IPO-Bound PhonePe Scales Up Lending and Insurance

As it gears up for a public listing, fintech major PhonePe is aggressively scaling its lending and insurance distribution businesses to diversify revenue and reduce its heavy reliance on payments. While payments still contribute the bulk of its income, newer verticals are gaining traction, supported by rising loan disbursals, insurance policy sales, and a renewed push for a direct lending licence from the RBI.

PhonePe Accelerates Lending and Insurance Push Ahead of IPO

PhonePe’s Revenue Diversification Strategy Takes Shape

As it prepares for an IPO, PhonePe is actively expanding beyond payments, which currently account for around 80% of its top line. The company is focusing on lending and insurance distribution to build more stable and diversified revenue streams.

Launched in 2020 (insurance) and 2023 (lending), these verticals have steadily increased their contribution over the last two years.

Lending and Insurance Revenue Share Rises Sharply

Payments Dependency Begins to Ease

According to PhonePe’s updated draft red herring prospectus, the combined revenue share of lending and insurance rose to 11.55% as of September 30, 2025, compared to 3.58% in FY24.

This marks a significant shift for the company, which has historically depended on UPI payments as its primary revenue driver.

PhonePe’s Lending Business: From Merchants to Consumers

Evolution of PhonePe’s Credit Offering

Consumer Loans and Secured Credit Expansion

PhonePe initially entered the lending space with merchant loans. In February 2024, it expanded into consumer loans, followed later in the year by secured lending products, including:

• Loans against gold

• Loans against mutual funds

• Vehicle-backed loans

Loan Service Provider (LSP) Model

PhonePe currently operates as a Loan Service Provider (LSP), distributing credit on behalf of its partner institutions. The platform works with 56 banks and NBFCs, enabling it to scale lending without carrying credit risk on its balance sheet.

As of H1 FY26, PhonePe’s lending arm had cumulatively disbursed ₹14,270 crore in loans.

Direct Lending Ambitions and RBI Licence Journey

PhonePe Revives Push for Direct Lending Licence

Earlier Licence Attempts

PhonePe has made multiple attempts to secure a direct lending licence:

• October 2021: Subsidiary applied for an NBFC-ND II licence

• May 2022: Application returned after a related party sought a similar licence

• March 2023: Second application filed

• June 2023: Returned as another group entity had received in-principle approval

Fresh Application Filed in November 2025

PhonePe has re-applied for the licence in November 2025, signalling its long-term intent to build a direct lending engine. The application is currently under review by the RBI.

Insurance Distribution Business Gains Scale

PhonePe’s Insurance Arm Shows Strong Momentum

Product Expansion Across Segments

PhonePe began its insurance journey with travel and Covid-19 policies, and later expanded into:

• Motor insurance

• Health insurance

• Life insurance

• Micro-insurance products

Policy Sales and Insurer Partnerships

As of H1 FY26, PhonePe had:

• Sold 18.5 million cumulative insurance policies

• Partnered with 29 insurers

Market Share in Digital Motor Insurance

Two-Wheeler and Four-Wheeler Segments

According to a Redseer report cited in PhonePe’s IPO filings:

• PhonePe held a 20–25% market share in non-assisted digital two-wheeler insurance

• It had a 12–15% market share in non-assisted digital four-wheeler insurance in FY25, measured by premium value

Strong Revenue Growth from Lending and Insurance

Financial Performance Highlights

H1 FY26 Growth

• Lending and insurance distribution revenue rose to ₹452.6 crore in H1 FY26

• This was up from ₹216.8 crore in the same period last year

FY25 Performance

• In FY25, revenue from these businesses tripled to ₹557.6 crore

Market Opportunity Remains Massive

Long-Term Growth Potential in Credit and Insurance

According to Redseer estimates:

• Consumer and MSME loan disbursals are expected to grow from ₹115 lakh crore in FY25 to ₹207–226 lakh crore by FY30

• India’s insurance market is projected to expand from ₹12 lakh crore to ₹19–21 lakh crore over the same period

These trends provide a large runway for PhonePe as it deepens its presence in both segments.

Why This Matters for PhonePe’s IPO

PhonePe’s growing lending and insurance businesses signal:

• Reduced dependence on low-margin payments

• Higher monetisation per user

• Stronger long-term profitability narrative for public market investors

With regulatory approval pending and scale improving rapidly, these verticals could play a pivotal role in shaping PhonePe’s IPO valuation.