Indian digital payments company PhonePe is expanding into the e-commerce market with the launch of its hyperlocal commerce app Pincode on the Open Network for Digital Commerce (ONDC). The app will be launched in Bangalore initially in 150 pin codes for grocery and food, with the aim to expand into 10-15 other cities by the end of the year. 

PhonePe has 450 million users, with one in four Indians on its platform. With Pincode, the company aims to enable local retailers, MSMEs and farmers to connect with the wider local ecosystem. PhonePe is not competing with e-commerce giants Flipkart or Amazon, instead, it is focused on creating a hyperlocal quick commerce alternative that is inclusive. 

To support the hyperlocal commerce app, PhonePe has a significant investment plan and is currently in the midst of a $1 billion fundraise, having raised an additional $200 million in primary capital from Walmart last month. Part of the funds will be used to grow its ONDC-based shopping and account aggregators. 

Founded in December 2015 as a digital wallet and online payment app, PhonePe's foray into the Indian e-retail market comes as it is expected to triple in value from $50 billion in 2022 to $150 billion by 2027. The growth will be led by new online shoppers, primarily from tier II and III cities. For PhonePe, which dominates UPI with around 50 per cent market share, the expansion into local commerce is expected to bring the next wave of growth. 

The company will also launch its seller platform in the next few months, to get its vast merchant base onto the ONDC network.

“With ONDC, we are not facilitating pan-India transactions. We do not believe a federated model will work with that. Flipkart solves a very different problem extremely well. They have the most sophisticated supply chain in the country. But local market dynamics are different. I don’t think any player has cracked the hyperlocal market in a meaningful way,” observed Sameer Nigam, chief executive officer (CEO) and founder of PhonePe.