Paytm’s focus on subscription services to create additional payment monetization continues to expand with the number of merchants paying subscriptions for payment devices like Paytm Soundbox and POS reaching 6.1 million at the end of January, an increase of 0.3 million in the month.
The number of merchants paying subscriptions increased by one million in Q3 FY23. With their subscription-as-a-service model, the strong adoption of devices drives subscription revenues and higher payment volumes, while increasing the funnel for their merchant loan distribution.
Paytm is seeing sustained traction in subscriptions and earning more than ₹100 per month per device. Further, Paytm has received additional incentives on select installations from partner banks, RBI and NABARD etc.
Paytm’s founder and CEO Vijay Shekhar Sharma during the recent earnings call said that Paytm’s focus with merchants is not limited to just devices but includes various other subscription line items.
The total merchant GMV processed through Paytm’s platform in Q3 FY 2023 aggregated to ₹3.5 lakh crore, marking a YoY growth of 38%.
During the earnings call, founder and CEO Vijay Shekhar Sharma said that Paytm’s focus on merchant payments has created a scalable UPI revenue model in subscription. “I feel highly positive and inspired by the adoption of our device business, especially Soundbox which has led to significant scale in UPI acquiring,” he said. UPI has emerged as one of the key low CAC customers and merchant acquisition channels for us.
Paytm’s registered merchant base expanded to 31.4 million at the end of December 2022. Their CEO Vijay Shekhar Sharma also mentioned that Paytm’s revenue from merchant business in the payments industry is particularly higher than every other peer company. “Somebody chose P2P, somebody chose P2M, we chose merchant business. Our acquiring side market share, which NPCI does not yet declare, once they start declaring, you will see how well Paytm is capitalized there over other UPI players, also standalone UPI players or other payment aggregators,” he added.
As per the notification received from the Government of India on January 11, 2023, Paytm estimates that for Q1-Q3 FY 2023, it will receive ₹130 crore of UPI incentives in Q4 FY 2023.
Paytm leverages their two-sided ecosystem of consumers and merchants and rich insights from their platform to cross-sell high-margin financial services and merchant services. Paytm enables their merchants with tech solutions that allow them to accept payments through a wide variety of instruments and by deploying subscription-based devices that help with reconciliations. Paytm also enables commerce and allows them to advertise, sell gift vouchers, deals and tickets.
For consumers and merchants, Paytm offers various lending products such as Paytm Postpaid (BNPL), personal loans and merchant loans, with their financial institution partners. Paytm’s lending business continues to scale providing attractive upsell revenues.
Their portfolio qualities have been demonstrated over multiple payment cycles. Paytm believes that upselling lending products is a scalable opportunity and sees a large profit pool in their loan distribution business. The penetration for merchant loans is 5.2% of device merchants. Paytm believes there is a long runway for growth as their payments consumer and merchant base offers a large addressable market for loan distribution.
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