How PhonePe Beat Google pay and Paytm

In March 2021, mobile payments company PhonePe became the first platform to cross one billion transactions powered by the UPI ( Unifield Payments Interface ).

Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application, backed by the Govt. of India.

In December 2021, it surpassed Google pay in UPI transactions, and leaving Paytm far behind in the race.

What is PhonePe

PhonePe is a digital payments and financial technology company. Its headquarter is in Bengaluru, Karnataka, India.

Through PhonePe mobile payment platform you can transfer money using UPI, pay utility bills, recharge phone numbers, buy gold, invest and shop at your favourite stores. All throught one app.

PhonePe uses UPI Api, where you can insert your bank account details and create an UPI Id. PhonePe app does the rest.

UPI Api is an integrated system of mobile payments released by the Govt. of India to facilitate mobile banking.

PhonePe is currently the market leader in the digital payments space of India.

It was founded by Sameer Nigam, Burzin Engineer, and Rahul Chari in the year 2015.

Key metrics

The company offers services in the fintech sector and is valued at $5.5 Billion (2021). They have revenue figures of $92.85 million (2021).

PhonePe has received funding of around $1.99 bn (by April 2022).

PhonePe was acquired by Flipkart. in the year 2016.

PhonePe is the market leader in mobile payement space across all key metrics. The company leads in UPI with over 46% market share in the volume of transactions processed in the year 2021.

How PhonePe works

PhonePeallows user to access and maintain their bank accounts digitally anywhere and at anytime.

Users can link their credit and debit cards with PhonePemobile wallet and pay the funds for their needs.

To use PhonePe you need to add your bank account and create an UPI Id. At present the My Money option can be used to do that.

Go to My Money and add a new back account. PhonePe will fetch your account details and link it to your PhonePe account.

Then you can set an UPI PIN. Enter the last six digits of your Debit/ATM card number and the expiry date. You will get an OTP to set your UPI PIN. Thats all! Now you can send and receive money without revealing your bank accounts.

Users can also sent money to anybody they want through a few clicks on the app.

PhonePe business model

PhonePe app is UPI-based payment platform. Which means the platform uses the UPI technolgy for transfer of money.

The mobile app of PhonePe makes it easy to pay bills and recharge phones.

PhonePe also launched a POS machine for kirana stores in India for accepting payments.

In addition, PhonePe offers insurance brokerage.

PhonePe revenue model

Payment comission is a major source of earning for Phonepe.

The company earns comission on every mobile recharge through their platform. PhonePe also promotes various brands on its platform throught gift vouchers and cash back offers. Commission earned in these offers adds to PhonePe income.

PhonePe has collaboration with several merchants. When any user uses the platform to pay a merchant bill, PhonePe gets a comission from the merchant.

PhonePe has a facility of using multiple apps in its platform. These are apps from different vendors like Dominos, Myntra, OYO rooms, Grofers etc. The company gets a cut when a payment is made in any of these apps through the platform.

You can also buy gold through their platform, but for bit of extra money that goes to the platform.

PhonePe mareketing strategy

PhonePe marketing strategy makes extensive use of social media channels and TV commercials. New features and offers are announced on these channels on a regular basis.

The company is also enrolling hindi movie superstars Aamir Khan and Alia Bhatt to promote its products.

PhonePe wants to add more than 100 million people per year.

The systems at PhonePe are highly efficient at integrating data-driven insights. The company is using Machine Learning to drive increased conversion rates for both its users and partners.

PhonePe vs competition

PhonePe was the first fintech company to adopt UPI just four months after its release. Google pay and Paytm adopted UPI a full year later.

The company held onto its first mover advantage and has been giving fierce competition to its deep pocketed rivals like Google pay and Paytm.

The country’s soon to be USD 95 trillion digital payments market is a huge lucrative market for fintech companies and Phonepe is adopting tactics and strategies to grab a large chunk of the pie.

At present PhonePe reportedly has 110 million monthly active users.

Paytm and Google pay, both has larger bases with around 150 million users each, but according to latest estimates PhonePe is ahead in total number of UPI transactions ( 1 billion transactions approx. ).

In the year 2019 during COVID-19 outbreak, adoption to digital payements caught up and more and more users started to purchase daily use products online. That is when PhonePe registered a significant growth.

PhonePe was flexible and agile to the changing needs of the customers and offered options to fulfill their needs.

The company noticed that people were “in dire need to meet their essential requirements such as mobile recharges, bill payments, and grocery and medical purchases” -Raghupathy, (Head of Strategy and Investor Relations at PhonePe)

PhonePe shifted its focus to groceries and medicines. They wanted to make the purchase of these commodities as smooth as possible online.

The company reworked its homepage for users and made it easy to discover local stores, hospitals, and pharmacies nearby.

Customers could contact these agencies directly and find out about their business hours.

This facility to be able to connect with local kirana stores was a huge proposition in primarily metropolitan cities and a game changer, because delivery of essential commodities from local stores is still underdeveloped.

Another thing that helped PhonePe attract users during the pandemic, was its insurance products.

PhonePe offered coronavirus insurance packages for hospitalization, and there was also daily cash insurance to meet the needs of medical related expenses such as medicines, food, and commute.

Around 85% of new users from tier II and III cities and villages responded to PhonePe programs.

According to the company, it was able to get to the top due to reliance on data driven insights. PhonePe analyses collected data carefully and then implements needed feature. It also removes unwanted features in this way.

This approach has helped the company to beat competition and has resulted in the hyper-grow it has seen recently.

Meanwhile Paytm has turned their focus on merchant payments and Google Pay has stopped cash back plans for customers to adhere to the 30% cap that NPCI has put in. It all bodes well for PhonePe plans.

PhonePe’s business strategy isn’t very different from its competitors. What makes it unique is its strength in data models, proprietary algorithms, and analytics capabilities.

The road ahead for PhonePe

PhonePe is trying to raise funds and it needs numbers to show to investors and the 1billion transactions number is helpful.

The company is creating newer categories to operate in. It is already into insurance and mutual fund, now the plans are to enter stock brokerage.

Lending in another category the company is keen on.

PhonePe has plans to expand its merchant network to 25 million by end of 2021 from about 19 million at present.