  5. Regulatory Environment: The regulatory environment for lending has become more favorable in many countries, allowing fintech companies to enter the market more easily.

Overall, lending provides fintech companies with a revenue stream that can help them grow their business while offering a valuable service to their customers.

BharatX partners with Snitch – Indian Men’s Clothing Brand

BharatX, the VC Backed early-stage FinTech startup enabling credit for e-commerce companies, has partnered with Snitch, the online men’s clothing brand, after it made waves on Shark Tank India and wowed the Sharks.

The Snitch clothing brand can now offer a new ‘SnitchPay’ feature powered by BharatX to enable customers to pay for purchases in three instalments. The offering adds no extra cost or interest, hoping to attract greater numbers of customers with the convenience

Snitch customers now have the option to pay one-third of the total bill when completing their order. The BNPL offering then asks for the remainder of the payment across the following two months.

All transactions are made through a secure gateway, with all communication taking place via Whatsapp. BharatX also explained that it plans to give its ‘Pay-in-3’ offering as an option to D2C and fintech companies.

Mehul Nath J, CEO and co-founder of BharatX, commented on the partnership. He said: “We are delighted to announce our partnership with Snitch – a brand that is gaining immense popularity amongst customers. For those wishing to purchase on Snitch, our ‘Pay-in-3’ feature via the Shopify plug-in empowers them to fulfil their aspirations without having to worry about spending a lump sum amount at once.

Approximately 110 Million Households whose income is more than 5 lakh per annum, do not get access to Formal Credit.

BharatX aims to provide easy integration of its embedded credit offering, to enable companies to increase order conversion and customer retention. The company aims to verify new companies looking to add the plugin to their platform in less than five minutes.

The company had announced that it had successfully raised USD4.5 Million in Y Combinator funding back in May 2022.