PhonePe, widely known as a free UPI app in India, generates significant revenue through merchant services, lending, and marketplace commissions, positioning itself for long-term profitability despite ongoing losses.
- 86% of PhonePe’s revenue comes from its payments business including merchant fees.
- Merchant subscription services are PhonePe’s fastest-growing revenue segment.
- PhonePe processed nearly half of all UPI transactions in India by volume.
What happened
PhonePe has evolved from a simple UPI-based payments app into a fintech super app with multiple revenue streams. While consumer P2P and P2M UPI transactions are largely free for users, PhonePe charges merchants fees and subscription charges for QR code devices and point-of-sale systems. These merchant services are growing rapidly and contribute significantly to the company’s revenue.
In FY25, PhonePe’s revenue exceeded ₹7,000 crore, with 86% coming from the payments business. The company generated ₹3,918.5 crore in operating revenue in the first half of FY26, on track to grow 15%-20% by year-end. PhonePe processes approximately 10 billion UPI transactions monthly, which is roughly 47% of India's UPI volume, making it a dominant player in the market.
Why it matters
Monetizing UPI transactions is a challenge for fintech companies as P2P payments typically do not generate direct revenue. PhonePe’s diversified approach leverages its scale to sell merchant subscriptions, facilitate bill payments, and offer financial products such as loans and insurance. This layered business model helps it build a sustainable revenue base.
As PhonePe prepares for an IPO, profitability remains a key concern. By studying the trajectory of rivals like Paytm, which also started with heavy reliance on UPI, investors and the company understand that the path to profits involves scaling merchant and lending businesses that command fees and commissions beyond transactional volume.
What to watch next
PhonePe’s continued growth in merchant services will be a critical indicator of its path to profitability. Its ability to increase subscription revenues for QR code devices, soundboxes, and PoS machines amid increasing competition from Google Pay, Paytm, Amazon Pay, BharatPe, and others will be closely monitored.
Additionally, PhonePe’s expansion into lending, insurance, and advertising will be important drivers of future revenue. How effectively it leverages its large user base for these financial products and maintains transaction volumes will shape investor confidence and its market valuation as it edges closer to a public listing.