UPI currently has 25 crore merchants, while only 1 crore merchants have the devices.
“We believe that overall subscription for payments and other services will be a huge market. India could have a potential of 100 million merchant entities and over 500 million payment customers in the near term,” said the company, which held an analysts’ meet in Mumbai. Held, said.
In addition, Paytm said that there is a huge opportunity for bank partnerships to sell their products where FASTag and co-branded Credit Card is already a success, and has been identified EMI aggregation on PG, Remittance as the next among others. For financial services, the company said it would focus on growing lending and stock brokerage offerings. The company charges 2.5% to 3.5% upfront of the loan value and offers a net payment margin of 7 to 9 bps of GMV on processing. Of this, UPI gives 3 to 4 bps to the company and other instruments give it 15 to 18 bps.
“Since UPI is growing faster than other instruments, we expect the blended margin to stabilize at 5 to 7 bps,” said the mobile payments and financial services company-owned One97 Communications Told.
Paytm went into depth about its subscription as a service model and how it monetises its device business. “We charge around Rs 100 per month per active device. Some high-end device charges are high (up to Rs 250 per month). Select establishments get additional incentives from partner banks, RBI, NABARD etc. We take aggressive depreciation (2 years for soundbox and 3 years for EDC) and expect to generate enough cash to fund net capex in 12 to 18 months. ,
The company said that its payment processing fees as a % of GMV will be lower because of (a) higher UPI in the mix (b) routing and rate optimization Small credits are best served and collected digitally – Paytm has such There is a big TAM for loans which has been the much talked about Paytm’s fast growing lending business. The company said that small credits are best served and collected digitally and its payments customer base provides a large TAM for such loans.
“We help distribute small ticket personal loans and merchant loans to various lenders. Postpaid drives credit volume with good quality small loan amounts. On disbursement of loans, we typically make an advance of 2.5% to 3.5% of the loan value, Paytm said in its new earnings presentation.
The company expects these margins (sourcing and collection) to move largely upwards. “We help distribute small ticket personal loans and merchant loans to various lenders. Postpaid enhances credit volume with small loan amounts of good quality.
On collections, Paytm said it made 0.5% to 1.5% of the current disbursement value.
“Co-branded credit cards give us up front distribution revenue and lifetime usage fee. We have 3 lakh cumulative active cards till Sept 2022 and average retail spend per active card is Rs 22,000 – 24,000 per month, both showing healthy growth (We activated around 48,000 new cards in October 2022),” it said.
Paytm Commerce business with cash profit enables merchants to get more business by helping them sell tickets, gift vouchers and deals etc. Paytm’s commerce GMV was Rs 2,021 crore, and it generated 6% revenue (Rs 125 crore).
The company also gave an in-depth look at its costs with the two major expenses being the cost of building the platform and the expansion of the platform.
“Paytm’s cost of building platform was Rs 401 crore in Q2 FY2023, with a 10-15% YoY growth expected on an ongoing basis, while the cost of expanding the platform: marketing and sales, which directly leads to revenue opportunities in the market 309 crore in the previous quarter,” it said.
The company said it believes in increasing profits despite investments in sales and marketing.
Paytm recently reported a strong second quarter revenue growth of 76% to Rs 1,914 crore in FY2023. Following its Q2 results, the company “remains ahead” of its September 2023 profitability guidance.