Jul 19, 2023

How The Payment Platform Of Phi Commerce Works The fintech startup’s payment platform helps enterprises in three major areas: Payment collection across online and offline channels, payouts and reconciliation. As most businesses have adopted an omnichannel approach, they need to manage and monitor online and offline payments around the clock. To ensure a seamless experience across channels, payment options must be consistent across all channels and implemented appropriately. It will be unfair if online shoppers have exclusive access to BNPL/EMI options, but in-store customers fail to benefit from these schemes. When it comes to collecting payments from distributors or dealers, enterprises deal with the added complexity of split payments and matching with against invoices, among other activities. “Tracking and reconciling payments is a big pain point for businesses. That’s why we wanted to create a platform which would be flexible enough to not only cover all payment modes and channels but also provide value adds like APIs for accounting thereby creating huge efficiencies for our customers” said Thattil. Service-oriented framework: The team has built the platform aligned to a service-oriented framework. Thus, instead of hard-coding the application and feature set for each payment mode, services can be configured across payment flows to ensure uniformity in solution offering across channels and payment instruments, without impacting the platform’s core code base. Payment reconciliation via Phi Commerce NEFT: National Electronic Funds Transfer (NEFT) is a popular mode of online transfer introduced in November 2005. But Thattil identified a critical information gap as payee names, purpose of payment and other details are rarely available when merchants receive the money via NEFT. “This can be confusing, especially when you receive several NEFT payments every day. Most merchants use a manual reconciliation process, which is often error-prone and time-consuming,” said Thattil. Phi Commerce launched its unique virtual account number (VAN) solution to address this problem and ease out operations and reporting challenges for such transactions. As the VPN generated is unique for each customer, the startup can automatically track and update all related payments in real time due to its seamless integration with merchant systems. This eliminates the need for manual payment reconciliation, while customers/payers are no longer required to provide their unique reference numbers (URNs) as proof of payment. Phi Commerce also provides summary settlement reports, which can be used to reconcile payments. With built-in dashboards offered by Phi Commerce, merchants can also easily and efficiently track settlements. On the revenue front, it follows a typical payment aggregator model, with the merchant discount rate (MDR) serving as the primary source of revenue. Additionally, its platform technology is deployed to businesses as a white-label solution, and Phi Commerce charges an annual subscription for the same. Can Phi Commerce Outshine Competition, Iron Out Regulatory Glitches? The fintech’s closest competitor is Razorpay, which provides a similar suite of enterprise payment solutions. However, several other players like Lyra.com, MONEI, Fiserv, Pinelabs, FSS Tech, Airpay, Cashfree, CCAvenue and Instamojo also offer a few services, which match some of Phi’s offerings. Nevertheless, Thattil is confident about the fintech’s cutting-edge offerings. Phi Commerce has strategically designed its platform architecture to offer cost-effective solutions, adding significant value to existing payment systems and helping resolve the challenges many businesses face today. For instance, it will soon introduce Soft PoS, allowing merchants to use their mobile phones as PoS devices. “Usually, merchants have to pay a monthly rent of INR 500-600 for a PoS terminal. Therefore, this all-new feature [soft PoS] is bound to disrupt the digital payments space, particularly in Tier II and III locations,” said Thattil. Phi Commerce plans to expand globally in two to three years, starting with Southeast Asia and eventually moving to the Middle East and the EU. The fintech aims to process 5 Bn transactions via its platform in FY24 and triple the value of transactions from the previous year. As the world marches towards a less-cash society, payment rails will be pivotal in driving innovative enterprise solutions and widespread financial inclusion. The ultimate in this value chain could be the blockchain technology and decentralised finance (DeFi), guaranteeing data fidelity and secure operations. But this is easier said than achieved as the sector struggles to cope with regulatory compliance and funding crunch. According to Inc42’s Fintech Report (Q2 2023), payments startups raised $213 Mn or 25.4% of the $838 Mn funding in fintechs in Q2 2023, while lendingtech startups bagged the most – 67.1% or $562 Mn, to be precise. Moreover, the RBI introduced a series of stringent measures for prepaid and credit card players, and nearly every fintech sub-sector has been under its scanner ever since. Not without reasons, though. According to the central bank’s 2022-23 annual report, Indian banks saw the highest number of fraudulent transactions in the digital payment space in FY23. Additionally, the rollout of a government-backed digital currency (CBDC) instead of validating in-circulation private cryptos or the growing popularity of neobanks with advanced technology features may force payments startups to rework their playbooks to avoid roadblocks. Although Phi Commerce aims to lead India’s digital payment revolution, ever-growing regulatory challenges can be a big hurdle going forward. It is pertinent to note here that the company burnt its fingers in 2022 when it was about to go live with a large business prospect. The RBI had then introduced a new policy mandating all payment data to necessarily reside within the country, giving Phi Commerce a surprising blow and putting its plans on the back foot. “One of our partners was a multinational company, which processed payments from its data-centre in Europe. Just a week before the big launch, we went back to our customer, took him into confidence and we were able to convince them to push the launch by a month to enable compliance with the mandate. Our transparency with our customer ensured that our relationship, built on this foundation of mutual trust, prospered in the years to come,” recalled Thattil. Thattil is optimistic, though, about the road ahead. After all, a vast segment of India’s 1.4 Bn population remains outside the digital realm, although individuals and businesses in this space must be empowered with secure and efficient tech solutions. But given the size of this still untapped market, no single player can capture it all, and there will be enough growth opportunities for Phi Commerce and its ilk. Note: We at Inc42 take our ethics very seriously. More information about it can be found here. Loading Next…