PhonePe has tied up with HDFC & SBI to leverage distribution to go after credit for the ETB customer

60-70% of existing to bank customers don’t have credit cards. Some % of this base + existing MC / VISA customers are the target

HDFC SBI ICICI YES

Total Users 480 120 56 10.25

Digital Platform users 74 NA 30 NA

Credit Cards 21 24 18 2.6

% users that have a Credit Card 4.38% 20% 32.14% 25.37%

Target: Existing to Bank, hence two of the largest issuers have tied up with PhonePe - “instant credit” happens through pre-approval
Two variants launched with each bank: “Premium” and “Everyday” for the existing carded customer, and the not carded customer

1) 10-30% with credit cards: “Everyday” card for reconciliation and consolidation on UPI expenses (SBI Purple & HDFC Uno)
2) 60-70% without credit cards: Top segment here -> Premium (lounge spends, priority pass), middle segment -> Everyday (rewards)

I expect ~30-50% of the non carded segment is the TAM for the co-branded card, the bottom 50% could be the PL / BNPL segment

@ Ambika Pande
 All top UPI Apps have PAs and vice versa: can we expect Easebuzz, PayU and Cashfree go this way?
7/ 10 UPI Apps (fintech) have a PA license. And 6/8 of the top PA’s in India have UPI Apps at some stage.

UPI App PA? PA -> UPI Apps

In principle authorization granted, Waiting for
#1 ✅ final approval ✅ Invested in Pop in 2025

#2 ✅
Granted in 2023
❌ NA

#3 ✅ Operating, application in process

❌ NA

#4 ❌ No. Is an NBFC with $1B AUM as of 2024

❌ NA

#5 ❌ No. Flipkart invested ✅ Acquired Fave in ‘22. Not live on UPI yet

#6 ✅ In principle authorization granted, Waiting for

final approval ✅
Got TPAP license for “RediffPay” in 2025

#8 ❌ No. Acquired a NBFC Tri O Tech for its PPI in Were first UPI Apps. Launched PA’s after
‘22 ✅
#9 ✅ Granted in 2024 Were first UPI Apps. Launched PA’s after
✅
Granted in 2025
#16 ✅
Rationale could be owning the end to end payment journey, from payment
#17 initiation at checkout, to actual transaction on the consumer app
✅ Razorpay (PA) invested $30M in 2025

*Feb 2025 data, NPCI website @ Ambika Pande

Full stack play for existing players is the way forward: standalone plays in each of these will not sustain
Example: CCAvenue -> RediffPay (UPI App), PayU -> Acquired Mindgate (UPI App Switch), but new standalone players is a question

UPI Switch deployed on

Expect more full stack plays across the below value chain: Customer account: Money
debited from here
issuing side, that
connects with NPCI.
Merchant -> PA -> UPI App -> Payer Switch -> Payee Switch -> Issuing Switch.
Mindgate, Sarvatra, Olive
Example: PayU PA acquired Mindgate a Payer & PSP side switch. Remitter Bank both provide Acquiring &
Issuing Switches

Issuing Switch

Payer PSP 7. Debit 8. Debit Payee PSP (PA

Merchant UPI App / TPAP request confirm
Acquiring Switch)
(TPAP switch)
checkout 4. Txn 5. Address
request sent resolution
NPCI
[Link]
success / 6. Send acct
failure details
[Link] 9. Credit
confirm request

2. Customer checks txn Issuing Switch

1. Customer initiates UPI amount, and enters PIN 3. UPI App switch -> Once the txn is sent to
txn at merchant checkout connects with NPCI. NPCI, NPCI forwards this
/ PA, which launches UPI Checks customer details, Beneficiary Bank to the Payee PSP Bank
App validates PIN. for merchant VPA
Account where funds are resolution. Also takes
Infra deployed within the transferred. In case of P2P, it care of recon, refunds,
bank, usually 3rd party. is the receiver's account. In txn routing etc
case of of P2M, could also be
Example: Mindgate, PA Acquiring Bank Pool
Sarvatra Account

@ Ambika Pande
At 2% MDR, Credit on UPI value needs to be at ~6.13% of UPI P2M value, to cover ecosystem costs
Currently, CC on UPI is at ~1.2% of P2M value, which is a significant gap, it needs to scale to 6x of current value

Assumption: 2% MDR on CC on UPI, and P2M < 2k is not charged. For FY25 ~6L Cr CC on UPI txns needed
Currently, CC on UPI (Rupay) is 1L Cr for FY25 (Annualized) which is 1.2% of UPI P2M value, which is a significant gap

Source: NPCI, and public reports, 1$USD = INR 84

@ Ambika Pande
To get to ~7%, you need more CC on UPI spends, and for that, more customers need a card
Give add on CC on UPI to the existing base, or open up CC to a new base of customers, which is an underwriting issue

Rupay CC on UPI cards to be issued

Existing CC users. Give Give Rupay CC to non

them a new Rupay CC CC base

Customer profile: Existing MC / Visa user, Wants Rupay Customer profile: Doesn’t have a credit card. This
CC for UPI transactions, CC transactions don’t shift from is a new base the bank has to underwrite
MC to Visa, UPI txns shift from savings to Rupay

Advantages of Rupay add Limitations Bank underwriting

on:
1) Only domestic txns New ways / better
1) Can earn Visa points 2) Not eligible for utilization of data to
through add on Rupay card Smartbuy (HDFC) underwrite new base of
2) Consolidated statement customers. Will take time
for spend tracing

@ Ambika Pande
NPCI made ~INR 2748 revenue, and INR ~1094 Cr in profits in FY24: operating costs were ~173 Cr
This is coming to approx: cost of 1p per transaction: and they’re making ~17p per transaction!

FY24 Revenue: INR 2748 Cr

FY24 Operating cost: INR 173 Cr

FY24 Profit: INR 1094 Cr

NPCI earns ~17p / txn at a cost of 1p / txn

NPCI per txn costs: NPCI per txn revenue:

- UPI txns in FY24: 131B - UPI txns in FY24: 131B

- Even at 100% ops cost - Assuming 80% revenue
attributed: 173 Cr attribution
- Per transaction cost to - Per transaction revenue
NPCI: 1.3p! to NPCI: 17p!

@ Ambika Pande
UPI Apps are placing their bets on Rupay CC on UPI to make money
PhonePe has launched its Rupay CC with HDFC, Slice will be launching with NE SFB, Paytm, etc all have plays here

@ Ambika Pande
Globally, UPI equivalents have a MDR / Fixed Fee model, the end user is not charged in any of the examples I found
Real Time
# Region
Payment Rails
Pricing & Remarks

1. India P2P & P2M both are not priced

2. UK Merchant charges vary by banks, user not charged Global pricing trends
Sweden 2.5% MDR / txn, user not charged
3. ✅ Across the world, merchants
are charged per txn fee / MDR
4. Thailand Slab based pricing, upto 5k baht free, then ranges from 2 - 10
baht user not charged ✅ Free for end user
✅ Mostly driven by bank apps,
5. Singapore MDR < 1% + some fixed fee / txn, user not charged instead of 3rd party, unlike UPI

P2P service, free for users, but banks charged $0.5-$0.75 / txn
6. US
7. Brazil MDR: 0.2-0.3%, user not charged Maybe this is why there
are 75+ UPI Apps
8. Nederlands 0.2 - 0.75 euros + MDR charges, user free
operating in the market.
9. Poland $0.1 - $0.75 / txn, user free
The bet is that eventually
10. Spain Charges differ based on merchant & PG, user free pricing WILL come in
11. Switzerland MDR: 1.3% + CHF 0.30, user not charged

Yape & PLIN: 0.5%, user not charged

12. Peru

13. Indonesia MDR capped at 0.7% / txn, user free

14. Malaysia MDR capped at 0.5% / txn, user free

15. Australia MDR 0.5% - 1% / txn, user free @ Ambika Pande