PhonePe Records 5 Bn UPI Transactions Thanks To Tier 2, Tier 3 Growth

With Unified Payments Interface (UPI) crossing the billion mark in October this year,  the Bengaluru-headquartered digital payments unicorn PhonePe has managed to cross 5 Bn transactions, the company announced.

PhonePe has noted a 5x increase since November 2018, when it had noted 1 Bn transactions. It also claimed that nearly 56% of the 5 Bn transactions come from Tier 2 and Tier 3 cities.

However, despite the whopping number of transactions, Phone Pe reported a loss of INR 1904.72 Cr in the financial year 2019, ending March. In terms of revenue, it has recorded a 401% hike with INR 245.8 Cr in FY19, compared to INR 49 Cr in the previous year. Moreover, the company’s expenses also grew by 156% in FY19, amounting for INR 2153.2 Cr.

This rising expense can be attributed to the money spent on advertising and promotions. The Ministry of Corporate Affairs filings note that advertising and promotions made up for 85% of PhonePe’s total expense.

With Unified Payments Interface (UPI) becoming an important mode of transaction, Phone Pe has majorly benefited in the users aspect as well by registering over 150 Mn users on its platform. Out of these, over 55 Mn are PhonePe’s monthly active users (MAU).  On the other hand, its biggest competitor in the UPI payments, Google Pay, has over 67 Mn MAUs.

PhonePe was founded in 2015 by Sameer Nigam, Rahul Chari and Burzin Engineer. Then Bengaluru-based company offers peer-to-peer transfer, recharges, bill payments and gold purchases, among others. In 2016, Flipkart acquired PhonePe and since then it has become a super app that integrates 25 large digital apps including Goibibo and OYO.

In 2019, the company also launched a new feature ‘Switch’, which allows users to use apps for groceries, shopping, food and travel bookings without downloading any other application. With this, PhonePe planned to enhance users experience.

This year, ecommerce giant Flipkart passed a resolution to set up PhonePe as an independent entity. Media reports suggest that after this move, PhonePe has been in talks to raise up to $ 1 Bn from private equity (PE) firms KKR & Co, General Atlantic LLC, Tiger Global and Tencent, at a valuation of $10 Bn. At present, the company is valued at over $7 Bn.

This month, PhonePe has also raised $80.26 Mn from its Singapore-based parent entity PhonePe Pvt Ltdin exchange for 1.3 Mn shares. Bank in July 2019, the parent company had infused $101.5 Mn for 2.02 Mn PhonePe shares.

PhonePe was a key factor in Walmart’s decision to acquire Flipkart group in 2018. Since, the acquisition of the Flipkart group, Walmart has made some major reshuffle in the management teams of Flipkart and fashion subsidiaries Myntra and Jabong. However, the US-based company made no such big changes in the management for PhonePe.

With entry of big players like Google Pay, Amazon Pay, Paytm and PhonePe, the Indian UPI payment segment is at an all time high. In November 2019, National Payments Corporation of India’s (NPCI) noted 1.22 Bn UPI transaction of worth INR 1,89,224 Cr. This was a 19.4% hike in its growth, compared to  955.02 Mn transaction in September 2019.