E-payments battle costs companies $900 million in loss


2020-12-31 02:57:39

BENGALURU: The fight for dominance in digital payments has caused a collective loss of nearly $900 million (Rs 6,500 crore) for Paytm, PhonePe and Amazon’s payments unit in India for the year ended March 2020. Two of these firms reduced cashbacks, but marketing & promotional spends and other costs remained high.
The total loss for the three units translates to around Rs 18 crore per day. Compared to the financial year ended March 2019, the cumulative loss has gone down by 9-10%, but it is still more than double the loss in fiscal year 2018 (Rs 2,729 crore).
Data for PhonePe sourced from business intelligence platform Tofler shows the Bengaluru-based company’s revenue rose by 73% to Rs 427 crore in 2019-20, while losses declined by 7% to Rs 1,771 crore. PhonePe’s losses had more than doubled in the year before as it spent heavily on cashback rewards.

A person aware of the company’s operations said the jump in PhonePe’s revenue was on account of its financial services vertical starting to generate revenue, and earnings through distribution of coupons and banner ads on its platform.
Its losses remained high as it continued aggressive spends on marketing and promotions, and to scale its feet-on-street operations to widen the merchant network in rural India. It has Bollywood actors Aamir Khan and Alia Bhatt as brand ambassadors promoting the company through television commercials.
Costs related to technology and employees are also significant for PhonePe, Paytm and Amazon’s payments unit, according to annual reports of these companies.
Google Pay is another big player in the segment. It operates through a Singapore unit whose financials could not be determined. But tech media platform Entrackr estimated that Google Pay spent almost Rs 1,160 crore for rewards to its users in 2019-20. If this is some indication of its losses for the year, the cumulative loss of the biggest digital payment players would surpass $1 billion.
“I think what has happened is these companies have reduced customer acquisition costs but they are spending aggressively on marketing. Three leading players would have spent a total of around Rs 400 crore in marketing during IPL and they have other high fixed costs as well, employee expenses being a sizable chunk,” said Ashneer Grover, co-founder and CEO of BharatPe, which competes with these firms for merchant payments.
TOI earlier this year reported that Paytm, which is backed by SoftBank and Alibaba, had managed to cut its losses by 30% for the financial year 2020 to Rs 2,942 crore, but this also impacted growth. Revenue rose by just 1% to Rs 3,280 crore.
The large losses of the consumer-focused payments companies is similar to what’s been happening in the e-commerce space with Walmart-owned Flipkart and Amazon India, both of who have been fighting to corner new users. The recent entry of Reliance’s commerce venture JioMart is expected to further intensify this battle in the coming year.



Source link

Leave a Reply