Hello and a very warm welcome to Building Bharat, the fintech evolution. Now in this decade since India's digital revolution has begun, there are few entities that have mirrored the nation's economic transformation quite like PhonePe. You haven't seen many of those. From a fledgling startup to a platform that commands nearly half of India's UPI volume, this journey has been of relentless scale. But now as the company is moving towards the public markets, that narrative is shifting. It is no longer just about the transaction as it were. It is about the relationship. So from the strategic depth of the non-payment revenue mix to the challenge of onboarding the next 200 million rural users, how do you build a moat in an interoperable world? That's the question we want to ask Sameer Nigam, co-founder and CEO of PhonePe. So good to have you with us.
Thank you for having me here. It's a pleasure.
Tell me about the digital public infrastructure. We've seen it move in a robust kind of way from those cash-heavy transactions that we've seen over a period of time now to having this. How has it really reflected in the kind of business model that you created to now when you're ready to go into an IPO?
You know honestly, 10 years ago when I used to tell people India is going to try and create a UPI moment, I used to get laughed out of buildings because the idea that a state-backed regulator, nonprofit entity will create a payment network not just to actually compete with Visa or Mastercard but to reach half a billion active users in about 10 years was unthinkable. Right. No one's created interoperable platforms like India has in the last 10 years. No one's created DPIs. So I think from our vantage point the most exciting part today is not just are the DPI firing, they are as sort of secular in terms of adoption as one had ever hoped for.
Correct. I use it. Everybody in my office uses it. Everyone in my family uses them. Every one of my staff uses it. Everyone of their family members uses it. Everyone in their village hometowns uses it.
I think the satisfaction of seeing technology finally really reach everyone. That line between India and Bharat was more about whether you could affordably reach people through technology. That line is vaporizing in front of us. And I think as a founder, that just being part of that journey gives us tremendous joy.
Yes, it's quite apparent and that joy is translating into how you're going into the public markets. But even as you do, in the kind of preparations that you're making, yes indeed I've seen that business kind of grow. It is a utility-driven business, of course you're facilitators to an entire economy that is moving towards a Viksit stage which is in itself a huge task and it's an important task one has to kind of commit by way of that business model. But the offerings are kind of extending and you are going into financial services. How important and crucial was it and where did you start and where are you taking it?
So we started in fact with saving products. We started with things like DigiGold almost seven or eight years ago, right, and we introduced SIPs. We constructed SIPs on gold savings. India loves gold but ETFs don't talk to the 700 millionth customer. Gold does. We got in mutual fund distribution and we do SIPs. We're one of the fastest growing contributors to new SIPs in the country and when you have a quarter billion people using your app every month, a sliver of a sliver adds up very very fast. And I think watching Indians participate in the wealth market, in the savings market, in the formalized lending market, we're seeing that in real time. Non-payments revenues for us are now actually a majority which most people don't really realize. In fact, we tried to put as much detail out as we could in our DRHP. It was a long DRHP.
And I think both on the customer side as well as the small businesses who we also, by the way, we have almost 50 million merchants in the country, right, and they are the backbone of the economy. I used to hear that, I used to read about it in newspapers but until we started seeing the amount of money that flows through these businesses compared to enterprises, I didn't know how big they are collectively.
Is that because a lot of them were not in that entirely formal space?
It wasn't that they weren't in the formal space. They had bank accounts but they weren't doing gross settlements on NEFT. They weren't using RTGS for payroll, right? They were using cash to pay their supply chain and daily vendors. But when you take, I mean again, 50 million, right? That's a very large number of people running a business. So even if they're doing one lakh transactions or value a month, just look at that math. It's massive. It's staggering. It's just extremely federated out. Correct? So it's not an attractive business model if you're not willing to play on very very low ARPUs, right? I often liken our business to like the telecom business. If voice won't make money for you, you can't even wait long enough to play the data game.
You got to be able to play the voice game and make money at that with a billion people. Then everything else is gravy, right?
Yeah. So when you talk about that entire ecosystem which has grown over a period of time and now you're sitting on this massive amount of data which really helps scale up the business too, right? Isn't that exactly how it works? So the kind of model that you've kind of created, how far into the future have you seen how India is growing, how the adoption rates are and what users, and I believe you're sitting on 600 million users right now, they're already on board?
Closer to 650 plus lifetime users.
That's what I'm saying. So with that kind of user base, the directions in which you can take this are enormous. How do you kind of build from that point onwards to the possibilities that exist?
We have almost 650 million lifetime users. But more importantly every day we have 150 million users. Over 100 million of them transact, send or spend money every day, right? More than two times a day. In terms of value flowing in terms of money transfer or merchant retail payments, in terms of money flowing through the platform, it's now approaching almost $2 trillion annually, right? NPCI, in fact, UPI is now almost at one-tenth of GDP. So the macro level data or patterns that we can see are I think unparalleled. That's in terms of the money movement but in terms of sheer activity, the reason I again said we liken ourselves more to a utility or a telco. In India, we are the most trafficked application across all categories put together of any app that an Indian company has built. There are only six apps: Facebook, Insta, WhatsApp, YouTube, Google, Chrome, Search and Chrome that have more activity. So we see where the money is moving. So I think if you ask us in terms of where the market's moving towards, the youth in particular, the younger the population, they're digital first. They're not switching from cash to digital payments. They never really went to cash.
They never did. And the Gen Z in particular, as they enter the market, I don't think they'll know what a currency note looks like. So for them, everything's online. Their first insurance, their first loan, their first purchase. They're buying everything online. And I think we just need to make sure that we maintain the trust. There's a lot of focus on privacy. There's a lot of focus on making sure that risk and fraud you just invest very deeply behind because people trust us in the payment space. Just like when you hear of the proverbial WhatsApp news becoming WhatsApp Baba when you get past 300 million people, right? Like I saw this on WhatsApp and it's the gospel truth. If you see activity happening on PhonePe, it's legitimate. So we need to be just careful of that.
Correct. So then to be able to build your verticals based on the kind of generations that are going to be using your services in the future. Tell me how you've thought it through starting from the point of say insurance or mutual funds like you mentioned. How much further can it go and the direction in which it needs to grow?
Well, for us it's very very early. I don't look at the opportunity in terms of the revenue number of today. I look at it in terms of the penetration of today, right? I mean when you talk about health and life insurance, let's just take an example, right? Globally, everyone's talking about AI. The biggest problem in a category like health or life insurance, one is can you talk to the insurer and understand what they're saying. Second is misselling. Right. These are perennial issues. NLPs got solved in a way that was unimaginable 5 years ago. So now every Indian in their native language can converse with an agent which is trained on insurance plans and programs and data. So now you can actually get recommendations digitally in your language that a physical agent can't even give you today, right? Without any perversion of intent. So it's almost as though we can build an agent that can give you the precise policy that you should get, not the one I want to sell you, but the one that you need. And that over the next 10 to 15 years, I believe completely changes how people will think of insurance. India will have its moment. If I think of lending, the payments data that is getting generated both by the small businesses and the consumers tells us so much not just their income levels but behavioral patterns, their risk propensity. So you can actually decide how to get them enrolled into the formal products at a much lower distribution cost now with the right kind of products meeting them.
Right. So then talking about the kind of products that you're going to create to be able to address the kind of user base that you have and it's quite wide, to be able to reach out to the rural kind of user that requires a different kind of pivot you think or it is going to happen organically?
