PhonePe to tap new revenue streams in financial services, consumer engagement

Today, our revenue streams include payments revenue, distribution income from in-app distribution fees, financial services including mutual funds/digital gold/insurance and advertising. We will bring in new revenue streams in the consumer engagement and discovery side, and financial services such as loans and working capital for the 15 million merchants who are on PhonePe. We have set a target of 25 million merchants by December 2021, of which nine million will be in rural areas. We will have 15,000 agents to go and enable digital payments in 6,000 talukas in India.

Also read: Flipkart announces partial spin-off of PhonePe

In the next three-four months. We have Rohit Bhagwat, who is an Independent Director and a financial services veteran. There is Binny Bansal, who is one of the most successful consumer tech entrepreneurs in India and an investor himself. There’s Rahul Chari (co-founder and CTO, PhonePe) myself and two Flipkart appointees who are from the Walmart family and two more independent directors who are still to be placed. One will be a PhonePe minority investor, for which discussions are ongoing and will probably be somebody from Tiger Global or Tencent. We are looking to add some local firepower in terms of industrialists or people in the financial services sector as that’s a big area of investment for us.

Right now just under 500 of our 2,200 employees are under the ESOPs. In less than four weeks we will issue letters to all 2,200 employees. Back in the day, I think employees were all shareholders. My father worked at Larsen & Toubro and a significant part of the company was owned by the employees. In the start-up sector, really young people have done very well for themselves but it’s been concentrated on the tech and business side of the functions. I think ensuring all our customer service agents and all our salesforce last-mile employees also get to participate in the wealth creation is a bit of a paradigm change in a good way as it is more participative. I’m excited about somebody in my sales team in Bhopal who has ₹3.5-4 lakh worth of equity seeing it double in the next few years — that’s a game changer.

Also read: PhonePe gets ₹150 cr capital infusion

Given that we have raised a war chest and got our investors on our board aligned to going the maximum, I think we may spend more on capital outlay than we had originally planned. At the operating level, we will be profitable in two years, but if we keep expanding on our capex or keep investing in the brand, profitability may be delayed somewhat. That’s the nature of tech companies. For most global platforms, conventional profitability comes later because we keep redeploying capital into the business to grow and scale it.

For three years now, we found ourselves saying — we will look at it next year. And then we’ve said “no”. In 2021 we might get into lending with partners. Until the NPA data are revealed on the retail side post the pandemic, I don’t think we should, as a company, be using equity dollars to lend to retail customers. Giving people money and hoping to collect it without having a collections army is just hard.

When you trying to enable something as broadbased as digital payments it is a huge task in itself. In our third year, in January 2019, we had announced the target of 250 million users by 2020, and we got there a few months early. By the end of 2022, we want to get to 500 million users. We are at 265 million right now and are looking to double that number in the next 24 months, which is an aggressive target.

We launched PhonePe ATMs in February 2020 and by March we had almost two million merchants enabled and transactions had hit one lakh a day and then the lockdown happened. For seven-eight weeks no one ventured out. During that time we switched all our focus on enabling delivery using digital payments with Flipkart and other players as well. Most people stopped wanting to pay cash. We didn’t go back and look at the ATM for the better part of this year, as we were totally focussed on digital payments growth. ATM centres are still there but we haven’t been purposeful in growing it.

We’ve just scratched the surface with 300 apps on our Switch platform across categories including pharmacies and healthcare, food and travel, services, transit, hotels, shopping, financial services, entertainment and games. Peer-to-peer chats have been live on PhonePe for about a year. We have payments, we have 300 mini apps, we have 15 million stores which you can interact with and discover, we have services, everything except for lending at this point.

On the one hand we can say, we are a super app, but on the other if I look at WeChat, for example, which has one billion users everyday, we are just 35 million users in comparison. They are 30 times larger and, under every single category in China, WeChat and Alipay are so much bigger than anything we have in India today. I think, from the coverage standpoint we are right up there in being a super app, but in terms of volume of activity we are far behind where we could be as a market.

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