UPI is Free, So How Did Google Pay and PhonePe Earn Over ₹5,000 Crore?
UPI is Free, So How Did Google Pay and PhonePe Earn Over ₹5,000 Crore?
Unified Payments Interface (UPI) has transformed how India pays. From street vendors to big businesses, millions use UPI apps like Google Pay and PhonePe to send and receive money without paying any charges. But despite offering this service for free, both platforms earned a combined ₹5,065 crore last year, according to media reports. How did they make this kind of money without charging their users? The answer lies in their smart business strategies that go far beyond basic money transfers.
Voice Speakers in Kirana Stores
A significant part of the revenue reportedly comes from lakhs of small shops and kirana stores across India. These stores often use voice-enabled speakers that announce every UPI transaction out loud with phrases like “Rs 20 received via PhonePe.” These speakers are provided by the payment apps on a monthly rental basis, usually at ₹100 per month.
According to reports, more than three million stores use this service, helping platforms like PhonePe earn close to ₹30 crore every month, adding up to ₹360 crore annually. These speakers not only make transactions smoother for shopkeepers but also build trust with customers by confirming successful payments.
Scratch Cards Turned Into Advertising
Scratch cards that users receive after making UPI payments have become more than just a cashback gimmick. Reports suggest that they now serve as an advertising tool. When users win scratch cards, they often see brand names and discount offers.
Brands reportedly pay Google Pay and PhonePe to feature their promotions through these cards. This method helps brands get noticed by millions of app users while also keeping users engaged with rewards and gamified experiences. For the platforms, this becomes a powerful tool to generate ad revenue without disrupting user experience.
Software and Financial Services
Beyond basic transactions, these apps have started offering value-added services to small businesses. This includes features like GST filing support, invoice creation tools, and even access to small loans. According to experts, these services are packaged under a Software-as-a-Service (SaaS) model, meaning businesses pay for tools that make their operations smoother.
Interestingly, platforms benefit from a unique advantage here—they already have millions of users who trust them, so they don’t need to spend on customer acquisition. In business terms, they operate with zero Customer Acquisition Cost (CAC), which gives them a strong profit margin.
The Real Business Behind UPI
While UPI as a payment service is free and will likely remain so for users, the platforms built around it are now turning into full-fledged fintech ecosystems. From charging businesses for extra features to earning ad revenue through brand promotions, their income comes from creative models that don’t rely on transaction fees.
This approach has helped apps like Google Pay and PhonePe scale their business in a country where pricing is sensitive, and users expect digital services to be free. By offering trust, ease of use, and additional services, they’ve turned a free payment tool into a multi-crore opportunity.
