Ever since demonetization in 2016, digital payment platforms have gained massive popularity! Initially, you might have hesitated to use mobile applications for digital payments. But as soon as you realized the high degree of convenience and security of digital payments, you probably never looked back. One such successful digital payment app is PhonePe. It is a multi-purpose mobile application that provides transaction services through the internet. In simple words, it is an online payment platform. Through this app, you can accomplish various tasks like mobile recharge, payment of electricity bills, and other bill payments. In this article, you will get a thorough explanation of “The PhonePe Business Model.”
This article covers three major areas of PhonePe business model-
- Working Strategy
- Marketing Strategy
- Revenue Sources
Working Strategy- PhonePe Business Mode
PhonePe app works as a broker or a bridge among banks, customers, and traders. They work through the proprietorship by influencing the customers and traders. It was launched by Sameer Nigam in the year 2015. PhonePe has successfully acquired a license from RBI (Reserve Bank of India) for providing services related to money transactions and payment systems in India. Apart from money transactions between the banks, it confers additional facilities too. Currently, the prime objective of PhonePe is to expand its user base, and then comes the profits.
Services of PhonePe provided by PhonePe Business Model
PhonePe provides you with the following services-
- PhonePe Pre-Paid Instrument (PPI) – It is commonly known as “PhonePe Wallet.” It is nothing but a digital wallet.
- PhonePe Gift Card (eGV) – With this gift card, you can make purchases in retail stores, restaurants, gas stations, and other places. In the PhonePe gift card, you need to load money on the card after which you or any recipient gift card can spend it.
- PhonePe UPI– You can use it to transfer money or purchase products on offline or online merchant platforms. It never charges any extra fees on payments through UPI (Unified Payments Interface). On PhonePe UPI you can link small finance banks too.
- Mutual Fund Distribution- Here you can purchase and redeem your mutual fund units.
- Insurance Solicitation- You can solicit PhonePe insurance based on your needs.
- RBP (Recharge & Bill Payments) – With RBP, you can pay the bills and recharge your account through the service providers that are listed on the PhonePe platform.
- Merchant Payments (Switch Merchants) – With this feature, you can access merchant websites and use the payment instruments suggested by those merchants.
- Digital Gold – You can also buy digital gold through PhonePe. It is a virtual method of buying and investing in precious metals without the need to possess the physical form of gold.
Marketing Strategy- PhonePe Business Model
The brilliant marketing strategies of PhonePe, helped it to become a limelight of online payment platforms. The growth of PhonePe as a P2M (Person to Merchant) payment app was accelerated with its effective multichannel marketing techniques. It involved the following-
- “Har phone pe PhonePe hai” campaign– The motive of this slogan was to educate the people about the role that PhonePe plays for its users all over the country. It presented the little moments of the everyday life of a common man to unlock the nation’s mission of the Self-reliant India Campaign. This film conferred multiple messages to the Indian spirits about the digitally enhanced lives that you are living. It shows the journey of Indians and how warm-heartedly we accepted and adopted digital solutions in every sphere of our lives.
- Television advertisements– IPL 2021 was a major move of PhonePe to drive awareness and expand its visibility to its audiences. PhonePe was an official co-presenting sponsor for the television broadcast of IPL. It also sponsored four IPL franchises of 2021 namely Mumbai Indians, Chennai Super Kings, Royal Challengers Bangalore, and Delhi Capitals. It also partnered with Disney+Hotstar.
- Social Media Campaigns– PhonePe effectively utilizes social media channels to gain maximum followers. It has more than 100K followers on Facebook, Instagram, Twitter, and YouTube. The commonly used hashtags for social media campaigns are #HarphonepePhonePeHai, #Bills, #BillPayments, #PayYourBills, #Scan, #Pay, #Wallet, #Payments, and #ProtectYourself.
Revenue Sources- PhonePe Business Model
PhonePe has various revenue-earning mechanisms. As you know, you need to pay processing fees of around INR 1.00 to INR 2.00 to PhonePe if you make transactions above INR 50.00. Similarly, it earns commissions from other sources too. However, all UPI-based transactions that you do on this app are free of any charge. But why? You may wonder! The primary reason is, the UPI transactions are based on IMPS (Immediate Payment Service) due to which it cannot charge any additional fees from the banks.
Why are UPI transactions free on PhonePe?
The leading digital payments and financial services companies like PhonePe, Paytm, GPay, etc. are the key beneficiaries of India’s UPI (Unified Payments Interface). The Union Cabinet provided the incentive scheme of INR 26 billion to banks and digital payment apps (including PhonePe) to promote RuPay cards and low-value UPI transactions for P2M transactions. This incentive is counted as a profit estimate for this digital payment app. Thus, the BHIM UPI merchant payments have become an indirect revenue-generating source due to the government’s incentives.
Then how does it earn revenue? Well, the answer is simple. It’s through commissions!
Sources of Revenue
It earns money through commissions from the following services-
- Mobile recharges– PhonePe earns a commission from telecom companies when customers recharge their phones through PhonePe. The platform charges INR 1.00 to INR 2.00 if the recharging amount is above INR 50.00.
- Bill payments– Similar to mobile recharges, whenever you pay to make a bill payment to a company through PhonePe, then it earns a commission from the respective company.
- Applications– Have you seen a separate column in the PhonePe app displaying different apps like Dominos, Myntra, Grofers, etc.? Whenever you make payments on those apps, then PhonePe receives a specific amount of money from them as a commission.
- Gift vouchers– For every gift that you sell through a voucher, PhonePe earns a considerable commission through it.
- Digital gold– As you have seen above you can purchase virtual gold through PhonePe. PhonePe charges extra money for this purpose. That’s why you need to pay a bit of an extra amount of money than the actual price of digital gold.
- Mutual funds– Whenever you invest in the mutual fund investment feature of PhonePe, then the latter earns a specific amount of commission from the respective mutual fund company.
- UPI Incentive– PhonePe receives incentives provided by the government to promote low value UPI transactions. Also, it acts as a source of revenue for the app.
Conclusion (PhonePe Business Model)
Even though PhonePe itself is not an established bank, it provides outstanding digital payment services. The volume of digital payments in India increased exponentially with 33% YOY (year-on-year) during the fiscal year of 2021-22. Do you know 7,422 crores of digital payment transactions were recorded in that year? Similar to PayTM, PhonePe was also a key player to facilitate this enormous digital payment transaction. Because of the successful PhonePe business model, it provides quick, safe, and convenient online transactions. Thus, there are more than 280 million users and around 17 million merchandisers of this app.