Paytm is not number 1 in UPI — and it doesn’t need to be

Paytm Payments Bank which owns Paytm UPI is the top beneficiary bank, ahead of the likes of SBI

Paytm is not number 1 in UPI — and it doesn’t need to be
Paytm Payments Bank has been the top UPI beneficiary bank for 17 months in a row.

QoQ to Rs 377 Cr.

UPI has become one of the most important tools of digital payments in India. And there has been a lot of buzz about UPI ranking — which app is number 1, but a silent winner seems to have emerged in the battle — Paytm Payments Bank.

Paytm Payments Bank has been the top UPI beneficiary bank for 17 months in a row. Paytm UPI is owned by Paytm Payments Bank, which is a subsidiary of One97 Communications Limited, which owns Paytm. And unlike its competitors, PhonePe and Google Pay who are currently focused on UPI alone Paytm has built a multitude of payments and financial services. This puts it at the forefront of India’s fintech race.

As the top beneficiary bank, Paytm Bank has turned out to be the leading destination for most UPI transactions in the country. This means that people want to accept money through Paytm, and then use it for other transactions.

In fact, recently, Paytm Payments Bank said that it supports market capping in UPI. In a media statement, Paytm Payments Bank Spokesperson said, “We believe the proposed implementation of UPI market capping will be hugely beneficial for the UPI ecosystem. This move by the NPCI will bolster the growth of digital payments and democratize it for the citizens, ending market concentration risk. With this, UPI will become even more accessible and enable further digital adoption.”

Additionally, Paytm Payments Bank has recently announced that users on the Paytm app will now be able to make UPI transactions to any mobile number across all UPI payment apps even if the recipient is not registered with Paytm. With this, Paytm app users can instantly receive money from and send money to any mobile number with a registered UPI ID across payment apps. This interoperability will further bring in more users to Paytm UPI and also increase digital adoption.

Paytm recently had a solid second quarter in FY 2023, with a 76% YoY surge in revenue to Rs 1,914 crore. The company’s strong revenue growth has come from the fact that the company has diversified its business model. While payments form an important pillar of Paytm’s business model, its other verticals like lending, commerce, and cloud services are accelerating its monetisation and platform expansion which is driving growth.

Within payments, Paytm has offerings beyond UPI, which shows that it doesn’t need to be a market leader in UPI to foster growth for the business. In Paytm’s story, UPI has

enabled the company with the efficient user and merchant acquisition, and allows it to better monetise the platform by upselling loans and payment devices.

“UPI merchant payments (which are free for the merchant) have become revenue-generating due to government encouragement for digital payments in the form of incentives for UPI P2M transactions. Due to the tailwinds for UPI merchant payments, we are also able to make attractive subscription revenues for payment devices, and MDR for non-UPI payments,” said the company in its earnings release.

Analysts at Morgan Stanley said government incentives have made UPI P2M GMV economically viable, and Paytm is now able to monetize transactions through all payment instruments (the incentive is accounted for in 3Q/4Q, when notified by MEITY).

True. Because even without UPI incentives, Paytm has recorded 56% YoY revenue growth in payment services to both merchants and consumers, while its net payments margin (payment revenue plus other operating revenue less payment processing cost) grew 428% YoY and 15% QoQ to Rs 443 Cr. Paytm’s strong growth in devices continues even in this quarter with 4.8 million devices deployed.

In financial services and others, Paytm raked in Rs 349 crore in Q2FY23, up 293% YoY and 29% QoQ, and accounts for 18% of total revenue supported by sourcing and collection revenues in the loan distribution business and higher scope of penetration going forward.

Its revenue from enabling commerce for merchants, where it offers advertising, ticketing and deal vouchers, and more, went up by 55% YoY and 14% QoQ to Rs 377 Cr.

From seamless and superfast payments to democratising credit through digital lending, Paytm shows momentum across its operating and financial metrics that reflect the solid ecosystem it has built.

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First published on: 09-12-2022 at 12:30:51 am