What it is
PhonePe is a payments app built on UPI, launched in 2016 by Sameer Nigam, Rahul Chari and Burzin Engineer and later acquired by Flipkart (and subsequently spun out, with Walmart as a major shareholder). It started as a way to send money and pay merchants, and now sits across merchant payments (QR codes and POS devices), bill payments and recharges, insurance and wealth distribution, and an app store (Indus Appstore). In September 2026 it handled 10.91 billion UPI transactions, 45.57% of listed-app volume, ahead of Google Pay at 32.23%.
Business model
UPI person-to-person and most merchant payments carry zero MDR, so the volume itself earns almost nothing. PhonePe makes money around it: merchant services (devices, soundboxes and payment-acceptance products), NPCI incentives on UPI credit cards and acceptance devices (₹286 Cr in FY26), advertising and distribution of financial products such as insurance and mutual funds, and other payment-linked services. Of the ₹7,920 Cr FY26 operating revenue, ₹7,619 Cr was sale of services. Payment processing costs alone were ₹1,907 Cr, so the business has to find margin in what it layers on top of a free rail.
Core user flow
Link a bank account → pay by scanning a QR or entering a number → use it for recharges and bills → get shown insurance, mutual funds, loans and merchant offers inside the same app. On the merchant side: accept payments with a PhonePe QR or soundbox → get offered devices, working capital and other services.
What’s working
- Scale in the one metric that decides the category: 10.91 billion transactions in a single month and 45.57% of app volume, a lead of roughly 13 points over the next app.
- Revenue still grew: operating revenue rose 11.5% to ₹7,920 Cr in FY26 even though two revenue lines were switched off by regulation (rent-payment services, discontinued in 2025 under RBI guidelines, and real-money gaming, banned in 2025). Rent was 22.7% of revenue in FY24 and 13.4% in H1 FY26, so the core has been replacing lost revenue.
- Share has been stable under regulatory pressure: PhonePe’s share slipped only 0.9 points year on year (46.47% to 45.57%), while Google Pay lost 3.2 points.
What I’d change
Bet: PhonePe is the clearest example in Indian fintech of volume leadership that does not convert into profit. Its FY26 net loss widened to ₹2,792 Cr, while Paytm, with a smaller UPI share, reported FY26 revenue of ₹8,437 Cr and a profit of ₹553 Cr. Part of PhonePe’s loss is one-offs: a ₹685 Cr goodwill impairment on Indus Appstore (which the company says is still pre-revenue), a ₹365 Cr loss from the Pincode shutdown, offset by a ₹434.5 Cr gain from selling a 5% stake in MapmyIndia. By my arithmetic that leaves an underlying loss of roughly ₹2,177 Cr, still heavy, driven by ₹2,390 Cr of non-cash ESOP cost and marketing spend that nearly doubled from ₹496 Cr to ₹956 Cr. Meanwhile NPCI’s 30% share cap (now due by 31 December 2026, measured over a rolling three months) hangs over the 45.57% share, and the IPO was deferred in March 2026. I’d stop spending on the adjacent bets that have not worked (Pincode, Indus Appstore, which had three senior exits this year across Indus, Share.Market and insurance) and put the marketing budget behind the merchant and financial-services lines that actually earn a margin on UPI volume.
Metric to track: operating revenue per UPI transaction, and the share of revenue from outside payment processing and NPCI incentives. If the first stays flat while volume grows, scale is not converting; if the second does not rise, the cap risk becomes a revenue risk too.
One number
PhonePe handles about 46 of every 100 UPI app transactions in India, yet it lost ₹2,792 Cr in FY26 while Paytm, with a smaller share, made a ₹553 Cr profit on revenue only about 6% higher (₹8,437 Cr vs ₹7,920 Cr, my calculation from the two reported figures).
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