Analysts at both the brokerages shared that the move will be significant for Paytm and other fintech firms, which will be able to monetize Unified Payments Interface (UPI) payments and generate higher revenue.
On June 8, 2022, RBI proposed to link the RuPay credit card with UPI, saying it has become the “most inclusive mode of payment” in the country and aims to deepen the scope of UPI.
In a June 10, 2022 note, Goldman Sachs suggested that the central bank’s move would have a “positive impact” on fintech platforms such as Paytm and potentially increase credit card penetration in the country.
“In our view, this could potentially increase credit card penetration and expand the scope of digital payments Indiahaving a positive impact on both card companies (eg SBI Card) and fintech platforms (such as Paytm),” reported years Quoting the Goldman Sachs report.
The brokerage said Paytm’s payments vertical would particularly benefit from the RBI’s proposal because of higher usage of credit cards with merchant discount rates (MDR)-based through UPI. “We expect a positive impact on Paytm’s payments segment. As a result of increased use of credit cards, there will be a potential higher mdr revenue,” the brokerage said.
Another top brokerage firm, Citi, also said that the shift from debit/bank account to credit card could improve monetization of UPI payments, which would be a positive development for Paytm and other fintech platforms.
The brokerage firm said that it appears that all the recent guidelines related to digital payments are either beneficial for Paytm or will not have any impact on the company’s operations. Many global brokerages are bullish about Paytm stock, citing the company’s rapid revenue growth, quick loss reduction and strong improvement in contribution margins.
Global brokerage firm Goldman Sachs had said that the guidelines on digital lending are not likely to impact Paytm’s operations, but will help make the stock attractive. RBI issued guidelines on digital lending in August to ensure gradual growth of credit delivery through digital lending while easing regulatory concerns and protecting customers.
In a note dated August 10, 2022, Goldman Sachs said the move would be beneficial for Paytm as the financial services offered by the company are already in line with the guidelines of the central bank.
“We view Paytm’s financial services business practices in line with the key points as per the final guidelines issued by RBI (reserve Bank of India) on digital lending,” Goldman Sachs said in its note. It added that the RBI’s move should result in “limited-to-no impact on Paytm’s business/monetization model, and in removing the major overhang on the stock.” should help”.
The brokerage also highlighted that the RBI’s recent announcements related to digital lending guidelines, UPI through credit cards and Payments Vision 2025 are broadly “neutral/positive” for Paytm.
(with inputs from agencies)