PhonePe's Direct Integration Move for Payments: Can It Impact Third-Party Providers' Biz like Juspay?

Digital payments giant PhonePe has reportedly discontinued all third-party partnerships with payment aggregators, including SoftBank-backed orchestration platform Juspay. The fintech company has informed its merchants that all its payment solutions will now be offered via direct integrations.

Payment orchestration platforms like Juspay and IXOPAY allows online merchants to manage multiple bank partnerships via just one payment gateway. For stopping its partnership with Juspay, PhonePe said its has plans to directly integrate payment solution for its merchants, according to a Business Standard report. Juspay joined hands with PhonePe as a payment aggregator in February this year.

With this, the Walmart-backed fintech firm will now offer a direct integrated payment flow to the merchants --- from transaction origination to final settlement. Currently, the Bengaluru-based company has more than 40 million merchants. The report stated that around 15 per cent of PhonePe’s payment gateway volume is being processed through Juspay.

Read More | PhonePe Narrows its FY24 loss to Rs 1,996 Crore Even as ESOP Costs Rise

What Is Payment Orchestration?

A payment agreegator (PA) is payment platform provider which enables its clients to accept payments through various modes such as credit cards, debit cards, UPI, bank transfers, digital wallets, and e-mandates on a single platform. A merchant can integrate with PAs to offer different payment options to its customers.

The payment aggregator partners with banks to consolidate multiple payment modes and allow businesses to accept payment as per their convenience. The Reserve Bank of India (RBI) has given nod to several companies like BharatPe, Google Pay, and Amazon Pay to operate as payment aggregators. The central bank has cancelled the license of Paytm in November 2022, but the fintech giant said they would re-apply for it.

Read More | PhonePe, Liquid Group Partner to Expand UPI QR Payment Service in Singapore

On the other hand, Payment Orchestration serves as a critical enabler for PAs to connect them with various banks, acquirers, and payment service providers. This allows PAs to streamline payment processes through a unified software layer. However, this routing system increases the dependency of fintechs on third-party payment providers. And, it is complex process to manage transactions through other businesses.

But some media reports stated that PhonePe wants to provide better success rates to merchants through its solutions. It said the company has been able to achieve this consistently for merchants directly integrated with the platform.

Can It Impact Juspay Business?

PhonePe’s shift to direct integrations can leave an impact on Juspay’s “payment platform integration” business as it accounts for over 88 per cent of its total revenue in the fiscal year ending March 2024. In contrast, Juspay refuted these claims and said this will have a “negligible impact” on its business because merchants will continue to value the freedom and flexibility they get by working the payment orchestration.

“At Juspay, we firmly believe that the choice of payment solutions—whether through orchestration platforms or direct integrations—should always remain with the merchants. We want to emphasise that our existing merchant operations remain unaffected. With Juspay, merchants have access to best-in-class payment solutions, ranging from checkout, tokenisation, analytics to payment routing,” Juspay said.

"Our commitment to providing innovative payment solutions through open platforms remains unwavering, as demonstrated through initiatives like HyperSwitch, PrestoUI, HyperSDK. We continue to see strong merchant engagement, with businesses valuing our platform's flexibility and independence in managing their payment ecosystem," it added.

Read More | Flipkart, PhonePe Moving Toward Profitability, says Walmart CFO 

Currently, the platform has partnership with more than 50 payment gateways. The company exuded confidence in having new payment gateways including acquirers and issuers. It is worth-mentioning that Juspay witnessed 7.76 per cent fall in losses to Rs 97.54 crore in FY24 as compared to Rs 105.75 crore in FY23.