India-based startup BharatPe is enabling merchants to start accepting digital payments

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Indian payments company BharatPe has raised $50 million in Series B funding to scale its business in India, per TechCrunch; Amazon and Google were reportedly in talks to participate in the round, but the startup’s founding team passed due to concerns about "diluting their stakes."

The startup works with small merchants that may not have accepted digital payments before and gives them a QR code that enables consumers to pay via the country’s Unified Payments Interface (UPI), as well as a digital dashboard and access to short-term loans.

It’s attracted 1.5 million merchants and processed over 21 million transactions, worth more than $83 million, since it was founded in 2018, and it wants to use the new funding to bring in around 3.5 million more merchants in the next 12 months.

Here’s what it means: BharatPe is trying to capitalize on India’s surging digital payments market by recruiting offline merchants and bolstering their capabilities.

UPI, which enables mobile bank-to-bank transactions in India, is on the rise, with its transaction volume jumping 249% annually in July. It brought in 822 million transactions during the month, and India’s overall digital payments market is projected to be worth $1 trillion by 2023. This increasing popularity and value offers a tremendous opportunity to companies like BharatPe, especially since it facilitates UPI payments specifically.
But only 48% of urban merchants in India accept digital payments, making the recruitment of merchants key to the growth of India’s digital payments industry. India has millions of kiranas — small mom-and-pop grocery stores — as well as other small stalls that may not yet be able to accept digital payments. Enabling these merchants to accept digital payments could give BharatPe the opportunity to process significant volume as digital payments’ popularity grows in India.

The bigger picture: As competition in India’s payments market heats up, BharatPe may have to battle with industry leaders that take an interest in working with merchants more directly.

Paytm, Google Pay, and PhonePe are fighting for UPI transaction volume, and they could work with offline merchants to allow them to accept digital payments, boosting their own performances. Establishing a relationship with merchants could boost their acceptance and volume, giving them a leg up on competitors.

Because of this, the industry leaders might focus on solutions like BharatPe’s in the future, and since they can potentially offer additional features that tie into their greater payments ecosystems, they could grow to control the space. This would potentially serve as an extension of the firms’ efforts to court merchants, which has seen Google Pay offer a merchant-facing rewards program and Paytm enable merchants to settle payments instantly.

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