Flipkart fintech 2.0: Can super.money strike gold?

Nearly two years after parting ways with digital payments giant PhonePe, the e-commerce titan has unveiled its latest fintech venture, super.money. The move signals a renewed commitment to capturing a slice of India’s booming digital payments and financial services market.

Flipkart's fintech playbook

Flipkart’s fintech journey took a new turn last week with the launch of super.money, a payments app that enables users to make UPI transactions and earn cashback. This launch is not just another product in Flipkart’s ecosystem; it represents the group’s strategic push to establish a formidable presence in the fintech sector.

Read this | Flipkart's q-commerce entry weeks away, will take on Zepto, Blinkit, Instamart

On Wednesday, the company doubled down on this strategy, introducing a co-branded credit card in partnership with Utkarsh Small Finance Bank, expanding its financial offerings beyond mere payments.

“Flipkart still has to fully support them. That's a very big thing. PhonePe got that support and it achieved massive scale. Flipkart has done it in the past and will have to do it again," noted an investor who closely tracks fintech companies, emphasizing the scale of the challenge ahead.

Flipkart did not respond to Mint's queries regarding its shareholding and investment in super.money.

India’s UPI ecosystem has witnessed explosive growth, with the country recording 131 billion UPI transactions in FY24, valued at a staggering ₹200 trillion.

UPI transaction values have exceeded ₹20 trillion for the third consecutive month in July, hitting ₹20.64 trillion, following ₹20.07 trillion in June and ₹20.44 trillion in May.

In July, PhonePe led with 6.98 billion transactions, commanding a 48.3% market share. Google Pay and Paytm followed with 37% and 7.82% market shares, respectively, according to data from the National Payments Corporation of India (NPCI).

Déjà vu: Echoes of PhonePe’s early days

Flipkart-backed super.money’s origins are strikingly reminiscent of PhonePe’s beginnings. The app is spearheaded by Prakash Sikaria, a seasoned Flipkart executive with over nine years of experience, including roles as vice president and senior vice president of growth.

Sikaria’s ambition to build a financial services firm within the supportive environment of Flipkart echoes the early days of PhonePe, which was built by a trio of determined executives from Flipkart’s Bengaluru office.

“A big part of PhonePe’s initial years was essentially three strong-willed executives (Sameer Nigam, Rahul Chari, Burzin Engineer) sitting out of Flipkart’s Bengaluru office and building relentlessly to become the next big thing in fintech," shared a former PhonePe executive.

PhonePe was incorporated in December 2015 and quickly gained attention when Flipkart acquired it in April 2016. In August 2016, PhonePe partnered with Yes Bank to launch a UPI-based mobile payment app.

By November 2018, PhonePe had crossed 1 billion transactions and grew more than 5x the following year, underscoring the platform's rapid ascent. Today, PhonePe dominates the UPI ecosystem by market share, setting a high bar for super.money to meet.

Flipkart Group—the entity that owns Flipkart.com, Cleartrip, and Myntra—had acquired PhonePe for $20 million, signalling an early effort to establish a presence in the financial services landscape. By December 2022, PhonePe had completed its separation from Flipkart, creating two independent entities with Walmart as the majority shareholder of both businesses.

More here | Zeta turns focus back to India for credit on UPI service: CEO Turakhia

“Sikaria has always wanted to build a financial services firm. Flipkart offers an ideal way to start out," the former PhonePe executive noted.

The Flipkart effect

One of super.money’s key advantages is the vast user base across Flipkart Group’s various businesses. With 500 million users on its e-commerce platform, and Myntra's monthly active userbase of 60 million in 2023, the potential for rapid customer acquisition is significant.

“Having easy access to the consumer is important. People open an app and use it for something every day, from shopping to payments. This is how companies can build frequency," said Anand Daniel, partner at Accel.

Flipkart’s ecosystem could provide super.money with a ready-made audience, crucial for building the frequency and engagement that fintech platforms need to thrive. Additionally, other Flipkart businesses, such as its recently launched UPI handle on Flipkart.com, complement the group’s fintech ambitions, even as Sikaria insists that super.money’s focus will remain distinct.

“Everyone has a merchant UPI today. They are all embedding UPIs in their workflows. They are not building a UPI-first fintech player, and that distinction will remain," he explained.

A UPI-first fintech player benefits from easy customer acquisition by facilitating UPI payments on its platform. This approach not only drives growth but also opens opportunities for cross-selling financial services, which super.money believes will be the key to monetization over time.

Competition and Strategy: Carving out a niche

super.money’s initial strategy for capturing customers involves offering a payments platform, positioning it against larger players like PhonePe, Paytm, and Google Pay.

“We want to be among the top five UPI players by December," Prakash Sikaria, founder and CEO of super.money, told Mint.

Achieving this goal would require super.money to surpass significant competition; as of July 2024, the top five UPI players included PhonePe with 6.98 billion transactions, Google Pay with 5.34 billion, Paytm with 1.13 billion, followed by Cred at 142 million and Axis Bank apps at 108 million transactions.

Since its beta launch in June, the platform has achieved 10 million transactions and 1 million downloads, signalling an impressive start for a young company. However, scaling in the payments space presents challenges. Payments account for the bulk of business for established players like PhonePe and Paytm, who have spent years building their market share in UPI transactions.

“PhonePe, Google Pay, and Paytm have the first-mover advantage in the payments space. They’ve been around for so long, it’s difficult to imagine a new close competitor," a fintech executive noted.

And this | Dressing Pine Labs for IPO: What ‘fintech bully’ Amrish Rau can learn from Paytm

PhonePe’s standalone payments business reported an adjusted profit after tax of ₹710 crore in FY24, compared to a loss of ₹194 crore the previous year. Paytm, meanwhile, generated nearly ₹900 crore in revenue from its payments business in the June quarter, accounting for about 60% of its total revenue.

However, Sikaria emphasized that UPI payments are seen as a channel for user acquisition and engagement, not the end goal. “UPI will only be an acquisition platform. In fact, I don’t want to scale the UPI consumer base beyond 30-40 million. The idea is to keep churning out to increase the Arpu (average revenue per user) of the platform," he said, stressing that super.money is not intended to be a payments-only platform.

“Payments companies are trying to serve 200-300 million users, which is why that business is key for them. This is also why they run ad-supported models," Sikaria added, noting that super.money will remain ad-free.

The holy grail of fintech

According to Sikaria, financial services—including loans and other products like insurance—are expected to be the primary growth drivers for super.money. The company aims to monetize by offering financial services to first-time borrowers who have never had an unsecured card.

“If you give a product to someone who has never experienced it, they are more forgiving, and adoption is better," Sikaria explained. For every card issued, four applicants are rejected, creating a sizeable market for super.money to tap. The company will continue targeting the mass affluent population.

“If it’s not as premium as CRED and not as mass-focused as banks, then it’s quite a big market," the fintech executive cited earlier commented. However, scaling financial services comes with its own set of challenges. In merchant lending, super.money will compete with the likes of Paytm and Bharatpe, while its insurance and other products will face competition from Groww, PhonePe, and others.

“We’re looking to solve two aspects in product-market fit (PMF) over the next two years. The first is growth PMF through rewards and UPI transactions. The second is monetisation PMF through financial services," Sikaria said.

Also read | A modest fee is all it will take to sustain the UPI ecosystem

The company is already seeing early signs of growth PMF and expects monetization to begin in the next couple of months, according to the executive.