Daybreak - Is Flipkart bringing a knife to the fintech gun fight with Super.money?

Episode Date: September 24, 2024

Back in 2022, e-commerce giant Flipkart’s 35 billion dollar universe was left with a gaping fintech hole after the payments app Phonepe was spun off. There a brief period, after that, when it wasn’t clear whether Flipkart would ever try to dip its toes in consumer payments play again. But then again, this is Flipkart. Here is a company that has a finger in every pie – from online travel, fashion, quick commerce, logistics, even medicine delivery. Some may say it was only a matter of time before the company filled that gap and took another big fintech bet. That time came in June, when Flipkart launched Super.money, a credit-first unified payments interface app. Emphasis on credit-first. But the thing is, right now, credit is a hill everyone is queueing up on. So, does Flipkart stand a chance? Tune in. Don't forget to send us your recommendation for this Thursday’s Unwind segment. The theme is “your favourite opening line from a book or film.” Send them to us on WhatsApp as a voice note or as a text message. The number is [phone]. Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get alert, as soon as we release our first studio recording, episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Hi, this is Rahil, the host of Daybreak. Before we start today's episode, I have a slightly strange question to ask you.

When was the last time you watched a movie or read a book and the opening lines really stuck with you? It could have been really funny or really powerful. This is actually for a new segment called Daybreak Unwind. You may have heard it. Every Thursday, my co-host, Nikda Sharma and I, come together to share our recommendations. They could be books, movies, music, even fun activities for you to check out over the weekend. And it isn't just us. We also have listeners like you sending their recommendations.

So this week, if you have a killer opening line you would like to share, text us on. on WhatsApp. Our numbered is 8971-08379. I'll also put it in the show notes of this episode. And now, on to the episode. Back in 2022, e-commerce giant Flipkarts $35 billion universe was left with a gaping phone pay-shaped hole. This, of course, was after the payments app was spun off,

which meant that the two companies completely separated their business operations and became two separate entities, free to chart their own growth parts. Of course, they do still technically remain cousins, tied together by that not-so invisible string called Walmart. The point is, after phone pay was spun off, there was a time when it wasn't really clear whether Flipkart would ever try to dip its toes in consumer payments play again. But then again, this is Flipkart. Here is a company that has a finger in every buy. From online travel, fashion, quick commerce, to logistics and even medicine delivery. Some may say it was only a matter of time before the company filled that gap and took another big fintech bet.

In fact, that time did come. It came along in June when Flipkart launched Super Money. This is essentially a credit-first unified payments interface app. Emphasis on credit first. You see, two years ago, the National Payments Corporation of India, India's retail payments body, said users could also make UPI payments using ru-pay credit cards. and its adoption is only picking up now, two years later. As of now, about a third of all payments apps support this feature.

But it has also opened the door for a third wave of UPI. Freshly minted fintechs like Super Money and Sachin Bansal's financial services company Navi are part of this wave. They want to make the most of the credit door that UPI has now opened. So far, things are looking up for Super Money. Since its beta launch in June, it's managed to do. round up 10 million users. And this is largely thanks to a 5% cashback offer. A former Flipkart executive says it's also on track to reach 25 million transactions by the third month. Now, all of this sounds great on its own, but when you look at the larger picture, you'll

realize that super money still has a long way to go. It's still a small fry in a very competitive market. Carving a niche for yourself in the crowded digital payment space dominated by players like phone pay and Google pay is really, really hard. On top of that, a big part of the super money promise is dependent on changing payment habits. More and more people have to get used to making UPI payments using credit cards. It's like Flipkart's three-month-old fintech venture is carrying a knife into a gunfight. So why is supermany going down this obviously painful road? Spoiler.

The answer has a lot to do with Prakash Sikarya. Flipka Chief Kalyan Krishnamurti's ideas, man. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Rahal Philippos, and I'll be joining my colleague, Sikda Sharma, every week to bring you one business story that is worth understanding and worth your time. Today is Wednesday, the 25th of September.

You know how sometimes when an employee goes up to their boss and threatens to quit, the boss will try placating them by offering them a new role or a hike or something like that? Well, super money, finally enough, was born out of that sort of negotiation. You see, Prakash Sikarya has been Kalyan Krishnamurti's go-to person for the last decade. So when Flipkart needed a counter to Prime Video, it was Sykariah who was in charge of setting up Flipkart video. To rival Google and Amazon ads, he launched Flipkart ads, which of course is now a sizable business for the e-commerce giant.

And then when it wanted to take on e-commerce marketplace Misho, Sikaria was once again given the time. of coming up with Shopsie, which is a reselling platform. So he was basically the star employee. But Sikaria had ambitions of his own. He wanted to leave Flipkart to set up his own fintech. And that was when Super Money, which by the way wasn't part of Flipkart's initial strategy, entered the picture. A former Flipkart executive explained that it was the carrot dangled in front of Sikaria to retain him.

Now, of course, FinTech is not new to Flipkart. For many years now, it has had its own fintech charter. Its team focused on payments and credit facilities like buy now, pay later, to improve commerce on the platform. Flipkart has even tried distributing loans to its 400 million user base. In fact, that project was nearing completion when Super Money entered the picture. It was kind of a two-birds-one situation. So on one hand, Flipkart was getting into regulated financial service territory, and on the other, it was on the verge of losing.

Sikarya to his fintech pursuit. So Krishna-Mutti likely brought the two together. The ultimate goal for Flipkart here is to assess whether supermoney is able to create a profitable fintech and to be among the top five in terms of scale. But it really has its work cut out for it. That's because credit is a hill that everyone is queuing up on right now. And with middling results, supermoney too like them, wants to make money from fees by distributing credit along with payments.

How it works is, first, buy a lot of. allowing users to make UPI payments with rupee-powered credit cards, and second, by hitching its wagon to Flipkarts 400 million users to cross-sell loans. A former Flipkart executive said that Prakash is targeting about 80 to 90 million users who are creditworthy but underserved. How do they know that? Well, based on Flipkart data, of course. But see, the bottom line is people are unlikely to open Flipkart to get a loan just because they're pushing it.

So is there a workaround? More on that in the next segment. Arunditie Ramanathan, a deputy editor here at the Ken, spoke to a banker about all of this recently. And they said that the early signs indicate that when people use UPI on credit cards, spending goes up by 20 to 25%. Which is why banks are obviously not missing any opportunity to support this new wave of credit first apps.

The thing is, getting a chunk of the UPI market for credit cards isn't easy. The biggest issue, of course, is merchant fees. You see, credit cards usually come with a 2% merchant fee, while UPI transactions are free. So merchants have been freely accepting UPI so far. Now that rupee credit cards are linked to UPI, small merchants won't face fees for transactions under $2,000. But online merchants still deal with regular credit card fees. So many merchants are now avoiding credit card payments via UPI. A payment's said that this has led to a success rate of only about 60 to 70%. But the same executive said that UPI on credit will likely find its footing through some very specific use cases.

For instance, if you buy a flight ticket on an online travel platform like Make My Trip, 80% will put a credit card for it. Generally, people don't do UPI transactions here. Now, for people who don't mind using UPI to make a credit card payment, there is potential to get hooked to this sort of payment method. The executive believes that this is the sort of use case that will attract a lot of new users. But according to another banker, Arundati spoke to, best case scenario, UPI credit could reach 10 to 12% of UPI volumes in the next two to three years.

Credit card issuers will also play a big role here. If credit card spend grows by 20 to 30% outside the usual channels, issuers will be more interested in offering rupee cards. So there is a window of opportunity for a new app like Super Money, but it isn't very large. The example that a lot of people cite is that of Ptm. It took about two years for people to realize that Ptm is not just a wallet and has UPI too. So there is an opportunity there for credit-based UPI payments too,

because people may seek out another app for that. And Super Money may just be that app. It is, of course, going to be a fight. but it's one that Flipkart is ready for. After all, it's counting on super money to bring back that mojo at lost with phone pay. Daybreak is produced from the newsroom of the Ken India's first subscriber-focused business news platform.

What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted by Rahil Filippos, produced by me Snigda Sharma and edited by Rajiv Sien.