As PhonePe nears its IPO date, the focus is on the tech infrastructure of the company and whether it can offer a path to profitability.
Author: Akshita Jain | EQMint | FinTech News
The fintech firm, which dominates the UPI payments market in India, is betting that years of heavy investment in a technology stack in-house will move it from scale-based growth to sustainable earnings.
PhonePe, founded in 2015 by Sameer Nigam, Rahul Chari, and Burzin Engineer, launched its UPI platform in 2016, just as India’s digital payment revolution was taking off. Over the years, the app has become a household name, and in the last three fiscal years, it has deliberately moved from a simple payments engine to a diversified financial services ecosystem, offering higher-margin offerings to its over 650 million registered users.
PhonePe develops a “growth flywheel” strategy in its updated DRHP, which uses its large payments user base to drive transactions, generate data and cross-sell financial products such as loans, insurance and investments. It is a move toward a business of financial services, not just low-margin payments.
Why PhonePe Built Its Own Tech Stack to Stay Profitable
According to the Redseer report in PhonePe’s UDRHP, “App experiences are becoming commoditised and indistinct.” In this environment, the report argued, fintech firms will survive only if they can build and control their entire technology stack. PhonePe has responded with a proprietary four-layer architecture that it describes as a powerful competitive moat.
PhonePe has invested Rs 33.73 billion in technology infrastructure since 2016. At the heart of this configuration is a self-managed, on-premises Infrastructure-as-a-Service layer. The company runs its own data centres, rather than outsourcing to cloud providers. These centres contain a compute layer of 1.04 million cores.
PhonePe in the UDRHP stressed the importance of this sovereign infrastructure for governance and data localisation. Nevertheless, 30.95 petabytes of storage and hardware-level redundancy across multiple sites are extremely costly. The firm is predicting the long-term cost efficiencies of this model, with a current server cost per transaction of Rs 0.06.
The Platform Flywheel Powering PhonePe’s Next Growth Phase
The middle layers of the technology stack are Platform-as-a-Service or PaaS and Software-as-a-Service or SaaS. These layers serve as a flywheel for the development of new and more profitable segments.
PhonePe combines infrastructure into reusable software components that its new regulated businesses can inherit from audit-ready systems. This approach aims to reduce the time it takes to launch products like insurance and lending.
PhonePe expects these businesses to eventually serve the high-volume and low-margin payments business. The scale of this technology is already evident. During the first half of FY26, the platform averaged 22,369 transactions per second.
Automation Driving Efficiency
The Data Intelligence layer is at the top of the technology stack. The company claims that this is the system responsible for transforming large-scale data flows into actionable insights and is used to drive automation across processes.
PhonePe reported a 9.37 per cent resolution rate for its 12.82 million monthly customer support tickets in September 2025. It also uses its Yatra engine to send nearly 595 million real-time nudges every day to improve user engagement. But, there is still debate as to whether such contextual decision-making can significantly reduce cash burn in a market where customer acquisition costs remain high.
Mobile Marketing Investing is now using PhonePe’s Edge Machine Learning (EML models to improve return on investment. This is viewed as an important step for a company that has been scaling for years rather than making immediate profits.
The IPO Verdict
PhonePe is a deeptech firm, not a payments app, and employs 1,880 engineering and product professionals.
Its IPO story consists of four pillars: governance, cost optimisation, flexibility and speed. The technology foundation is in place, as the draft prospectus states. The real test for PhonePe will be whether this technology engine can successfully turn its diversified financial businesses into profitable ones.
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Resource Link : ET
