Can lending drive profits for PhonePe? 💰

Hey there,

PhonePe just entered the Lending game.

With 500M users and 36M merchants, they have the scale. Yet, no profits.

Now, they plan to offer credit products to tap into India's underserved population.

THREAD: Here's how lending could be PhonePe's golden ticket to profitability 👇

1/ Targeting their massive user base with credit products:

PhonePe has over 500 million users. That's one in every three Indians. But, they've struggled to monetize this base.

Now, they plan to start as a personal loan distributor and also with co-branded credit cards with Axis Bank. These products could bring high-interest income while meeting customer needs.

2/ The potential in fintech credit is huge.

Take PayTM's lending business as an example. Their loan value soared from Rs 1,409 crore in FY21 to Rs 35,368 crore in FY23.

This growth highlights the vast potential of lending in India. As more people go online, the need for financial services for both business and personal use increases.

3/ Focusing on merchant partners:

PhonePe recently started offering working capital loans of up to Rs 5 lakhs to its merchants. They have a network of over 36 million merchants across major Tier 2, 3, and 4, covering 99% of India's postal codes.

PhonePe's loans can reach where traditional banking doesn't, supporting India's underserved entrepreneurs. This opens doors to both profit and purpose.

4/ Experience in launching new services:

PhonePe isn't new to introducing fresh offerings. They successfully launched insurance products, issuing over 56 lakh policies, so far. They know how to roll out new products without disrupting their existing operations.

There's demand, distribution, and trust. Now is an ideal time for PhonePe to enter India's vast credit market. This move can help merchants grow their businesses and provide consumers with easy digital loans.

In conclusion, with its strong distribution network, established trust, clear demand, and a history of successful new offerings, PhonePe is well-positioned to tap into India's credit market. This could significantly enhance their top-line growth and create a pathway to profitability.

✍️ Jargon of the day

Credit Line - A credit line is like a pre-approved loan you can use when you need it.

Let's take an example:

Say you have a credit card with a limit of ₹1 lakh from HDFC Bank. This ₹1 lakh is your credit line.

You don't have to use all of it right away. But whenever you need money, you can spend up to ₹1 lakh with your credit card without having cash in your account.

Loved this edition? Or have some thoughts to share? We'd love to hear from you

Cheers,
Hrishikesh