PhonePe’s bid to build a better playbook for financial services

PhonePe’s bid to build a better playbook for financial services


Pratik Bhakta

122 reads

Pratik Bhakta

122 reads

PhonePe has quietly edged out Paytm and Google Pay in the digital payments race. But as it prepares to move its corporate entity from Singapore to India and eventually plan an IPO, the big question is: can it boost its bottom line with the help of insurance and lending?

January 17, 2022

12 Min Read

Poush Mela, the annual village fair in Shantiniketan, a quaint university township in West Bengal, draws visitors from across the country. Tribals display their unique handcrafted wares here, and QR code stickers adorn every other stall.

The stickers for instant payments have become a unifying thread in commerce taking place in the smallest to largest corners of India. Paytm helped popularise this digital mode, and now, PhonePe is leading the charge. 

The Bengaluru-based startup, owned by US retail giant Walmart, hopes to capture a sizable chunk of rural payments with the help of over 1 lakh freelance workers and a similarly elaborate network of field agents.

Its performance during the months of July to September in this financial year indicates significant momentum: it processed about 5.2 billion transactions overall, settling $123 billion. On UPI alone, it has a market share of around 45%.

And a look at three diverse regions gives an idea of PhonePe’s reach. In West Bengal, it recorded over 180 million transactions during the September quarter, according to the data shared by the company. In Ladakh, it processed almost 600,000 transactions and in Maharashtra, one of India’s most industrialised states, around 800 million. 

Across UPI, cards and wallets, a total of 13.2 billion transactions were recorded in the country, RBI data for the quarter shows. Rough estimates suggest PhonePe may be commanding about 40% of the overall digital payments market. For the September quarter, Paytm settled 3.3 billion transactions and reported a gross merchandise value of Rs 2 lakh crore ($27 billion). 

PhonePe has also raced ahead of competitors in another major segment. On Bharat Bill Payment System, it handled 27 million consumer transactions in December 2021, settling bills of Rs 4,658 crore ($627 million). Billdesk processed 10 million transactions of Rs 1,324 crore ($178 million) and Paytm 9.9 million transactions of Rs 1,757 crore ($236 million), the data shared by network operator Bharat BillPay shows.


Wealth management, stockbroking and insurance are great money-making avenues on paper. But startups are yet to figure out how to woo customers without burning cash. PhonePe is hoping its payments user base of 350 million will come in handy here

In terms of adoption and transactions, PhonePe has grown exponentially over the past two years, a marked change from its standing in 2019 when it trailed Google Pay and Paytm. It is also expanding into ancillary financial services, entering the areas of insurance, wealth management and digital gold. It has applied for NBFC and asset management licences.

Revenue generation, however, has been a challenge for the company, and it lags behind Paytm on this count. 

  • In FY21, PhonePe’s revenue and loss were Rs 725 crore ($97 million) and Rs 1,727 crore ($233 million), respectively, as per data sourced from business intelligence platform Tofler. 
  • Paytm reported revenue of Rs 3,186 crore ($429 million) and a net loss of Rs 1,700 crore ($230 million).
  • Both spent around Rs 530 crore ($71 million) on marketing last year.

How fast can PhonePe improve its financials? CEO Sameer Nigam told The CapTable that it was on the right path to profitability. “Last year, 50% of the losses were due to provisions against ESOPs, which were to be allocated to our employees after the split from Flipkart,” he said.

In December 2020, PhonePe moved out of Flipkart’s fold and raised $700 million in fresh equity from Tiger Global and Tencent. It was valued at $5.5 billion.

Capital and customer base are clearly not a problem for the payments player. Nigam and co-founder Rahul Chari’s primary focus will be boosting the bottom line by offering a broader range of products ahead of a potential initial public offering.


Share this read




Premium Reads

No billion-dollar baby: Why social, video and reseller commerce players are changing course

By Aditi Shrivastava



Delhivery’s IPO gambit pays off (kinda); Coinbase-RBI spat

By Madhav Chanchani


Premium Reads

From unicorns to early-stage startups, everyone is downsizing ambitions

By Aditi Shrivastava


Premium Reads

Decoding insurtechs’ big bet on wellness

By Supriya Roy


Premium Reads

Impending divorce: How Shiprocket’s relationship with delivery partners imploded overnight

By Payal Ganguly

For subscribers only

Premium Reads


View More >>

Deeply reported and objective news on the country´s fastest-growing companies and the people behind them.