Digital payments company PhonePe is set to launch consumer lending services on its platform by January 2024.
Initially, PhonePe is strategically positioning itself to initially serve as a distributor of loans. During this phase, it is actively working on enhancing its internal underwriting capabilities. This signifies a dual approach, where the platform not only facilitates loan distribution but also invests in building its own expertise in the underwriting process.
As the evolution of its underwriting capabilities takes place, the final underwriting procedures will seamlessly transition to the oversight of authorized financial entities, such as banks or Non-Banking Financial Companies (NBFCs). These regulated institutions will assume the responsibility of conducting comprehensive and regulatory-compliant underwriting assessments.
Its distinctive strength lies in its ability to contribute to a robust and expansive customer base. This extensive user network can play a pivotal role in influencing a high approval rate for the loans facilitated through its platform. The synergy between PhonePe’s growing underwriting proficiency and the backing of established financial entities ensures a comprehensive and reliable framework for loan distribution, promising a favorable approval rate and a secure financial environment for both lenders and borrowers.
PhonePe’s Expectations from the Launch
“PhonePe is expected to have multiple consumer (credit) products over the next six to seven months. It has been working to build its underwriting capabilities to figure out which customers will fit the lender’s criteria and will open the offering slowly to consumers,” Economic Times reported.
PhonePe recently reported a registered user base of 500 million customers and 37 million merchants.
PhonePe’s Strategic Focus
While contemplating the potential introduction of a credit line offering in the upcoming year, PhonePe currently deems it a non-immediate priority. The current internal emphasis is on monetizing its user base and leveraging its significant distribution capabilities. In the realm of credit, the goal is to emulate the success attained in insurance distribution.
It has established a position as a distribution platform for various insurance products, including life, health, motor, and car insurance.
Working together with partners like Acko and others, the app allows users to pay their monthly subscriptions using the Unified Payments Interface (UPI).
PhonePe: Foray into the Merchant Lending Space
Earlier this year, PhonePe shared its entry into the merchant lending space. The fintech unicorn said it launched a merchant lending marketplace where banks and NBFCs will be able to offer credit to its 35 Million merchant base.
The platform diversified its products with new launches and introduced the Indus Appstore Developer Platform for Android developers, positioning itself as a competitor to Apple and Google. The self-serve platform allows developers to submit apps to the Indus Appstore.
PhonePe achieved revenue of INR 2,914 Cr for the fiscal year ending March 31, 2023, marking a substantial 77% increase from INR 1,646 Cr in FY22. The company credited this surge in revenue to the growth in money transfers, mobile recharges, and bill payments, as stated in an official statement.