Rahul Chari, Founder & CTO, @PhonePe_ | UPI & India's Digital Payments Revolution | SCALER POD 14

PhonePe's success stems from prioritizing speed, reliability, and security in its UPI-based payment system, unlike startups that often fix issues after launch. This is crucial in financial services. PhonePe's CTO's day involves reviewing team work, making architectural decisions, attending governance meetings, and engaging in external interactions. He's heavily involved in new BFSI initiatives. PhonePe's tech stack choices (Java, MariaDB, shared-nothing architecture) were deliberate and have enabled scalability from day one, minimizing the need for major rewrites. However, they acknowledge needing to improve mobile engineering considerations. The UPI protocol's separation of authentication and authorization is a key design feature that enables its versatility beyond simple payments. Early challenges included low UPI success rates and reconciliation issues. PhonePe addressed these by deeply understanding the UPI protocol, engaging with npci, and building robust failure mechanisms. Openly sharing data on failures and successes helped shape the ecosystem. PhonePe initially positioned itself as an alternative to prepaid instruments, emphasizing the natural flow of transactions enabled by UPI, rather than requiring users to load a wallet. The PhonePe wallet was introduced later. PhonePe's Wallet Strategy: The wallet plays a crucial role in handling refunds and returns, offering a faster alternative to card-based transactions and facilitating back-to-back purchases. Regulatory restrictions limit P2P transfers between wallets unless both parties are fully KYC compliant. Mobile App Challenges and Solutions: Maintaining app agility across diverse devices and network conditions in India requires a robust information architecture, prioritizing core functionalities (send/spend), and strategically introducing additional features based on user progression. Significant engineering effort is dedicated to optimizing performance across a wide range of Android devices. Engineering Approach to Scale: PhonePe uses a "pods" organizational model, assigning engineers to specific product areas for extended periods to foster deep domain expertise and improve productivity. This contrasts with traditional, project-based team structures. They prioritize native app development over cross-platform solutions for performance and feature control. Edge computing and optimized network libraries are key to handling network variability. Handling Regulatory Challenges: PhonePe proactively addresses regulatory compliance through robust infrastructure design, data anonymization techniques, and granular kill switches. They collaborate closely with auditors and prioritize building systems that inherently meet regulatory requirements. Onboarding and Upskilling: PhonePe utilizes various methods for onboarding and upskilling new employees, including videos, documentation, and a newly launched "PhonePe University" program. This program aims to accelerate learning, improve productivity, and provide broader exposure to different technologies and domains. The "Not a Bank" Advantage: PhonePe views itself as a scalable, intelligent distribution platform, partnering with banks rather than becoming one. This allows for greater agility and innovation in creating new financial products and services. They see immense opportunity in improving the distribution of insurance and investment products in India. Future Use of AI: PhonePe plans to leverage AI and machine learning for enhanced customer experiences, particularly in insurance claims processing, personalized financial advice, and fraud prevention. They aim to create more efficient and personalized user journeys, reducing reliance on telemarketing. PhonePe's founders discuss their journey building India's leading mobile payment platform. Key themes: early UPI focus, scalable architecture (Java-based, shared-nothing), prioritizing UPI over a proprietary wallet, overcoming scaling challenges, and leveraging AI for future growth. This segment offers a glimpse into the daily routine of PhonePe's CTO and founder, Rahul. He describes his day as a blend of reviewing internal documentation, participating in design reviews, and attending governance meetings. This provides insight into the leadership and management aspects of running a large fintech company.This segment details PhonePe's structured approach to decision-making and governance, balancing short-term and long-term strategies. Rahul explains the division of responsibilities between himself and other leaders, highlighting their focus on new BFSI initiatives and external interactions. This showcases their management style and organizational structure.This segment dives into PhonePe's technological choices, product design process, and engineering practices. Rahul discusses their preference for a homogeneous tech stack, the rigorous product design review process, and his personal transition from coding to leadership roles. This offers a detailed look at their engineering culture and decision-making processes. This segment details PhonePe's deliberate technology stack choices, including Java and a sharded MySQL database, emphasizing their focus on scalability and maintainability from the outset. It also discusses the trade-offs and adjustments made over time.This segment reflects on the initial limitations in mobile engineering expertise and the resulting architectural choices. It highlights the evolution towards a more balanced approach, reducing the load on the mobile app by building more composite layers on the backend. This segment details the challenges of using cross-platform frameworks like React Native for a large-scale application like PhonePe, highlighting the significant effort still required for native platform-specific development and the overestimation of UI similarity across platforms. The speaker uses WhatsApp as a real-world example of a successful app with distinct iOS and Android versions. This segment discusses PhonePe's approach to project management, emphasizing a focus on incremental development and avoiding the "shiny object" syndrome. The speaker contrasts their approach with traditional methods involving t-shirt sizing and detailed prioritization, highlighting the advantages of their pod-based model and the flexibility it allows for feature development. The speaker discusses the potential of AI to personalize insurance products based on individual needs and circumstances. This includes using AI to create a base product with customizable add-ons tailored to factors like life stage, location, and medical infrastructure. This segment highlights the potential of AI to create more relevant and valuable insurance products. The speaker reframes the company's role as a highly scalable, performant, and intelligent distribution platform for payments, insurance, and investments. They emphasize the significant engineering effort required to maintain reliability and performance at scale, highlighting the company's focus on intelligent data usage, design patterns, and user interface to create a superior distribution platform. This approach allows for partnerships across various industries.Drawing a parallel to Zomato's decision not to enter the food production business, the speaker explains the company's strategic focus on its core competency: distribution. They argue that there's significant potential within the distribution layer itself, and expanding into unrelated areas would detract from their core strength. This segment provides valuable insight into strategic decision-making and resource allocation.The speaker addresses the low penetration of insurance products, particularly health and term insurance, as a significant distribution challenge. They argue that improving distribution efficiency will lead to better pricing and product selection, ultimately increasing consumer value and driving organic growth through word-of-mouth marketing. A strong digital distribution platform is presented as key to solving this challenge. This segment traces Rahul's extensive career path, starting with his early work in embedded software, his entrepreneurial ventures, and his eventual role at PhonePe. He shares experiences from working at Sun Labs, Andiamo Systems (acquired by Cisco), and his own startups, highlighting key learnings and motivations. This provides valuable context for understanding his current role and perspective.This segment focuses on Rahul's decision to return to India and pursue entrepreneurship. He describes his first startup, Bhoomi.com, which aimed to crowdsource real estate information. This showcases his entrepreneurial drive and his ability to identify market needs and develop innovative solutions.This segment details Rahul's second startup, Manoramic.com, a music download store that later pivoted to a B2B model, powering streaming services for major players like Google. This illustrates his adaptability and ability to pivot based on market demands and technological advancements.This segment discusses Rahul's work at Flipkart, where he led the development of Flight, a native music and ebook app. He highlights the challenges and innovations involved in building apps for the early smartphone era in India. This provides a historical perspective on the evolution of mobile apps and the Indian market.This segment reflects on the early days of smartphone adoption in India and the impact of Flight on the app development landscape. The speaker shares personal anecdotes about the limited resources and challenges faced during that time. This offers a unique perspective on the evolution of the mobile app ecosystem in India.This segment concludes with Rahul's experience leading engineering and product for Flipkart's supply chain, highlighting the humbling experience and the broader perspective it provided. He defines a good software engineer, emphasizing the importance of understanding the problem statement and building impactful solutions. This provides a valuable perspective on the qualities of successful software engineers. This segment details the obstacles faced in launching a digital music platform in India in 2012, highlighting the lack of established payment infrastructure like digital wallets and the prevalence of micropayment challenges, ultimately explaining why the venture failed.This segment explains how the failure of payment gateways during Flipkart's Big Billion Day sale in 2012 exposed critical flaws in India's payment infrastructure, directly leading to the creation of PhonePe as a solution to address these shortcomings and enable India's digital transformation. This segment emphasizes PhonePe's commitment to open data sharing, including publishing anonymized transaction data through their Pulse platform, to foster collaboration and improve the overall UPI ecosystem. This approach is presented as a key factor in their success.This segment describes PhonePe's innovative predictive logic platform, "Kill Switch," which uses machine learning to preemptively prevent potentially unsuccessful transactions, prioritizing consumer experience over immediate transaction volume. The speaker argues against becoming a bank, emphasizing the advantages of a fintech model that partners with existing banks. This approach allows for innovation and the creation of new products without the burdens of traditional banking regulations and legacy systems. The speaker highlights the potential for fintechs to act as a layer on top of banking, improving user experiences and developing new financial products through intelligent data usage and strategic partnerships.The speaker discusses the Yes Bank crisis as a wake-up call, emphasizing the importance of business continuity planning (BCP) and disaster recovery (DR). They explain that becoming a bank shouldn't be solely driven by BCP concerns but rather by the ability to surpass the capabilities of a fintech-bank partnership, which currently isn't feasible due to governance and compliance requirements. The speaker acknowledges the ongoing journey of banking system improvements in technology and expresses hope for future developments. The speaker explores the future applications of AI in payments and insurance, focusing on smart recommendation systems, fraud prevention, and claims processing. They envision AI playing a crucial role in creating more efficient and personalized experiences, including conversational AI for claims assistance and advisory services for investments. The "no telemarketing" approach is highlighted as a key benefit of AI-driven solutions. A shared-nothing architecture is a database or system design where each node operates independently, possessing its own CPU, memory, and storage. There's no shared resource among nodes; data is partitioned across them, with each node processing only its assigned data. This design significantly improves scalability and fault tolerance. If one node fails, the others remain unaffected, ensuring system continuity. It's particularly beneficial for handling high transaction volumes and massive datasets, making it a popular choice for large-scale systems. The provided text gives limited information on PhonePe's specific mechanisms for ensuring speed, reliability, and security of transactions. However, it highlights a predictive logic platform ("skill switch") that analyzes various factors to assess transaction success probability and potentially prevent fraudulent or high-risk transactions ( ). A focus on building for scale from the outset ( ) also suggests a robust infrastructure designed to handle high transaction volumes. To compare PhonePe's approach to other payment methods, a detailed analysis of its security protocols, infrastructure, and transaction processing methods would be necessary, which is beyond the scope of the provided context. PhonePe's decision to utilize a completely native platform for its app, abandoning React Native due to performance and security concerns, is detailed. The discussion highlights the importance of speed and efficiency in a utilitarian app like PhonePe, emphasizing the need for a seamless user experience to ensure quick transactions, particularly in high-pressure situations like toll booth payments. The speaker also explains the security advantages of a native approach, especially concerning the handling of sensitive data and edge models.This segment analyzes the security vulnerabilities inherent in nested payment gateways, illustrating how multiple layers of apps and overlays increase the risk of data breaches. The speaker uses the example of OTP entry screens, highlighting the potential for malicious actors to intercept sensitive information at various stages of the transaction. The discussion contrasts the security and speed of traditional cash transactions with the complexities of digital payment systems, emphasizing the need for streamlined and secure processes.The speaker contrasts the security and efficiency of UPI with traditional card payments, emphasizing UPI's fewer transaction hops, resulting in enhanced speed, reliability, and security. The discussion highlights how UPI's design, particularly the separation of authentication and authorization, contributes to its superior security and user trust. The speaker argues that UPI's inherent advantages translate into user convenience, even if users don't fully understand the underlying technical aspects.This segment focuses on the thoughtful design choices in the UPI protocol, particularly the separation of authentication and authorization. The speaker explains how this design feature enhances security and unlocks potential for future applications beyond simple payments, such as KYC and document signing. The discussion also touches upon the importance of consistent user interfaces, like the standardized PIN screen, in building user trust and confidence.The speaker explains the four-party model in UPI (app, bank, app, bank) and how it enables transactions between different apps, unlike wallet models that require both sender and receiver to be on the same app. The discussion then shifts to PhonePe's strategic decision to prioritize UPI over its own wallet, highlighting the inherent advantages of UPI in terms of speed, reliability, and security. The speaker also discusses the limitations of PPIs (prepaid instruments) and their unnatural association with moving money between sources.This segment details PhonePe's evolution from a wallet-centric approach to a UPI-focused strategy. The speaker explains how PhonePe inherited a wallet from Flipkart but strategically positioned itself as an alternative to prepaid instruments, emphasizing UPI's potential as the nation's primary payment rail. The discussion also touches upon the regulatory restrictions around P2P transfers on PPIs, highlighting the importance of full KYC compliance to prevent money laundering.The speaker addresses the challenges of scaling a mobile app in India's diverse market, focusing on the wide variety of devices and network conditions. The discussion highlights PhonePe's strategies for maintaining agility while adding new features, emphasizing the importance of a clear information architecture and a focus on core use cases. The speaker also details the technical challenges of optimizing performance across different devices and network conditions, including the development of custom network libraries and push notification systems. This segment explains PhonePe's unique organizational structure using "pods," where engineers are assigned to specific product areas for extended periods, fostering deep domain expertise and end-to-end ownership. The speaker contrasts this with traditional horizontal engineering teams and emphasizes the increased productivity and business value resulting from this approach. This segment addresses the engineering challenges posed by the constantly evolving regulatory landscape in the financial technology sector. The speaker explains how PhonePe proactively addresses these challenges by building systems with flexibility and adaptability in mind, emphasizing the importance of infrastructure-level changes to ensure compliance and minimize the need for complete system overhauls.This segment delves into PhonePe's infrastructure design and its role in meeting regulatory requirements. The speaker describes how they integrate compliance considerations into their infrastructure, including database deployments, access permissions, and data anonymization, to ensure adherence to regulations and minimize risks. The discussion also touches upon the importance of prioritizing regulatory compliance over purely technological advancements. This segment focuses on PhonePe's strategies for onboarding and upskilling new engineers, particularly in the context of the complex financial domain and internal systems. The speaker discusses various methods, including videos, induction programs, documentation, and the recently launched "PhonePe University," highlighting the challenges of transferring tribal knowledge and the ongoing efforts to improve the onboarding process. The provided text mentions PhonePe used MySQL and MariaDB initially, employing a sharded architecture from day one for scalability ( ). They also used an application-agnostic sharding library integrated into their Java development framework ( ). However, a complete picture of their tech stack isn't available in the given context. This segment clarifies the independent nature of PhonePe despite Flipkart's investment, emphasizing their focus on building a large transaction platform and prioritizing product development over short-term financial gains. It explains how PhonePe's independence was maintained even after Flipkart's investment. This segment discusses the initial hurdles faced by PhonePe in its early days, particularly concerning UPI's success rate and transaction reconciliation. It highlights their proactive engagement with NPCI and the India Stack team to understand and improve the UPI protocol. In PhonePe's early stages, crucial decisions involved technology stack, frameworks, databases, and cloud infrastructure ( ). They prioritized a practical approach, focusing on core strengths and building for scale from the outset, even before launch ( ). While specific challenges aren't detailed, their strategy suggests they proactively addressed potential scaling issues and made well-researched choices to avoid later rework. The company's success indicates that their initial technical decisions proved largely effective. Further details on specific challenges and their solutions are not available in the provided context. PhonePe's early technology choices included a focus on scalability from the very beginning ( ). They used a sharded architecture with MySQL and MariaDB databases ( ). Their choice of Java and an application-agnostic sharding library integrated into their framework contributed to their ability to handle large transaction volumes ( ). While the provided information doesn't detail the full tech stack, the emphasis on scalability and the use of sharding clearly impacted their performance positively, allowing them to manage high transaction loads. More specific details about their programming language choices and other aspects of their architecture are not available in the provided context.