PhonePe Terminates its Collaboration With Juspay

Nitin Konde, Varun Bhardwaj

Dec 4, 2024 — 3 min read

PhonePe Ends Collaboration with Juspay

The leading digital payments company, PhonePe, has cancelled its collaboration with Juspay, a payment orchestration platform, stating that it intends to integrate payment solutions for its merchants directly. With this change, the fintech company, which is sponsored by Walmart, will be able to provide its merchant clients with an integrated payment flow from transaction origination to final settlement.

More than 40 million retailers are part of the Bengaluru-based company's network. One of PhonePe's primary functions as a payment aggregator is to offer its merchants best-in-class success rates via its solutions. According to a statement from a PhonePe representative, the company has chosen not to sell its solutions through any payment orchestration platforms since it can consistently accomplish this for merchants that are directly integrated with the business.

Opting for Direct Integrations

The spokesman also stated that the business will only use direct integrations in the future to provide its solutions to retailers. In February of this year, Juspay, an online payment aggregator (PA), was given the final approval to function as a PA. The main goal of partnerships between digital payment firms and payment orchestration platforms, including payment aggregators, is to increase transaction success rates.

These platforms assess available gateways and procedures, taking into account a number of factors that could affect a transaction's success, including reliability, prices, and speed. At any given moment, they direct transactions via the most effective payment gateway. In essence, the platform is in charge of rerouting the transaction to a different payment gateway in the case that the primary gateway goes down, avoiding service interruptions.

Juspay Largest Payment Orchestration Platforms in India

According to a media report, Juspay, which is supported by Softbank, makes up about 15% of PhonePe's payment gateway business. It is one of the biggest platforms for payment orchestration in the nation. As of March 31, about 88% of the company's revenue came from its payment platform integration division. If other payment platforms decide to follow suit and break up their partnerships with payment orchestration platforms, this might have an effect.

But in February of this year, Juspay also obtained the authorisation to function as a payment aggregator. It might soon begin to compete with businesses it previously collaborated with, like PhonePe and RazorPay.

PhonePe is on the Rise

In 2023, PhonePe raised around $1 billion from investors including Tiger Global, Walmart, and General Atlantic. Together with efficient cost control, this large investment enabled PhonePe to reduce its losses in FY24 and surpass INR 5,000 crore in revenue.

According to the company's consolidated annual report, which is available on its website, PhonePe's operating revenue increased by 73.8% to INR 5,064 crore in the fiscal year that ended in March 2024. Payment service revenue continued to be PhonePe's main source of income, but a $195 million funding round helped the company generate an extra INR 661 crore in interest income, mostly from investments and deposits. As a result, PhonePe's overall revenue increased from INR 3,085 crore in FY23 to INR 5,725 crore in FY24.

Employee perks accounted for 46.45% of total expenses for tech company PhonePe, up 16.4% from INR 3,096 crore in FY23 to INR 3,603 crore in FY24. Of the INR 1,876 crore in ESOP expenses included in this number, only INR 288 crore were paid in cash; the remaining amount was paid in non-cash. Payment processing fees increased 74.8% to INR 1,166 crore in FY24, in tandem with its expansion. Moreover, overall costs increased by 31.3% to INR 7,756 crore in FY24 due to expenditures for advertising, IT, licenses, legal, and other overheads.