E-payments battle costs companies a collective loss of $900 million

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In India, for the year ended March 2020, a collective loss of $900 has occurred for Paytm, PhonePe, and Amazon’s payment units due to the fight for dominance in digital payment. Cashbacks has been reduced by two firms, but marketing & promotional spending remains high. ₹.18 crore was the total loss for the three units in each day. The cumulative loss has gone down by 9-10% compared to the fiscal year ended March 2019, but it has gone double the loss in the financial year 2018. Data sourced from business intelligence platform Tofler shows the Phone Pe, the Bengaluru-based company’s revenue rose by 73 % to ₹437 Crore in 2019-2020 while losses declined by 7% to ₹.1771 Crore. The PhonePe had spent heavily on the cashback rewards which caused double the losses than the previous year.

A person who is well known about PhonePe’s operations said that the jump in the company’s revenue is due to the financial services vertical start generating revenues, and also through distribution of coupons and banner advertisements in the platform. This high amount of loss is due to the aggressive spending on marketing and promotions and to increase its feet-to-street operations among the merchants of rural India. Aamir Khan and Alia Bhatt are the brand ambassadors of PhonePe who promotes through television commercials. According to the annual report of PhonePe, Paytm and Amazon’s payment unit cost related to technology and employees are also very much significant.

GooglePay is another major competent in this industry. As per the estimation of tech media platform Entrackr, Google pay spend an amount of ₹1160 crore in 2019-2020 for rewards to its users. If this is some indication of its losses for the year, the cumulative loss of the biggest digital payment players would surpass $1 billion. Earlier in the year 2020. TOI has been reported that Paytm, which is backed by Alibaba and Softbank had managed to reduce the loss by 30% for the financial year 2020, to an amount of ₹2942 Crore. But this also affected growth. Revenue increased by just 1% to Rs 3,280 crore. The large losses of the consumer-focused payments companies are similar to what’s been happening in the e-commerce space with Walmart-owned Flipkart and Amazon India, both of which have been fighting to corner new users.

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