Fintech

PhonePe Ends Partnership with Juspay, Shifts to Direct Integration

• ByStartupStory     |    December 3, 2024

In a significant shift within the Indian digital payments ecosystem, PhonePe has decided to discontinue its partnership with Juspay, a prominent payment orchestration platform. The Walmart-backed digital payments giant announced that it would now provide its payment solutions to merchants solely through direct integration, bypassing the need for a third-party payment orchestrator.

The move comes at a time when several major players in the digital payments space, including BharatPe, Google Pay, and Amazon Pay, have secured licenses from the Reserve Bank of India (RBI) to operate as payment aggregators. BharatPe received its license in January 2023, followed by Google Pay in December 2023, and Amazon Pay in 2024. In contrast, Paytm’s payment aggregator license was canceled in November 2022, although the company plans to reapply in the near future.

PhonePe, which is one of the largest players in India’s digital payments landscape, explained its decision to shift to direct integrations, citing the need to ensure higher success rates for its merchants. A spokesperson from the company said, “As a payment aggregator, one of our core roles is to provide the best in class success rates to our merchants through our solutions. We are able to do it consistently for merchants directly integrated with us and hence have decided to not offer our solutions through any payment orchestration platform.”

“Going forward, we would offer our solutions to merchants through direct integrations only,” the spokesperson added.

Direct integration refers to the process in which payment data is transmitted directly from a merchant’s server to the payment gateway’s server, which not only enhances the user experience but also improves transaction speed.

Juspay, backed by SoftBank, accounted for around 15% of PhonePe’s payment gateway volume. The company is considered one of the largest payment orchestration platforms in India, with its platform integration business generating approximately 88% of its revenue as of March 31, 2024. However, with PhonePe’s decision, Juspay’s revenue could face a significant impact if other payment aggregators follow suit.

Interestingly, Juspay has also recently acquired a license to operate as a payment aggregator, granting it the ability to compete with the very companies it previously collaborated with, including PhonePe and RazorPay.

The decision by PhonePe reflects the growing trend among payment aggregators to develop their own payment orchestration systems, aiming to maintain control over transaction processes and improve success rates for merchants. As the competition within the sector intensifies, more companies may follow PhonePe’s lead, signaling a shift towards greater autonomy in payment solutions.

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