Walmart has separated its Indian payments company PhonePe from parent company FlipKart, India’s largest e-marketplace, to prepare the payments company for an IPO — and apply the unit’s expertise and technology to Mexico and other countries.
Walmart tailors its financial services offerings to the financial environment in the countries where it operates. In Mexico, where Walmart’s majority-owned subsidiary Walmex owns the Cashi payment app, the Bentonville, Arkansas-based retail giant sees an opportunity to apply PhonePe’s technology and expertise.
“To accelerate the learning process, part of Cashi’s engineering team is based in India and gets ideas from PhonePe’s development team,” said Leigh Hopkins, Walmart’s executive vice president of international strategy and development and regional CEO of Asia and Walmex. . “Last year, we placed one of PhonePe’s executives on the Walmex board to provide input.”
India is a global leader in digital finance adoption, thanks to the Indian stackan open application programming interface based digital infrastructure introduced by the government in 2016 to help people access financial services, healthcare and other essentials.
The India Stack includes the Unified Payments Interface (UPI), an interoperable rail that enables near-real-time transfers between bank accounts and digital wallets, and face-to-face and e-commerce payments. The UPI uses India’s biometric digital ID system, which had 1.36 billion users as of January 2023, to authenticate users.
In 2018, Walmart acquired PhonePe as part of its $16 billion acquisition of Flip Kart. Walmart is not allowed to own physical stores in India due to Indian regulations. Recent investors in PhonePe, which is valued at $12 billion, include venture capitalists Ribbit capitalWalmart’s US fintech joint venture partner.
Walmart plans to use what it learns from PhonePe about providing financial services to low-bank consumers in other countries. “We believe we will learn a lot about digital payments and financial services, which we will feed back to our businesses around the world,” said Hopkins.
Bienvenido in Mexico
PhonePe, like Cashi, is a QR code based mobile payment system. PhonePe has 440 million users and 4 billion monthly transactions, with its total payment value growing 50% year-over-year by 2022 to $950 billion. It can be used online and at 35 million merchants in person, Hopkins said.
Cashi, on the other hand, cannot be used outside of Walmex stores, unlike other Mexican payment apps such as Mercado Pago, Baz, and PayPal.
In the fourth quarter of 2022, the number of Cashi users increased by 218% year-over-year to 5.4 million. Users fund their Cashi wallet through cash deposits at Walmex stores or through their credit or debit cards.
“Because Cashi and PhonePe enable payments without consumers needing a credit card, they provide e-commerce access to the large, underserved consumer segments in India and Mexico,” said Francesco Burelli, a partner at Hamburg, Germany-based Arkwright Consulting. “The two apps have different strategies, with Cashi leveraging incentives and loyalty and PhonePe offering more use cases. Cashi’s value to Walmart is consumer data that fuels its advertising business and provides insights for growing its Mexican retail franchise.”
Mexico lags behind India in banking as 42% of Mexicans are completely unbanked and do not have a traditional or non-bank financial account, said Andreas Farge, a senior analyst at Payments and Commerce Market Intelligence, a subsidiary of Coral Gables. Florida Based America Market Information.
India, on the other hand, is 80% banked, largely due to the government’s banking efforts.
And Cashi has already established a strong foundation for Walmart to build on, Farge said. “Cashi is the third largest Mexican payment app after Baz and PayPal,” he said.
According to Ashutosh Sharma, vice president and research director at Forrester Research in Cambridge, Massachusetts, PhonePe is the most used Indian payment app.
PhonePe’s services include P2P transfers, mobile phone top-ups, utility bill payments, mutual funds, and auto and motorcycle insurance.
“We are adding services such as stock brokerage and life insurance, and are now offering cross-border payments that allow PhonePe users to make QR code-based payments in Singapore and the UAE,” said Hopkins. “PhonePe intends to offer [buy now/pay later] through third-party providers to its users.”
Other Indian payment services like paym also want to diversify into financial services to improve their financial performance and capitalize on their subscriber base, Sharma said. “They’re starting with insurance distribution, mutual fund distribution and other paid services,” he said.
Around the world
Just north of Mexico, Walmart sees another way to use PhonePe to improve financial services.
In the US, Walmart is the majority shareholder A, a New York-based fintech that offers a banking app for Walmart customers and staff. One, whose other owner is Palo Alto, California-based Ribbit, plans to turn its app into a place where users can manage all of their finances.
“One focuses on products other than PhonePe, but there will undoubtedly be good lessons between them and we try to make those connections,” said Hopkins.
Ribbit’s investments in One and PhonePe are a confirmation of Walmart’s strategy, said Richard Crone, CEO of Crone Consulting, based in San Carlos, California.
“Ribbit is a tier 1 venture capitalist, and the startups it supports have a higher success rate than other startups,” Crone said.
Walmart also wants to apply PhonePe’s expertise in South Africa. “What we know about Indian and Mexican digital payments should be a recipe for success in South Africa, which is in the early stages of digital,” said Hopkins.