PhonePe is a digital payment app that simplifies and manages your online transactions while also offering additional services through its platform.
With many companies providing similar features, PhonePe stands out thanks to the advancements made by the National Payments Corporation of India (NPCI), particularly with the introduction of UPI (Unified Payments Interface), which enhances transaction efficiency.
UPI has become a major player in the digital payments space. In Q3 2023 alone, UPI processed over 117.6 billion transactions worth more than ₹182 lakh crore, with monthly transactions increasing by over 49% from January to December 2023.
In this dynamic environment, let’s take a closer look at how PhonePe generates its revenue
About PhonePe
PhonePe, founded in 2015 by Sameer Nigam, Burzin Engineer, and Rahul Chari, is a prominent digital payment platform in India. Headquartered in Bangalore, PhonePe is built around UPI (Unified Payments Interface) transactions.
The app supports 11 Indian languages and offers a wide range of services, including mobile recharges, money transfers, DTH recharges, utility bill payments, tax-saving funds, and data card recharges.
With a license from the Reserve Bank of India, PhonePe is authorized to provide money transfer services and operate as a recognized payment system.
The platform boasts over 280 million users and supports payments for more than 17 million merchants across nearly 500 cities in India.
PhonePe Business Model
PhonePe offers more than just bank-to-bank money transfers. It provides a variety of features, including insurance, food ordering, gold purchases, loans, and grocery shopping, along with essential services like mobile recharges and bill payments.
As a comprehensive super app, PhonePe integrates all these services into one platform. Users can also take advantage of small discounts on various products available through the app.
PhonePe applies a commission on payments between customers and merchants, whether online or offline. However, since UPI transactions are processed through IMPS, there’s no additional commission for banks.
Recently, PhonePe introduced its own POS (Point of Sale) machine, which is now available in many stores. This new device uses Bluetooth technology and is recognized for being one of the most affordable POS solutions globally, making payments easier for both users and merchants.
How PhonePe earns money?
Mobile Recharge
PhonePe offers easy online mobile recharges for both prepaid and postpaid connections. It earns revenue through commissions from telecom operators for each recharge transaction. Additionally, there’s a small platform fee of ₹1 to ₹2 for mobile recharges over ₹50.
Bill Payment
For each bill payment made through the PhonePe app, the company receives a commission from the biller.
Gift Vouchers
PhonePe sells a variety of gift vouchers for services like Oxigen Wallet, Airtel Money, and Freecharge. It earns a commission on each voucher sold.
Digital Gold
PhonePe allows users to buy digital gold. While the actual pricing is competitive, there may be a small additional charge when purchasing through the app.
Mutual Funds
The app features mutual fund investments. PhonePe earns a commission, which is a percentage of the investment, from the mutual fund companies when users purchase their schemes.
UPI (Unified Payments Interface)
PhonePe doesn’t make money directly from UPI transactions. Instead, it uses the data from these transactions to innovate and develop new products.
Revenue Model of PhonePe
PhonePe doesn’t run its own payments bank, and transferring money back to your account is free of charge. The platform also provides various promotions and cashback offers for transactions.
The bulk of PhonePe’s revenue comes from mobile recharges and bill payments. It also features exclusive offers and vouchers for different brands on its app.
PhonePe uses analytics from Yes Bank to customize its services for users and partners with Flipkart to track purchases. This collaboration enhances advertising and notifications for users and helps Flipkart maintain and use significant amounts of money by keeping users engaged with the PhonePe platform.
Unlike payment banks such as Paytm and Airtel Money, PhonePe operates as a fintech startup, focusing on non-banking financial services.
With a 47% market share, PhonePe is known for its secure online transactions. It offers a wide range of payment and transaction services through its app, website, and third-party platforms, both online and offline. It also provides wallet services comparable to those of Paytm and Amazon Pay.
PhonePe is widely used across India and is praised for its excellent services and attractive deals. It stands out for its effective payment features and appealing offers while employing traditional revenue strategies.