PhonePe, one of India’s largest fintech platforms, is painting on a broad canvas, with its ventures spanning consumer payments, merchant payments, insurance, lending, stock broking, and commerce through local commerce aPincode, and the Indus App Store.
Managing these multiple verticals in a fast-growing market demands strategic prioritization, and PhonePe has built a distinct framework to achieve this according to co-founder Rahul Chari.
In a candid fireside chat with YourStory Founder and CEO Shradha Sharma, PhonePe’s leadership shared their insights on how they prioritise, operate, and maintain focus across these broad areas at TechSparks Bengaluru 2024.
Given the diversity of PhonePe’s verticals, Chari emphasised that a decentralised approach won’t work. “operating in a decentralised manner, where independent teams chase their own goals without alignment, is not an option.” Instead, the company takes a hybrid approach, where some business lines operate independently, but the overall strategy is guided by a unified vision.
PhonePe’s approach to compartmentalising its priorities is crucial in determining where teams can operate independently and where alignment is necessary.
Chari elaborated, “We then basically have to look at where the goals are completely independent, where they can actually chase it in a singular manner, and then it becomes much more about governance, acting like a board with capital allocation. And where it is a unified story… we try to compartmentalise that problem into, say, the PhonePe app, where payments are the one where the flywheel starts from.”
PhonePe processed half of all Unified Payments Interface (UPI) transactions by value in August. It processed payments worth Rs 10,33,264.34 crore, representing 50.14% of the Rs 20,60,735.57 crore worth of payments processed within the UPI system.
By allowing independent verticals like Share.Market and Indus App Store to operate with more autonomy, PhonePe’s leadership acts as an internal investor or board, delegating operational responsibility to experienced leaders. On the other hand, for verticals closely tied to payments, such as insurance and lending, the company maintains a more integrated approach to ensure alignment with the core business.
At the heart of PhonePe’s strategy is the core app, where consumer and merchant payments act as the foundational layer. Other services, such as insurance and lending, feed off the consumer data generated from payments. This integrated approach allows for a balanced prioritisation, tilting towards payments but not at the cost of other key areas.
One of the major challenges faced by any company in a fast-growing market is staying focused amidst external pressures and competition. PhonePe, with its deliberate and long-term view, makes a clear distinction between reacting to market noise and sticking to its internal strategy.
The company avoids knee-jerk reactions to external market forces, instead relying on its internal metrics to guide decision-making. “If you keep favouring outside noise—there’s a new launch by a competitor, so lending suddenly becomes important, or there’s a huge investment wave in insurance—you can’t operate like that. Conviction to be more inside-out than outside-in is key,” Rahul explained.
This long-term perspective enables PhonePe to launch new verticals only when it’s ready.
For example, despite the intense focus on lending in India’s fintech space, PhonePe started lending in its eighth year. “We started lending a year back in our eighth year as a company, and seventh year as a product, with the scale that we have. Our belief is that we need a two-sided network of scale, where many consumers and merchants are transacting regularly,” Chari said.
However, sometimes PhonePe also compartmentalises its business into distinct verticals, which allows them to focus on different areas with varying degrees of independence.
“In the case of, say, Share Market (PhonePe’s broking vertical), where it’s completely independent, we play almost the internal investor role and control function, rather than trying to be an operating function,” Chari explained. This allows PhonePe’s leadership to entrust vertical heads with the autonomy to drive their initiatives forward, while governance and capital allocation decisions are made centrally.
Hemant Gala, CEO, PhonePe’s Lending Services, added that the company is careful not to react hastily to market trends or competition. “If we try to take knee-jerk reactions from an organizational perspective, we end up randomizing the teams,” he noted. Instead, PhonePe’s leadership carefully evaluates market signals before making any decisions, ensuring that they don’t disrupt internal operations.
“One of the things we try not to do is to let our thoughts immediately become evident to the entire floor, because then it becomes something that [people] react to,” Chari said. He emphasised the importance of calibrating the signal-to-noise ratio to prevent teams from getting distracted by unnecessary noise.
PhonePe’s leadership culture also plays a significant role in its success. Sonika Chandra, who is the Chief Business Officer at the consumer payments vertical, stressed the importance of purpose-driven leadership: “It’s not about creating roles and then getting people to fill them. It’s about identifying the impact areas people can have and then identifying the right talent for those areas.”
Chandra emphasised that leadership is about driving purpose and impact, rather than merely occupying positions. “It’s crucial to be clear about what you’re leading—it’s not about leading teams; it’s about leading initiatives that make a difference,” she said.
The digital payments giant reported an adjusted profit after tax (PAT) of Rs 197 crore for FY23-24, marking a turnaround from a loss of Rs 738 crore in FY22-23. Excluding ESOP-related costs, the company achieved a 74% year-on-year revenue growth, reaching Rs 5,064 crore, up from Rs 2,914 crore in the previous fiscal year.
The standalone payments business contributed significantly, with an adjusted PAT of Rs 710 crore, compared to a loss of Rs 194 crore the previous year. PhonePe attributed its improved profitability and growth to its market leadership, platform reliability, and strategic focus on cross-selling a diverse product portfolio.
