One playbook, two strategies: PhonePe’s finserv ambitions come from Paytm stock

With a user base of over 350 million, PhonePe is eyeing growth in its investments business. Recent acquisitions and applications for regulatory licences are part of its strategy but its biggest challenge is likely to be the cross-selling hurdle which has humbled bigger rivals like Paytm in the past

PhonePe has been slowly but steadily building out its wealth management vertical, applying for multiple licences and making acquisitions

Most recently, the Walmart-owned firm acquired investment bundle marketplace WealthDesk and an registered investment advisory firm OpenQ

PhonePe’s full-stack ambitions—it wants finserv to contribute over 40% of its revenue—are reminiscent of rival Paytm’s; it also seems to be following a similar playbook

And while it’s a playbook that has landed Paytm in a stalemate of sorts, PhonePe seems to have a couple of aces up its sleeve

A couple of weeks ago, PhonePe made an announcement that marked another move in the slow game that the payments company has been quietly and unobtrusively playing. It announced the acquisition of the Mumbai-based WealthDesk, a marketplace for investment bundles, and OpenQ, a registered investment advisory (RIA) firm. Together, the deal cost PhonePe $75 million, according to a report report Bloomberg Walmart-Backed PhonePe Buys Indian Wealth Management Firms Read more by Bloomberg.

The Walmart-owned company’s end game? To become a full-stack financial services platform. It’s been on that road for a while now.

In 2019, it began operating as a distributor for mutual funds. The company lists over 200 funds on its platform, including from asset management companies (AMC) like Nippon, ICICI Prudential, and SBI Mutual Fund. Currently, it also offers users the option to invest in digital gold and silver. It has applied for an NBFC NBFC NBFC Non-banking financial company licence, a stockbroking licence, and most recently, an AMC licence. A spokesperson for PhonePe told The Ken that the firm has received the stockbroking licence from India’s securities regulator, the Securities and Exchange Board of India (Sebi), and is “actively working on launching [its] stock broking services.”

Until the vertical becomes operational, however, mutual funds are PhonePe’s go-to. The WealthDesk-OpenQ acquisition, then, adds another layer to its wealth-management arm.

Operational since 2016, WealthDesk allows users to invest in stock and ETF ETF Exchange-traded funds Exchange-traded funds are funds that trade on exchanges, generally tracking a specific index bundles curated by investment advisors licensed by the Sebi. OpenQ manages 10 investment bundles on WealthDesk. And while Ujjwal Jain, WealthDesk’s chief executive, has maintained that the two operate independently, the two companies have the same address for their office space on their websites. And Jain lists himself as one of OpenQ’s co-founders.

PhonePe’s ambition has its origins in its original business proposition—payments. Or rather the market-share cap that’s looming for those in the space. The National Payments Corporation of India (NPCI) introduced a new rule new rule Moneycontrol Can 30% market share cap on UPI ever be implemented? Read more in 2021, which said that the market share of payments companies shouldn’t exceed 30%. NPCI is the body that owns and operates all retail payments services in India, including UPI.

AUTHOR

Jaspreet Kalra

Jaspreet covers banking, financial technology and digital assets. He is a graduate of St. Stephen’s College, Delhi and Columbia University’s Graduate School of Journalism. Jaspreet has previously worked with CoinDesk and Bank Automation News. When unoccupied with work, he can be found pretending to read hardbacks while listening to stand-up specials.

View Full Profile

The only business subscription you need

Unrivaled analysis and powerful stories about businesses in India and Southeast Asia from award-winning journalists. Includes access to longform articles, premium newsletters across a range of topics depending on your interest and our top-ranked podcast. For those who want to be prepared for what comes next.

So much journalism in India is superficial.

Articles are generic, almost cookie-cutter in their approach. And they don’t provide enough context on the issues they cover. The Ken is different. I don’t always agree with everything they say but I appreciate their commitment to publishing deeply reported narratives and investigations. Their reporters find new ways to analyze tech among other industries. And that’s always worth a read.

Sid Talwar / Co-Founder and Partner / Lightbox Venture Capital

As entrepreneurs, we thrive on being in the know at all times.

A personal subscription to The Ken was a no brainer. But as startup founders, this isn't enough. Team members also need to be in the know, for everyone handles customer-facing responsibilities and an ecosystem change that impacts customers also impacts us

Kiran Jonnalagadda / Co-founder / HasGeek and Internet Freedom Foundation