New Delhi, Sept. 18 -- India's payments story is one for the books. Led by UPI, the country has built an open-banking infrastructure that is now inspiring nations across the Middle East, Southeast Asia, and Europe to develop similar real-time systems.
Considering the scale of this ecosystem and observing how market leaders deploy next-generation technology, provides insights into the future of digital retail - more specifically in the fintech space.
According to data from NPCI, UPI recorded a massive 24.51 billion transactions in August alone. PhonePe maintained its market leadership by processing 11.19 billion of those transactions, accounting for 45.64% of the total ecosystem volume. A platform serving a base of over 72 crore users and 5 crore merchants, certainly deploys robust AI solutions to drive deeper value and scale personalization.
Let's take a deeper look at how AI is reshaping payments in India, made possible by the nation's current largest payments player.
Beyond Hype: What PhonePe's AI Charter Is Trying to Solve
Rahul Chari, Founder & CPTO of PhonePe captures the essence of the company's approach to AI with a simple premise: not every interaction needs AI.
Indians across geographies and demographies are already comfortable with peer-to-peer transfers, QR-based payments, recharges, and bill payments. They don't need a conversational agent in the middle.
AI is a layer that can be added where it meaningfully improves access, understanding, or decision-making. While this translates to subtle enhancements to existing flows in certain instances, it may lead to reimagining an experience entirely in others.
Two themes stand out in PhonePe's AI charter:
1. Breaking language and access barriers
2. Handholding users through complex financial decisions
Breaking the Language and Access Barrier
India's Digital Public Infrastructure (DPI) offers platforms like PhonePe an abundance of structured data. However, a lot of information that could unlock services like credit rests on unstructured data.
Chari points to a structural gap: today, credit bureau coverage is only around 50-60%. This indicates that a significant number of people who are creditworthy are "invisible" to traditional underwriting.
AI, in this context, is less about chatbots and more about making sense of disorganised or "unstructured", real-world facts.
Chari gives a concrete example from merchant lending:
"When we are trying to say, disburse a loan, or approve a merchant for a loan - if we are able to take images of the store, to then determine the age of the store, the upkeep, the stocking, the kind of items that are there, and add that to the existing data on payments flow, etc. available in real time - it can enable perhaps a larger loan or a loan on better terms."
This is a highly practical solution based on computer vision, pattern recognition, and real-time decisioning. It offers merchants who don't have a formal credit footprint but have a business, inventory, and a payment trail, an opportunity to leverage the power of credit.
Language, Voice, and Vernacular Interfaces
In a nation with vast linguistic and cultural diversity, the true metric of success for payments isn't just speed, but accessibility. Breaking down the language barrier is a massive differentiator AI is set to bring to the space.
According to Chari, this translates to:
* Large language models that understand and respond in vernacular languages
* Voice-based interfaces that allow users to speak naturally rather than navigate menus
* Interactive flows that can collect information and provide guidance in real time
In practice, this could mean a user in a Tier-3 town using conversational AI on the PhonePe app to, say, understand loan eligibility, or a user asking, in their native language, how to pay an electricity bill or discover a service.
Handholding Through Complex Financial Decisions
Complex financial journeys such as investing, buying insurance, planning a holiday, or even understanding spending patterns are seen as fairly more complex journeys.
PhonePe's AI charter leans heavily into this gap.
1. From Search to Guided Action: One of the simpler but powerful use cases Chari outlines is AI-enhanced search within the PhonePe app. Instead of hunting through menus, a user could simply ask, "Mujhe sona khareedna hain" - translating to "I want to buy gold". The system then returns to the exact action page, pre-fills known information, and simplifies the journey to almost a one-click experience. This is where natural language processing, semantic understanding, and context come together.
2. Conversational Transaction Insights: PhonePe is also looking at leveraging AI to turn raw transaction data into conversational insights at a per-user level. Questions like "Year over year, how have my spends trended?" or "Where can I potentially save money?" would allow users to discuss their finances with the app and eventually guide them toward relevant products like mutual funds, gold, or other instruments based on those insights.
While the business incentive of cross-selling and higher product adoption is apparent, financial literacy and planning is interactive and moreover, personalised.
3. From Booking to Planning Travel and Insurance: Categories like travel are research-heavy, and Insurance for some can be anxiety-inducing.
Imagine a conversational holiday planning interface within the PhonePe app that could help with research and then seamlessly transition into bookings. That's a step change from the general practice, where users research on one platform and book on another.
With insurance, an AI layer can help users research and compare policies, discuss personal context (like family health history), then move into an "agentic" mode to complete the purchase and get the policy.
The Bigger Picture: AI as the Second Layer of India's Payments Story
To sum up, the contours for how money runs on top of India's DPI are clear:
* Use AI to break language and access barriers in a country of many tongues and uneven literacy.
* Combine structured DPI data with unstructured signals to underwrite those the formal system has missed.
* Turn apps from static menus into conversational guides for complex financial decisions.
PhonePe's AI journey is a microcosm of a larger shift in fintech: from building rails to building relationships, from moving money to making sense of it.
Published by HT Digital Content Services with permission from Millennium Post.