PhonePe sharpens focus on merchant lending, consumer loans ahead of IPO push

IPO-bound digital payments major PhonePe is increasingly focusing on lending distribution, especially merchant loans and consumer credit, as the company expands beyond payments into a broader financial services platform. According to details shared in its public offer document, the company sees lending as a key growth driver alongside merchant services, insurance and wealth products.

PhonePe has scaled its merchant loan distribution rapidly over the past three years. Disbursals rose from just ₹11 crore in FY23 to ₹1,718 crore in FY24 and further to ₹4,507 crore in FY25. In the first half of FY26 alone, merchant loan disbursals reached ₹3,820 crore, more than double the ₹1,838 crore disbursed in the same period a year earlier.

The strong growth in lending has also translated into higher revenue. Merchant lending income increased from ₹19.9 lakh in FY23 to ₹71.65 crore in FY24 and surged to ₹328.04 crore in FY25. For the six months ended September 2025, lending revenue stood at ₹288.09 crore, compared with ₹132.55 crore a year earlier.

PhonePe initially entered the lending distribution business through merchant loans, and later expanded into consumer credit and secured lending products. The platform now enables fully digital personal loans, collateral-free merchant loans, and secured products such as loans against gold, loans against mutual funds and vehicle loans, which are offered in partnership with banks and NBFCs.

The company said its digital platform allows loan disbursal directly into bank accounts after approval, while repayment features such as Equated Daily Instalments (EDI) enable small merchants to repay loans through automated daily deductions, making credit easier to manage. PhonePe said its lending products are designed to improve access to formal credit, particularly for small businesses and users in non-metro regions.

As of September 2025, PhonePe had enabled total merchant and consumer loan disbursals of ₹14,270 crore, with lending services available across nearly 99 percent of India’s pin codes. The company currently works with 56 lending partners across merchant, consumer and secured loan products.

PhonePe said its lending distribution capability is supported by the scale of its payments ecosystem, which generates large volumes of transaction data that help assess credit risk and improve collections. The platform also uses automated reminders, mandate-based repayments and analytics tools to reduce delinquencies and improve conversion rates.

Financially, the company has reported strong growth as it shifts from a pure payments app to a diversified fintech platform. Revenue rose 40 percent to ₹7,115 crore in FY25, while adjusted profit increased sharply, supported by higher contribution from merchant payments, lending and insurance distribution. Merchant-related revenue has nearly doubled as a share of total income over the past two years, reflecting the company’s strategy to focus on monetisable business segments.

With lending, merchant services and financial distribution emerging as key revenue engines, PhonePe is positioning itself as a full-stack digital financial services platform as it prepares for a potential public listing.