PhonePe, India’s most valuable fintech startup, has raised an additional $200 million as part of an ongoing funding round. The startup has managed to pull in a total of $650 million in recent weeks despite the market slump, as it seeks to bolster its war chest following its separation from parent firm Flipkart. The majority of PhonePe is owned by Walmart, which has invested in the latest round.
Dominating Transactions on UPI
PhonePe has gained recognition for its dominance in facilitating transactions on UPI, which is a network that was established by a consortium of retail banks in India. UPI is the most popular way Indians transact online, processing more than 8 billion transactions a month. Currently, Google’s GPay and PhonePe process more than 80% of all UPI transactions, with PhonePe commanding about 50% of all these transactions.
Expanding Offerings and Becoming a Distribution Engine
PhonePe is slowly becoming a distribution engine, leveraging its large base of 450 million registered users to cross-sell products such as insurance. The startup plans to deploy the funds from the funding round to build and scale wealth management, lending, stockbroking, ONDC-based shopping, and account aggregation businesses.
End Game: Becoming a Bank
According to a report prepared by auditing firm KPMG and filed by PhonePe in January, PhonePe generated $234.3 million in revenue during the first nine months of 2022. The report also predicts that PhonePe’s revenue will be $325 million in 2022 and $504 million in 2023. Industry experts believe that the fintech giant’s aim to become a bank justifies its high valuation.
Positive Outlook for the Future
Judith McKenna, President and CEO of Walmart International, expressed her confidence in PhonePe’s ability to expand its offerings and provide financial services to Indians at scale. She stated that India is one of the world’s most dynamic, digital, and fastest-growing economies and that Walmart is pleased to continue supporting PhonePe.
With PhonePe continuing to make strides in the Indian fintech industry, the startup is likely to attract even more funding as it works to cement its place as one of the leading players in the market.
The National Payments Corporation of India (NPCI), which oversees the UPI network, had initially enforced a check on the market share of each participating player, which posed a concern for PhonePe’s growth. However, the NPCI recently extended the deadline until 2025, which has paved the way for another two years of fast growth for PhonePe.
With its large user base of 450 million registered users, PhonePe is leveraging its position as a distribution engine to cross-sell products, including insurance. The fintech startup intends to use the funds raised in the latest funding round to build and expand its wealth management, lending, stockbroking, ONDC-based shopping, and account aggregation businesses.
Sameer Nigam, co-founder and CEO of PhonePe, expressed gratitude towards Walmart, the majority investor, for their consistent support in achieving their long-term goals. In a statement, Nigam stated that PhonePe is enthusiastic about their upcoming growth phase, wherein they aim to introduce new offerings for Indian consumers and merchants, while also driving financial inclusion throughout the country.
PhonePe’s recent funding round is a testament to the fintech startup’s growth and potential to become India’s leading digital payment platform. As the company continues to scale and diversify its offerings, it will undoubtedly face stiff competition from other players in the space. However, with a solid financial backing and a proven track record of dominating UPI transactions, PhonePe is well-positioned to lead the charge towards a more digitized and inclusive financial landscape in India.
