UPI Payments: UPI payments have become the most popular digital medium in India today. While it’s completely free for ordinary users, companies like Google Pay and PhonePe still generate billions in revenue. The National Payments Corporation of India (NPCI) promoted digital payments by making it available for free, but companies leverage it for smart business models.
The Secret to Free Service and Revenue
UPI can be seen as a free digital highway. It attracts millions of customers to the app. Apps like Google Pay and PhonePe leverage this user base to sell various products and services. For example, PhonePe generated revenue of ₹5,064 crore in FY24, a 74% increase from the previous year. Google Pay’s revenue also remained at a similar level, bringing the combined revenue of the two companies to over ₹5,000 crore.
Revenue from Shopkeepers and Devices
Small shopkeepers, grocery stores, and vegetable vendors require additional digital devices. PhonePe and Google Pay offer QR codes, smart speakers, and PoS machines. Smart speakers generate audio signals for every transaction, and their monthly rental is approximately ₹100. More than 3 million shops across the country use these devices, generating annual revenue of ₹360 crore from the devices alone.
Additional Revenue from PoS and Payment Services
While the Merchant Discount Rate (MDR) on card payments is 0.5-1%, UPI transactions are free. However, companies generate revenue through this by providing better services to merchants. Approximately 90% of PhonePe’s revenue comes from this payments business.
Bill Payments and Commission Model
UPI is free for mobile recharge, DTH, electricity, and water bill payments. However, companies charge a 1-2% commission from service providers. With large transactions, these small commissions can add up to crores of rupees annually.
Earnings from Advertising and Offers
PhonePe and Google Pay feature offers, scratch cards, and cashbacks within their apps. Additionally, the companies charge advertising fees from brands. Analyzing user data and displaying relevant ads is also a part of their revenue. Approximately 10% of PhonePe’s revenue comes from advertising.
UPI itself is free, but digital wallet companies are leveraging it to generate billions of rupees. From small businesses to equipment rentals, payment services, and advertising, these companies create strong revenue streams for themselves through various channels. This demonstrates that even free services hide smart business strategies.