PhonePe: How Walmart’s Fintech Captured 48% of UPI

PhonePe processes nearly half of all digital payments in India, and it’s not particularly close. As of December 2025, the Walmart-backed fintech held a 48.7% share of UPI transaction value and 45.4% by volume, making it the undisputed leader in a market that processed over 20 billion transactions in a single month (NPCI, data, August 2025). Google Pay sits in second place at roughly 35%, while Paytm has slipped to around 7% following its regulatory troubles in early 2024. Together, PhonePe and Google Pay control more than 83% of all consumer-initiated UPI transactions — a duopoly that India’s payments regulator, the NPCI, has been trying to break up since 2021.

The numbers tell a clear story: PhonePe has 657 million registered users, 47 million merchants, and an annualised total payment value exceeding Rs 150 trillion. Revenue from operations hit Rs 7,115 crore in FY25, up 40% year-on-year. The company narrowed its net loss to Rs 1,727 crore and, on an adjusted basis excluding stock-based compensation, actually turned a Rs 630 crore profit. This is a company preparing itself for public markets — and the IPO filing is already with SEBI.

How did PhonePe become India’s largest payments app?

PhonePe’s origin story is unusually well-timed. Founded in December 2015 by Sameer Nigam, Rahul Chari, and Burzin Engineer, the company launched its UPI-based payments app in August 2016 — just months after NPCI introduced the Unified Payments Interface. It was the first app to go live on UPI, and that head start mattered enormously.

Flipkart acquired PhonePe before launch, giving it distribution through India’s largest e-commerce platform. When Walmart bought Flipkart in 2018 for $16 billion, PhonePe came along as part of the deal. In December 2022, PhonePe was spun out as a separate entity, with Walmart retaining a 71.8% stake and injecting fresh capital at a $12 billion valuation (TechCrunch). That separation was strategic: it freed PhonePe to raise independently, recruit with its own equity story, and pursue an IPO without Flipkart’s financials muddying the picture.

The growth trajectory since then has been steep. PhonePe crossed 500 million registered users in early 2024 and hit 600 million by March 2025, adding 100 million users in just 16 months. Daily transaction volumes now exceed 330 million. The app is live in every Indian state and processes payments across nearly 99% of the country’s pin codes.

How does PhonePe make money?

This is the question that matters most for the IPO thesis, because UPI itself is a free utility. PhonePe doesn’t charge consumers for person-to-person transfers — nobody does. The revenue model sits in three layers.

Payment processing fees account for 88.5% of operating revenue (FY25). PhonePe earns a cut of the merchant discount rate on UPI transactions, plus processing charges on bill payments, recharges, and other merchant-initiated payments. Revenue from this segment reached Rs 6,300 crore in FY25, up 32% year-on-year. The margin here is thin but the volume is extraordinary — and it’s growing as more offline merchants adopt QR-code payments.

Insurance and lending distribution is the fastest-growing segment, with revenue surging 208% year-on-year to Rs 558 crore in FY25. PhonePe doesn’t underwrite loans or insurance policies itself — it distributes products from 56 lending partners and insurers including HDFC ERGO. Merchant loan disbursals alone rose from Rs 11 crore in FY23 to Rs 4,507 crore in FY25. By September 2025, total loan disbursals across merchant and consumer products had reached Rs 14,270 crore.

Financial services and commerce — including digital gold, mutual fund distribution, and the Pincode hyperlocal commerce app — round out the mix. This segment’s contribution is still small, but the insurance and lending share of total revenue has jumped from under 1% in FY23 to 11.6% by September 2025 (PhonePe DRHP). That’s the trajectory that gets investors interested.

What’s PhonePe’s strategy beyond payments?

It’s not about being a payments app — it’s about being the financial services layer for 600 million Indians who’ve already formed the habit of opening PhonePe several times a day.

The lending push is the centrepiece. PhonePe launched merchant lending in partnership with banks and NBFCs, using its own transaction data to help partners underwrite small-ticket loans to shopkeepers and kirana store owners. It added consumer loans, credit lines, and in 2025 introduced Loan Against Mutual Funds (LAMF), letting users pledge their fund holdings for instant liquidity. The company now works with 56 lending partners and covers virtually every pin code in India.

Insurance is the second major vertical. PhonePe partnered with HDFC ERGO to launch affordable health insurance aimed at India’s “missing middle“ — the hundreds of millions of workers in the unorganised sector who earn too much for government schemes but can’t afford traditional private cover. The platform offers motor, health, life, and travel insurance, all purchasable in a few taps.

Wealth management rounds out the picture: digital gold purchases, mutual fund SIPs, and tax-saving instruments. PhonePe’s advantage here is distribution. With 657 million registered users and deep penetration in Tier 2 and Tier 3 cities, the platform can reach customers that traditional wealth managers and insurers simply cannot access economically.

How does PhonePe compete with Google Pay and Paytm?

The competitive dynamics have shifted significantly since 2023. PhonePe and Google Pay run a stable duopoly at the top, but the nature of their competition is evolving.

Google Pay’s strength is its integration with Google’s broader ecosystem — search, Maps, YouTube. It held 34.6% of UPI volume and 35% of value in December 2025. But Google Pay hasn’t diversified beyond payments with nearly the same urgency as PhonePe. It doesn’t have a lending business, an insurance marketplace, or a commerce arm in India at comparable scale.

Paytm, once the market leader, has been in structural decline since the RBI’s crackdown on Paytm Payments Bank in January 2024. Its UPI share has stabilised around 7%, down from peaks above 15%. Paytm retains strengths in offline merchant payments and its device ecosystem, but the regulatory overhang has made it a diminished competitive threat.

The real emerging competition comes from below: smaller UPI apps gaining share as the NPCI encourages market diversification. PhonePe and Google Pay have been losing market share for seven consecutive months through December 2025, though the declines are marginal — fractions of a percentage point each month. The NPCI’s 30% volume cap rule, if ever enforced, would require both PhonePe and Google Pay to shed significant share. That deadline has been pushed to December 2026.

What are the risks?

Three stand out. First, the UPI market cap. The NPCI’s 30% volume ceiling is designed to prevent exactly the kind of market concentration PhonePe has built. If enforced, PhonePe would need to cut its share by roughly 15 percentage points — a structural blow to its core business. The deadline has been deferred repeatedly, but it hasn’t been abandoned.

Second, profitability remains elusive on a reported basis. PhonePe’s net loss was Rs 1,727 crore in FY25, and widened to Rs 1,444 crore in just the first half of FY26. The adjusted profit figures exclude substantial stock-based compensation costs, which are real economic expenses. Investors will scrutinise whether the path to GAAP profitability is credible at the offered valuation.

Third, concentration risk around Walmart. Walmart holds 71.8% of PhonePe and will remain the controlling shareholder even after the IPO. That ownership structure gives Walmart effective veto power over strategic decisions. For a company operating in India’s heavily regulated fintech sector, having an American retail giant as your controlling shareholder introduces geopolitical and regulatory complexity that purely domestic competitors don’t face.

What’s the outlook?

PhonePe filed its draft red herring prospectus with SEBI in September 2025, received approval in January 2026, and initially targeted a $15 billion valuation for an OFS-only IPO that would raise approximately $1.35 billion. Walmart planned to sell around 12% of its stake through the offering.

Then markets turned. Geopolitical tensions and stock market volatility pushed PhonePe to shelve the IPO in March 2026, with reports suggesting the company lowered its valuation expectations to $6-8 billion during discussions with domestic mutual fund houses (TechCrunch, March 2026). The listing has been pushed to at least June 2026, though SEBI approval remains valid for 18 months.

The long-term thesis hasn’t changed. India’s digital payments market is projected to grow at a 10.5% CAGR through 2030. PhonePe’s non-payment revenue streams — lending, insurance, wealth — grew 208% in FY25, and management is betting that financial services distribution will eventually overtake payment processing as the margin engine. With 47 million merchants, 657 million users, and the deepest UPI penetration in the country, PhonePe has the distribution to make that bet work. The question is whether public market investors, when the window reopens, will price the company for what it is today or what it’s building toward.