In a span of three years, the digital payments arm of Flipkart, PhonePe has brought to its fold a significant proportion of the digital payments market. With over 80 million monthly active users, the platform witnesses more than 500 million total monthly transactions; and a robust technology backbone has been critical in supporting seamless operations at scale.
In an exclusive interaction with Express Computer, Rahul Chari, Co-founder and CTO, PhonePe, shares how the company has evolved since its launch in December 2015. He says, “In our journey over the last three years, our initial focus was on unlocking the value on peer-to-peer money transfer for our customers, and tapping the unorganised money exchange space and money transfers among friends and families. Secondly, we unlocked value in merchant payments, specifically among online players, because that was a familiar area for us due to our Flipkart background. Whereas, in the third year, we started focusing heavily on offline merchants, wherein we have scaled massively – almost 10 million merchants.”
Since the beginning of 2020, PhonePe has announced several key launches including mutual funds and insurance. A significant part of the company’s focus, especially with these recent launches, is now on financial services. The company has been putting a fair amount of investment in building a scalable and reliable technology for financial services. Apart from the product market fit, there has been a highly collaborated and coordinated effort by the regulators, policymakers and the private sector firms like PhonePe, which has led to growth in UPI adoption among masses, including rural India.
Interestingly, 70 per cent transactions on PhonePe comes from Tier 2 and Tier 3 towns.
Chari shares, “There have been certain attempts on the policy and regulatory fronts; moreover, there have been attempts from the private sector that have tried to work around some of the policy and regulatory roadblocks. In the last three years, these three parties have come together in a partnership model, which has resulted in a lot of engagement, and exchange of feedback. This has led to a positive movement, driven by collaborative efforts – this has been the biggest strength and factor leading to growth. Going forward, FinTech will play a crucial role. It’s about the partnership between financial organisations and the technology sector. The technology sector, alone, can’t step in and do something radically different. A lot of partnerships will come to the fore, which will yield more and more results in the next few years.”
One of the things that Chari is particularly proud of, is the infrastructure that PhonePe has laid out. The operations are carried out of he company’s own data centres and in a highly scalable infrastructure from a compute and network perspective. He informs that PhonePe has one of the most state-of-the-art systems in terms of reliability and scalability, and the company builds platforms and capabilities that unlock 10x value.
Elaborating further on the core pillars for investment in technology, he says, “At PhonePe, when we build something, we don’t build it as just a feature. We look at the core capabilities that can power a particular feature and how we can build it in a more generic manner, allowing it to unlock even more value in the future. Another focus has been on investment in intelligence through data. Having one of the best analytics teams, we have a major focus on data-driven decision making. Additionally, our data science teams are investing in various models that are powering our risk and fraud detection system, promotions platform and CRM. We believe that users have a personalised experience and they must not be presented with a lot of information and data intelligence plays a key role in ensuring this.”
Customer experience, across industries, is a critical component of digital transformation journeys of organisations. Personalised engagements are instrumental in driving an enhanced customer experience, and this is possible with extraction of value from data, using analytics powered by emerging technologies such as artificial intelligence and machine learning. Realising this, PhonePe leverages machine learning extensively. For instance, the company utilises ML in risk and fraud detection.
Chari informs, “As a transaction platform, it is very important for us to ensure that we operate in a real-time manner in terms of detection of any type of risk. When a transaction takes place on our platform, based on multiple parameters, we have make a decision to allow or disallow it. Similarly, we use ML for customer login and user onboarding. When there’s a new user on the platform, or there are transactions with irregular patterns, our systems are designed to detect these cases in real time because of our strong ML model. We also use ML in CRM communications and designing of offers and promotions for customers. This ensures that we reward the right customers and our investment is directed towards value-add for the company, in terms of engagement and customer retention.”
PhonePe has maintained a robust work-from-home policy and IT infrastructure, and the company has not faced productivity challenges during the Covid-19 situation. However, Chari stresses on taking cognizance if the existing situation continues for a longer period. In addition to the addressing the overall impact on the economy, he emphasises on working on new areas, wherein the company needs to provide more solutions and address the challenges. In the last three months, he informs, the company already had a roadmap in place and has been able to execute it seamlessly. For the near future, it is looking at more technology solutions, whiteboarding solutions, better documentation among other areas.
It is not just about agility and resiliency of IT infrastructure. Workforce enablement plays a pivotal role in strengthening an organisation. On these lines, Chari shares, “The strength of our engineering team is around 300, which is fairly small considering the scale of our systems and business. However, we offer an open operation environment for our workforce, providing them exposure to different technologies and different domains within the company.”
On sustainability front, PhonPe focuses on being vertically performant. The company follows a micro services architecture, wherein it is able to separate the application layer from the storage layer. It can make a much larger distributed cluster on the storage layer. Similarly, it has micro services on the application layer, allowing the teams to churn more virtual instances to cater at scale. The total number of merchants on PhonePe is around 10 million, spread across 400 cities in India. Considering PhonePe’s scale of operations, its hardware footprint is significantly lower, thereby forming a important sustainable IT practice.
Adding on the next big area for the digital payments industry in India, Chari says, “Going forward, we have to look at the next incremental push that will unlock maximum value. Effective usage of recurring payments is an area where the digital payments industry has lagged behind. We haven’t had a uniform model for establishing a mandate for recurring payment across instruments such as a bank account, wallet, debit card or credit card. Today we are restricted in terms of setting up a mandate on a particular instrument and use case. An universal way to check mandates on financial instruments digitally, and unlocking more use cases for recurring payments – this will be a game changer in the digital payments industry.”