PhonePe: ETtech Explainer: Behind PhonePe call to end third-party deals

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Online payments major PhonePe has informed its merchants that its payments solutions will be offered to them through direct integrations, thereby stopping all third-party partnerships with payment aggregators like SoftBank-backed Juspay.

In a communication sent out to merchants, a copy of which was seen by ET, PhonePe said that it sees third party payment players receiving a payment aggregator licence (PA) of their own as a conflict of interest.

This is a significant development in the merchant payments business where players like Juspay, which facilitates merchants to work with multiple payment gateways, might face loss of business. Juspay recently bagged the final approval from the Reserve Bank of India for a PA licence. What does this mean and what could be the potential impact of this move? ET explains.

Immediate impact
Many merchants who process very large volumes of payments might look at this as an opportunity to save a few basis points per transaction which they were paying to platforms like Juspay. Walmart-backed PhonePe is betting on its size and bargaining power to get large merchants to work with it directly.A Juspay spokesperson said that the company works with more than 50 payment gateways and it sees negligible impact from the move. Armed with a PA licence, they can offer a full-stack service with good pricing offers as well, industry insiders said.

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Market sentiment
ET had written back in December last year that Juspay had embarked on a journey to emerge as a fullstack payment aggregator. Sheetal Lalwani, cofounder of Juspay had told ET then that he was not competing with payment aggregators, rather trying to build for global and business payments use cases.“Juspay played a very critical role in the early days of digital payments, but now the routing technology is being built in-house by many PAs, so going forward even the other PAs might offer direct integrations to their merchant partners,” said a chief executive officer of a rival payment firm.

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