Indian online marketplace Flipkart is phasing out its payment gateway business Payzippy, a little over a year after it launched it, MediaNama had learnt from reliable sources. In response to a query from MediaNama, Flipkart informed us that it has made a strategic investment in mobile payment company Ngpay (Jigrahak Mobility Solutions Pvt Ltd), and it is phasing out Payzippy. Payzippy’s website lists clients such as babyoye, Bluestone.com, Makemytrip, Travelyaari, Caratlane.com, Yepme, Zansaar, Lenskart and Yepme, and the company has said that nothing will change for customers, since the technology developed by the Payzippy team will continue to power payments for Flipkart. Note that the Economic Times, in July 2014, had reported that Flipkart may buy Ngpay. Flipkart has said that it has made a strategic investment.
Ngpay appears to have a fairly comprehensive mobile app based marketplace, offering ticketing from IRCTC, multiple bus travel services, flight tickets, apart from recharging and top-ups, cinema tickets and events. Payments are allowed via Mastercard, Visa, Maestro and American Express. I just signed up for ngpay, and was informed that I’m its 3,850,027th user. It had raised $2.2 million from Helion Venture Partners in 2006.
The statement that Flipkart shared with us:
Flipkart is pleased to announce a strategic investment in ngpay, a company that has pioneered mobile payments in India.
Payments is core to Flipkart and we see this partnership giving rise to the largest mobile payments brand in India. Sourabh Jain’s expertise will help us drive innovation in payments, with features and products that provide a competitive end-to-end customer experience, to redefine the payments ecosystem in India. While we phase out our own payments product, PayZippy, nothing changes for our customers, who will continue to enjoy all the benefits of a safe and secure payment system through Flipkart.com. The PayZippy team has created innovative payments solutions, and the IP/technology developed will continue to be power and improve payments for Flipkart under the customer platform.
In our opinion, the two events (the investment in ngpay and phasing out of Payzippy) appear to be mutually exclusive. One service doesn’t replace the other. Payzippy is/was an online payment gateway service that was intended to become Flipkart’s independent mobile wallet, while Ngpay is a marketplace of mobile based services.
Payzippy couldn’t become a wallet before RBI changed its plans
Payzippy was announced on July 3rd 2013, following which, the company (Flipkart Payment Gateway Services Pvt. Ltd.) had applied for a Semi Closed prepaid wallets license with the Reserve Bank of India (RBI). This was necessary for the company to restart its wallet service for customers. Flipkart had shifted from an e-commerce model (wherein it took ownership of inventory that customers eventually bought) to a marketplace model (where customers bought products from vendors via Flipkart’s online technology platform) early in 2013. In an e-commerce model, businesses can operate a closed wallet, which allows customers to store money (or buy credits) from the store, and use it to purchase products from the same store. The shift to a marketplace model meant that the wallet could not be used to purchase goods from third party merchants, for which a semi-closed prepaid wallet license is needed.
This August, the RBI announced an updated list of companies that had been granted prepaid wallet license, and Payzippy wasn’t in that list. Online/mobile commerce companies with such licenses include Itz Cash, Oxigen, Paytm, Mobikwik. Ngpay/Jigrahak doesn’t have a prepaid payments license.
Subsequently, the RBI announced a set of draft guidelines for setting up Payment Banks, including for prepaid payment wallet companies. We expect the winding down of the Prepaid Payment Instruments license, since the Nachiket Mor committee, in January 2014, had pointed towards difficulties being faced by the Pre-paid Payment Instruments Issuers (PPI issuers), “and the underlying prudential concerns associated with this model”. It has recommended that the existing and new PPI issuer applicants should instead be required to apply for a Payments Bank licence or become Business Correspondents (BCs). This means that it is unlikely that fresh prepaid payment wallets licenses will be issued, leaving Payzippy with little hope, unless Flipkart applies to become a Payment Bank as well.
The other objective, for Payzippy, was to operate a payment gateway that is more efficient than existing payment gateways. Competition is rife in the space, and as we had wondered why competing e-commerce websites would sign up with a Flipkart owned payment gateway. More on why Flipkart launched Payzippy, here.
This closure appears to reinforce the perception that Flipkart is fairly ruthless when it comes to shuttering businesses that it feels haven’t scaled quickly enough. In the past, it has shut down its online music download business Flyte.