Walmart-backed fintech major PhonePe, which narrowed its net loss by nearly 30% in FY24, has significantly reduced its customer service team and scaled back cashbacks and incentives offered to users to trim expenses, according to its annual report.
Over the last five fiscal years, PhonePe downsized its customer service team by 60%, bringing it down to just over 400 agents from nearly 1,100. This was achieved through the use of AI-driven chatbots, which now resolve over 90% of customer service issues. “This significant cost saving was achieved without compromising customer satisfaction in any way,” the company stated in its report.
PhonePe also reduced payment transaction incentives or cashbacks offered to users to around Rs 15 crore in FY24, down from more than Rs 950 crore in FY19. These measures, coupled with a 74% rise in revenue, helped the company post a narrower net loss of Rs 1,996 crore in FY24, compared to Rs 2,795 crore in the preceding fiscal year.
Excluding ESOP costs, which amounted to Rs 2,193 crore, the company reported a net profit of Rs 197 crore in FY24. ESOP costs have remained a substantial expense for PhonePe over the past five years, even exceeding the salaries paid to employees. In FY23, ESOP costs were double the employee benefit expenses.
Its revenue from operations stood at Rs 5,064 crore in FY24, nearly doubling every year over the last five fiscal years. The company noted that around 10% of its revenue comes from subsidies the government grants to banks and fintechs in lieu of the zero Merchant Discount Rate (MDR) on UPI.
MDR is a payment processing fee that businesses pay to their bank or fintech for using the digital payment infrastructure. After removing the MDR on UPI transactions to boost the digital payment ecosystem, the government compensates banks and fintechs through subsidies for the loss of revenue from zero MDR.
Additionally, in FY24, PhonePe’s other income, which includes interest income, surged four times to Rs 661 crore, up from Rs 171 crore in FY23. Total income for the year increased by 85% year-on-year, while expenses rose by about 31% to Rs 7,756 crore.