Indian mobile payments app PhonePe has forayed into the country’s e-commerce space with the launch of Pincode, a hyperlocal commerce app, that leverages the government’s Open Network for Digital Commerce (ONDC) initiative.
Sameer Nigam, CEO and founder of Walmart-backed PhonePe, claimed in a statement that Pincode offered “a revolutionary new approach to e-commerce, which puts all the local stores and sellers at the heart of the digital shopping growth story.”
Pincode, currently live in Bengaluru (India’s version of Silicon Valley), will work with local shops, with an initial focus on categories such as grocery, medicines, food, electronics, and home décor.
The startup plans to expand to more cities and amass 100,000 orders a day by the end of the year. Over the next few years, Pincode will invest significant effort in digitally enabling “every Indian shopkeeper across the country.”
ONDC is key to Pincode proposition
The ONDC initiative was started by India’s commerce ministry in 2021 to democratise the e-commerce landscape by offering a zero-commission platform. It is an interoperable network where buyers and sellers can do business regardless of the service they use. The ONDC initiative aims to disrupt consumer reliance on proprietary services run by Amazon and Flipkart.
PhonePe’s Nigam said that building Pincode on ONDC is important because it can foster rapid growth of a new hyperlocal e-commerce business model. Apart from local buyers and sellers, such a model will also benefit other ecosystem participants, such as MSMEs, farmers, last-mile logistics and inventory management players, the company added.
However, while ONDC promises to be a major disruptor in the e-commerce sector, Morgan Stanley wrote in a recent report that ONDC also faces execution challenges, “such as in the ability to bridge the trust deficit between sellers and buyers, and provide real-time availability data for inventory management.”
“UPI moment for e-commerce”
Even so, PhonePe is keen to expand into India’s e-commerce market, which is forecast to be worth $133 billion by 2025, according to wealth manager Sanford C. Bernstein. And the company sees ONDC as its ticket in.
“This is the UPI moment for e-commerce. I think there is legitimate friction in the e-commerce industry. Would we have entered the e-commerce industry had ONDC not happened? Absolutely not,” Nigam was quoted as saying in TechCrunch.
PhonePe, which has cornered over 50% of all value transactions on the UPI network, will use its platform to cross-sell insurance and other services.
Valued at $12 billion, the fintech giant has raised $650 million out of the $1 billion that it pledged to raise by the end of the ongoing year (2023), according to media reports.
PhonePe recently secured a $650 million investment from global investors including Ribbit Capital and General Atlantic.
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