Building Digital Payments & Shaping Bharat’s Future: The PhonePe Story

India has emerged as a global leader in the digital payments ecosystem, reinforced by robust public infrastructure and dynamic fintechs building innovative products and services. This digital transformation has been aptly enabled by United Payments Interface (UPI), built by the National Payments Corporation of India (NPCI). UPI stands at the forefront of this global revolution by processing billions of transactions daily. As a result, users are no longer dependent on the ‘cash is king’ mindset as they have now transitioned to making payments digitally with ease. This shift, enabled by fintechs such as PhonePe, has empowered millions across the country at an unprecedented scale and truly paved the way for enhanced financial inclusivity.

Recently, Rahul Chari, Co-Founder & CTO at PhonePe, joined Dilip Asbe, MD & CEO at NPCI, on NPCI’s Innovators Playground to take a deep dive into building at scale, the ever-changing role of engineers, evolution of PhonePe and the revolutionary potential of AI. The conversation also revolved around strategies driving India’s digital payments success story. Here is an excerpt from the discussion:

Expressing his immense gratitude for the journey so far, Rahul described how thankful he feels reflecting on PhonePe’s achievements in a journey spanning less than a decade. Along with deepening the digital engagement for PhonePe’s existing users, he aims to further drive the cause of financial inclusion which has been a shared goal across the payments ecosystem. As a ‘builder’, he feels the mission is far from complete as his vision is to onboard the next 300 million users in India who need to be enabled for digital payments. He attributed much of PhonePe’s technological architecture foresight to his earlier experiences, particularly high-volume events such as Big Billion Days at Flipkart. “All the learnings that we had from Flipkart and that of building platforms of scale, we actually applied at PhonePe from day one,” Rahul mentions.

As Dilip Asbe highlighted the evolution of UPI from its initial design to a more sophisticated and resilient platform now, Rahul mentioned how he thinks of this progress as ‘a Ferrari on a racetrack but without a pitstop’. As Rahul explained, the challenge lies not just in planning to build the next big thing but also the far more complex task of being able to deliver incremental improvements at scale. That would help yield a higher impact for the entire ecosystem as rapid user adoption has increased the demand for speed, reliability and privacy. Being able to constantly and effectively improve the existing infrastructure, be it at NPCI’s core or PhonePe’s application layer, will keep the digital payments train moving faster and better.

At PhonePe, a crucial decision that Rahul mentioned was the adoption of a shared-nothing architecture, ensuring that all databases are basically isolated to only the services that actually operate them. This prevented databases from becoming choking points which is a common pitfall in high-transaction systems. By creating distinct application layers over each database, PhonePe avoided the postman effect of collecting too much data into a single, potentially overloaded, database. Furthermore, Rahul discussed that the decision to shard databases from day one might have seemed excessive initially, but it pre-empted massive re-architecting efforts later, proving the importance of scalability calls when building for population-level adoption. Another key insight that Rahul underscored was the laser-sharp focus on UX-driven services where API models are designed from the user’s flow rather than a bottom-up service primitive approach. This helped streamline interactions and reduced unnecessary performance overhead. For Dilip Asbe, this mirrored NPCI’s UPI philosophy wherein simply relaying UPI’s specs to the payments ecosystem made it hassle free for app developers, fostering rapid adoption and innovation.

Reflecting on PhonePe’s mobile application and going beyond the backend, Rahul explained how the app is far more than a simple view layer. “The app is a fairly intelligent ecosystem by itself,” he added, detailing features like a complete sync server with intelligent prioritization for content delivery, and priority queues in the network layer for different types of calls. This advanced client-side intelligence allows PhonePe to deliver an extremely snappy user experience, with most content pre-synced, rather than rendered on demand. He even ventured into the future, envisioning tiny LLMs that can start getting hosted on the phone itself, opening new avenues for customized and secure on-device AI experiences.

The Evolving AI Landscape

At this point, the conversation transitioned to the profound impact of Generative AI as Rahul addressed his initial thoughts on AI-generated code in production. He admitted to his perspective shifting as he read and saw how far the ecosystem has come with respect to the SDLC (Software Development Life Cycle) process. While full-scale distributed systems still require human design, functional code snippets and large blocks can be effectively assisted by AI. Keeping this in mind, PhonePe has been exploring AI’s role in coding assistance (Co-Pilot), pull request generation and unit test creation. This approach in a highly regulated environment has been cautiously but progressively driven by routing all LLM access through a custom platform layer for authorization and audit trails, ensuring control and answerability.

Both Rahul & Dilip unanimously agreed on the need for today’s engineers to adapt. In Rahul’s view, since AI can write code now, developers need to step up and look at problem solving by integrating multiple components and gaining a complete engineering view. This also means that engineers must move into a specialized role rather than remaining a generalist. Furthermore, Dilip advised young engineers to focus on long-term career development in a highly AI-driven corporate world.

PhonePe’s engineering philosophy and Rahul’s journey offer a comprehensive blueprint for the future of digital payments in India. It shows that the future is built on robust architecture, a deep commitment to shared learning and growth along with a prudent acceptance of AI. This stands as testament to India’s growing leadership in global digital innovation.

Watch the full conversation here.