New Delhi, India | December 28, 2025
Unified Payments Interface (UPI) has revolutionized digital payments in India by making money transfers instant, seamless, and free for users. With no transaction fees, platforms like Google Pay and PhonePe are used daily by millions—raising a common question: how do these apps generate revenue?
The answer lies in their business model, which extends far beyond payments. Instead of treating UPI as a basic transfer tool, these companies have built a complete digital ecosystem connecting users, merchants, brands, and financial services.
Merchants Drive a Large Share of Revenue
Small merchants and neighborhood stores are a key source of income. PhonePe, for instance, rents voice-enabled payment confirmation speakers to shopkeepers. These devices announce successful payments in real time, improving trust and transparency at billing counters.
Merchants pay around ₹100 per month for these speakers. With more than 30 million devices deployed nationwide, this single offering generates hundreds of crores in annual revenue.
Scratch Cards and Cashbacks Are Paid Promotions
Cashbacks and scratch cards shown to users are not free giveaways. Brands pay platforms like Google Pay and PhonePe to promote offers through these reward formats.
Users receive incentives, brands gain targeted visibility, and payment apps earn advertising revenue—without charging users for UPI transactions.
Financial and Software Services Add High Margins
Leveraging trust built through UPI, these platforms now offer invoicing tools, GST-related services, accounting software, and micro-loans for small businesses.
Revenue flows in through SaaS subscriptions, service fees, and commissions on loans, making financial services one of the most profitable segments.
Near-Zero User Acquisition Cost Boosts Profits
Because UPI is already widely adopted, payment apps spend very little to onboard new users. Low operating costs combined with diversified revenue streams explain how Google Pay and PhonePe remain highly profitable—even while keeping UPI payments free.
