At first glance, the small speaker sitting next to a kirana store’s QR code looks like a simple payment alert device. But according to a report by Bank of America Global Research, the ‘soundbox’ has quietly become a critical monetisation layer in India’s fintech battle, and a gateway to small business lending.
From payment alert to merchant monetisation
India’s payments ecosystem runs largely on UPI, a free rail that limits direct monetisation on the consumer side. Furthermore, the report stated that merchant payments are monetised better than consumer payments, driven by MDR on non-UPI transactions and subscription models such as soundboxes.
To deepen monetisation among small merchants, Paytm introduced its soundbox device, with PhonePe and others following. These devices enable platforms to charge subscription fees of Rs 80–100 per month. BofA estimates this is a 60% EBITDA margin business for platforms.
In effect, what appears to be a hardware play is actually a high-margin SaaS-like layer built on top of UPI.
The lending flywheel
The bigger prize, however, is credit. The report further stated that B2B lending, which includes SMEs and micro-merchants, are some of the biggest beneficiaries of fintech.
Crucially, many of these loans are repaid through an equated daily instalment (EDI) model. Instead of waiting for a bulky monthly EMI, lenders dip into a merchant’s daily transaction flows, collecting small amounts as money comes in.
It makes repayment feel lighter for the borrower and gives lenders a steady, predictable stream of cash, the report added.
Because payment platforms can see transactions in real time, they aren’t underwriting loans based on outdated balance sheets or last year’s financials.
They’re watching the business live, like how much it sells every day, how seasonal it is, and whether cash is actually moving. That kind of visibility gives them a clear edge over traditional lenders working off static paperwork.
Paytm’s first-mover advantage
While both platforms focus on lending and operate through partnerships with NBFCs and banks, BofA says Paytm has a first-mover advantage in merchant lending.
The report estimates that in H1FY26, Paytm generated approximately Rs 900 crore in merchant lending revenue, whereas PhonePe generated around Rs 300 crore. The report further stated that BofA expects Paytm to maintain its lead in merchant lending, given its focus and early start.
At the same time, the report notes that PhonePe also has access to rich merchant data, including throughput data and insights from consumers who transact at those stores.
Payments as the rail, Lending as the engine
More broadly, BofA frames lending as the primary value driver for fintech platforms. India does not have a dominant fintech “super-app” like China’s Ant Financial. Instead, vertical leaders have emerged across payments, insurance, lending and wealth management.
In that landscape, payments act as the user and merchant acquisition layer, while lending becomes the core profit engine. The soundbox, then, is not just a device that announces “Rs 250 received.” It is the data gateway that converts transaction flow into underwriting intelligence and small-ticket merchant payments into scalable credit businesses.
For Paytm, the early push into merchant devices and loans has translated into a lead in merchant lending revenues. For PhonePe, its scale in consumer payments and merchant reach provides a powerful base to close the gap, the report noted.