Beyond UPI: Merchant Payments & Financial Services Fuel PhonePe's Success

PhonePe Reports 56% Revenue CAGR in FY23 to FY25, Losses Narrow Sharply Ahead of IPO​

Revenue Growth Signals Strong Monetization Shift​

Digital payments major PhonePe has reported robust revenue growth and a sharp reduction in losses over the past three fiscal years, reflecting a decisive shift towards sustainable monetization and operational efficiency, according to its draft red herring prospectus.

Revenue from operations climbed to Rs 7,114.85 crore in FY25 from Rs 2,914.28 crore in FY23, translating into a compound annual growth rate of 56.25 per cent. The company stated that it is successfully transitioning towards long term monetization while strengthening its operating model.

A key highlight of this transition is the diversification of its revenue mix beyond core UPI payments.

Merchant Payments and Financial Services Drive Revenue Mix​

The contribution from Merchant Payments rose significantly from 14.75 per cent in FY23 to 30.78 per cent by September 2025. Financial Services, which includes lending and insurance distribution, expanded from 0.96 per cent in FY23 to 11.55 per cent in the first half of the current fiscal year.

Together, Merchant Payments and Financial Services contributed 42 per cent of total revenue, underscoring the growing monetization across multiple verticals and reduced dependence on pure payments volumes.

Losses Narrow, Profitability Metrics Improve​

The company’s financial performance also reflects improving cost discipline. Restated losses declined by over Rs 1,060 crore between FY23 and FY25 to Rs 1,727.41 crore. Loss margins improved sharply to 22.64 per cent in FY25 from 90.68 per cent in FY23.

PhonePe achieved positive adjusted EBITDA in FY24 and FY25, and reported adjusted EBIT profitability in FY25. The company also generated free cash flow of Rs 190.47 crore in FY25 and over Rs 250 crore in the six months ended September 30, 2024.

Technology Investments Support Operational Efficiency​

The improvement has been attributed to disciplined capital allocation and investments in proprietary technology infrastructure, including automated systems and in house data centres. By leveraging these systems, the company scaled transaction volumes without a proportionate increase in operating costs.

The company stated that its business model prioritizes free cash generation to fund reinvestment, expansion into new platforms, and balance sheet strength.

Expanding User and Merchant Base​

Founded in 2016 and headquartered in India, PhonePe had over 65 crore registered users and a merchant network of more than 4.7 crore as of September 30, 2025. Its offerings span consumer and merchant payments, lending and insurance distribution, and newer platforms such as Share.Market and Indus Appstore.

The financial trajectory outlined in the draft prospectus positions PhonePe as a digital payments platform increasingly focused on diversified revenue streams, operational leverage, and free cash flow generation.