As PhonePe moves closer to what could be one of India’s most closely watched initial public offerings this year, attention is increasingly shifting to the country’s digital payments duopoly and the broader push toward business diversification within the fintech ecosystem.
Although PhonePe has not formally announced a listing date, its updated draft red herring prospectus (DRHP) filed in January has revived discussions around scale, long-term sustainability and profitability. Market observers expect the company’s public issue to potentially open in FY27, with April being discussed as a possible timeline.
With public market investors becoming more discerning about fintech offerings, the focus is no longer solely on user growth and transaction volumes. Instead, the quality of earnings, revenue mix and the visibility of sustainable profits are coming under sharper scrutiny.
At the centre of this evaluation are India’s two largest fintech players: PhonePe and Paytm.
Analysts at Emkay Global recently highlighted that while PhonePe enjoys unparalleled scale within India’s payments landscape, questions remain regarding the depth of monetisation, the evolution of revenue streams and the pace at which the company can deliver consistent profitability.
Comparisons with Paytm have become unavoidable. A recent report by Bernstein observed that merchant payments are emerging as the most promising layer within India’s digital payments ecosystem. The brokerage noted that Paytm has shown stronger revenue intensity and improving profitability metrics in this segment. According to the report, while large consumer bases provide long-term strategic optionality, monetisation pathways appear clearer on the merchant side. Cross-selling credit products to merchants offers underwriting advantages, as platforms gain direct visibility into transaction flows, making merchant-led growth structurally attractive.
During its latest earnings call, Paytm founder and CEO Vijay Shekhar Sharma reiterated the company’s merchant-first approach. He pointed to improved monetisation through platform fees, EMI partnerships and expansion of device-led offline infrastructure. Sharma emphasized that deeper cross-selling of financial services to merchants remains central to Paytm’s next growth phase.
PhonePe, meanwhile, appears to be adjusting its revenue composition in response to similar market dynamics. In the first half of FY26, consumer payments accounted for 56% of revenue from operations, down from 69% in the same period the previous year. In contrast, merchant payments increased their contribution to 30.78%, up from 23.48% a year earlier, signalling a stronger focus on higher-yield segments.
At present, PhonePe’s revenue streams include consumer payments, merchant payments, device subscription fees, government incentives and infrastructure-linked grants.
On the consumer side, the company earns transaction processing fees across multiple categories, including person-to-person transfers, mobile recharges, bill payments, digital gold and silver purchases, travel bookings, transit payments, QR-based transactions and online payments made through partner platforms such as banks, telecom operators and Bharat Connect, formerly known as BBPS. While core UPI peer-to-peer transfers largely operate under a zero merchant discount rate (MDR) regime, PhonePe generates income by charging platform or convenience fees on selected services. Segments such as travel bookings, specific bill payments and other value-added transactions enable the company to levy transaction-based charges.
Merchant payments, however, are increasingly emerging as a key revenue driver. In this segment, PhonePe collects transaction processing fees from online and offline merchants, typically calculated as a percentage of the payment value processed through its platform.
As PhonePe advances toward its anticipated IPO, the debate around scale versus sustainable monetisation is likely to intensify. With investors placing greater emphasis on revenue quality and margin expansion, the evolving strategies of both PhonePe and Paytm will play a decisive role in shaping the next chapter of India’s fintech landscape.
