Home / Companies / People /  Our plan is to get into MSME lending by early next year: Sameer Nigam

Digital payments company PhonePe, which has a 45% share in the UPI (unified payments interface) segment, is exploring avenues to diversify as the digital payments industry continues to be threatened by the government’s zero merchant discount rate (MDR) regime and an upcoming requirement to curb market share. On Thursday, PhonePe made its entire transaction data since 2018 public and launched PhonePe Pulse, a website to provide insights and data on digital payment trends. The company has been on a spree to acquire regulatory licences; it has received licences for insurance broking, account aggregator, and has applied for stock broking and NBFC licences. In an interview, PhonePe founder and CEO Sameer Nigam talks about the company’s aspirations, how it plans to diversify revenues and where it sees its growth in the next five years. Edited excerpts:

With the launch of PhonePe Pulse, do you think it may put pressure on the regulators and government to relook at certain practices such as zero MDR?

Let’s be clear; we work at the mercy of the regulators and India’s central bank is by far the most progressive in the world. Not much credit is given to them. But I do think that if data like Pulse is available, academic think tanks which shape policy, will be able to tell regulators the impact from certain policy changes.

Today, people are working with imperfect data, even if their intention is right, which causes issues. With datasets like Pulse and what NPCI (National Payments Corporation of India) puts out, regulators and policymakers will see the stress (UPI market cap and zero MDR) put on the ecosystem.

PhonePe has long been pleading against the zero MDR regime and UPI market cap. What are you hearing from the regulators?

We have shared our perspective with the regulator and the government when asked. On zero MDR, we were pleading that UPI’s fast growth is because of fierce competition in the space. With zero MDR, the investment coming from the private equity market into UPI ecosystem has become zero.

From 40-45 third-party application providers (TPAPs) for UPI, the market has come down to 16 TPAPs. Most smaller banks have shut their UPI apps. With no financial model around UPI, transaction success rates will come down. For no fault of the ecosystem, the (digital payments) ecosystem will come to a grinding halt. Despite all of this, we continue to invest in the space, hoping one day zero MDR will turn back to market forces.

With no revenues in payment transactions, how is PhonePe betting on revenue diversification?

We are well-diversified. Payments is not the largest part of our monetization and other segments like advertising and financial services are opening up for us. There are revenues through digital gold, bill payments, and our insurtech business is also growing fast.

In the next five years, advertising will be around 20-25% of our overall revenues, financial services will be 40-45% and the rest will be platform and payments revenue.

What are new financial services segments that we see PhonePe diversifying into, apart from mutual funds and insurance?

PhonePe just got its insurance broking licence. We hope to launch insurance broking on our platform this month and will have a considerable amount of partners by October this year. I can confirm that we are working on lending and the plan is to introduce MSME lending by this year or early next year.

I can also confirm that we have applied for a stock broking licence and will have some exciting updates soon.

Will PhonePe be profitable by 2022?

On our existing lines of businesses, we will be profitable, but if we are launching five categories in financial services all at once, it will take us some time.

With diversification in financial services, do we see PhonePe go for a fundraise? What is your view on an IPO?

We haven’t even used the first tranche of our last funding round. And we have patient capital, which means that our investors don’t have to worry about fund life cycles. It’s a great time to raise money, but we don’t need to because we are not burning much capital. This year, it is very unlikely that we will raise new capital. On the IPO bit, I feel like it is becoming more about the fear of missing out. We are not in that race

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