PhonePe: Life Beyond UPI

In less than four years, PhonePe has emerged as the leader in UPI transactions, neck-and-neck with Google Pay, leaving behind Paytm and others. But where is the revenue model?

- Rukmini Rao

The digital payments ecosystem was still dominated by wallet players such as Paytm, MobiKwik and Freecharge when the Unified Payments Interface or UPI was launched in 2016. For the past four years, putting behind everyone else in the fintech space, Google Pay held the top spot in terms of monthly UPI transactions, largely driven by peer-to-peer payments. In October, PhonePe toppled Google Pay and climbed to the top spot with a market share of 40 per cent in terms of volumes. The company said it processed 835 million UPI transactions in October out of the total two billion for the month. Google Pay was around 816 million, Paytm around 250 million and AmazonPay over 125 million, according to industry sources. In a zero-MDR regime where transaction fees can hardly be a business model, PhonePe aims to reach half-a-billion users in the next couple of years.

But where is the revenue model? It reported a net loss of ₹1,905 crore, the latest available, on revenue of ₹246 crore. Even though in onboarding more customers, the odds in its favour have just got stronger. On December 3, Walmart-owned Flipkart announced plans to spinoff PhonePe into a seperate entity, with the former as the majority shareholder. Walmart has infused $700 million in PhonePe at a valuation of $5.5 billion. This will allow PhonePe to raise resources on its own balance sheet and fuel its growth as well as IPO ambition.

The UPI Game

Starting out as a UPI-first fintech, PhonePe has come a long way from just around 50 million installs in 2017 to over 250 million registered users on the platform. In October, the company said it processed 925 million transactions (its highest so far).