The Gautam Adani-run empire is considering applying for a payments licence for UPI transactions, which would allow it to compete with companies such as Walmart-backed PhonePe and Alphabet's Google Pay, which have a large share of India's digital market.
Adani Group Enters UPI
If you think of the Adani Group primarily as a B2B conglomerate, think again. Adani's consumer focus is becoming increasingly clear and its touchpoints with us, the consumers, are wider and deeper.
First there's Adani Wilmar, the FMCG company, then there's Adani Power, which powers Adani-run airports, lounges and homes, and then there's Adani-owned NDTV – all of which are on the brink of selling direct to customers.
According to latest reports, Adani Group's latest foray will challenge major players in the e-commerce as well as digital payments industry.
Yes, the Adani Group is set to become the latest entrant into India's crowded digital payments and growing e-commerce sectors.
The Gautam Adani-run empire is considering applying for a payments license for UPI transactions, which would allow it to compete with services like Walmart-backed PhonePe and Alphabet's Google Pay, which have a large share of India's digital market, according to a report by the Financial Times. The Adani Group is yet to confirm the news.
The report also said Adani Group would enter the e-commerce space by integrating the Open Network for Digital Commerce (ONDC) into its Adani One app, which it launched in December 2022, a month before the Hindenburg Research allegations surfaced.
Adani Group also reportedly plans to launch a co-branded credit card that will offer rewards to users of all Adani's services, including on electricity bills and airport shopping.
So, let’s take this one by one and see if Adani Group’s foray into the digital economy makes business sense.
The UPI space in India is expanding rapidly. We are talking hundreds of billions of dollars.
India recorded around 131 billion UPI transactions last fiscal year. 131 billion transactions means that every Indian takes out their smartphone and makes a transaction more than 150 times a year, essentially more than once every two days.
And the total UPI transactions last year was around Rs 200 crore, or 20 lakh crore.But the revenue generated by UPI apps is negligible: they charge 1.1% commission only on transactions above Rs 2,000, meaning that effectively, transactions below Rs 2,000 do not earn UPI service providers any profit.
So does it make sense for the Adani Group to get into a business that doesn't generate big bucks? It's certainly un-Gautam Adani.
Here is a quick introduction to the UPI apps used in India.
Walmart-backed PhonePe and Alphabet-backed Google Pay together account for 86% of India's UPI space, with the rest split between Paytm, BharatPe, Cred, and others.
So the question is, if the Adani group does set its sights on the UPI space, will it build it from scratch or acquire a smaller potential rival?Recall that Paytm, which took a big hit from the RBI in January this year, continues to operate as a third-party payments app.
Now let's move on to our e-commerce efforts.
Adani Group launched AdaniOne in December 2022. Until now, it has focused on travel services such as booking air tickets, train tickets, hotel rooms, and taxis to the airport. According to a Financial Times report, Adani Group plans to integrate ONDC into AdaniOne in the future and enter e-commerce in earnest. Recall that Tata Group tried its super app Tata New but failed to compete in the e-commerce market. Meanwhile, Reliance Agio has quickly consolidated its position.
But the question for Adani is whether Adani One, which already faces competition from the likes of MakeMyTrip, EaseMyTrip and Booking.com in the travel sector, can make a dent in the e-commerce industry as a whole, in a crowded landscape dominated by global players such as Amazon and Walmart-owned Flipkart, as well as domestic players such as Reliance Ajio, amid a plethora of less successful start-ups such as Snapdeal and Shopcrew.
Industry analysts say Adani's foray into new businesses is sure to make a big splash, at the very least. But it all depends on how much money he's willing to spend on new business ideas and for how long. Gautam Adani certainly has the cash, but does he have the appetite for D2C? We'll have to wait and see.
