Paytm plans to expand UPI, card processing and EMI for strong payment services growth

One97 Communications, which owns brand Paytm, is bullish on Unified Payments Interface (UPI) alongside card processing and EMI payments to drive its payment services business. The company has recently highlighted that UPI, which previously contributed 70% of the total Gross Merchandise Value (GMV), now accounts for nearly 80-85%, emphasising its pivotal role in the business model.

On Wednesday, One 97 Communications Ltd (Paytm) declared its Q4 results for FY24. It reported its consolidated net loss widened to Rs 549.60 crore in the March quarter from Rs 219.80 crore in the December quarter and Rs 168.90 crore in the same quarter last year.

Revenue from operations fell 3 per cent year-on-year to Rs 2,267.10 crore against Rs 2,334.50 crore in the same quarter last year. Paytm said its March quarter results were impacted by temporary disruption on account of UPI transition and permanent disruption because of PPBL embargo. Paytm has impaired the carrying value of company’s investment in PPBL.

During an earnings call on the same day, Paytm emphasised on recovery of its merchant GMV. In FY24, Paytm's GMV surged 39% year-on-year to Rs 18.3 lakh crore.

Paytm's revenue stream includes UPI incentives and higher payment processing margins from RuPay credit card transactions, overdrafts, and EMI aggregations.

While UPI merchant payments do not generate Merchant Discount Rate (MDR), Paytm benefits from subvention payments from the government. In Q4FY24, Paytm received UPI incentives of Rs 288 crore, versus Rs 182 crore received in Q4FY23. Paytm’s revenue from payment services increased by 26% to Rs 6,235 crore. Additionally, the net payment margin rose by 50% to Rs 2,955 crore.

During its financial results, the company also stated that it is seeing a positive growth trend in Payment GMV since the month of April (excluding certain products).

Paytm Soundboxes now brings the power of Rupay Credit Card on UPI, offering zero Merchant Discount Rate (MDR) to small merchants for transactions under Rs 2,000. This service allows small businesses to save on transaction fees, expanding their profitability and making it easier to adopt digital payments.

Merchant GMV Recovery

Paytm’s GMV has shown year-on-year growth. It aims to reactivate inactive merchants and add new ones to its platform. As of March 2024, merchant subscriptions came at 1.07 crore, increasing 39 lakh on the year. “We expect net additions to recover to past trend lines by Q3 FY 2025,” the company said.

Paytm continues to address its merchants’ needs through innovative product launches, which are backed by a large distribution and service network. It recently launched two more “Made in India” Soundbox which are customized to the needs of its merchants, with louder speakers and longer battery life.

Paytm continues to address its merchants’ needs through innovative product launches, which are backed by a large distribution and service network. It recently launched two more “Made in India” Soundbox which are customized to the needs of its merchants, with louder speakers and longer battery life.

UPI transaction in April

Last month, Paytm marked a third consecutive month of decline in terms of Unified Payments Interface (UPI) transactions in April 2024. The company processed 1,117.13 million transactions, a 9 per cent month-on-month decline in volume from 1,230.04 million transactions handled in March. The company has seen a contraction in its market share in the UPI ecosystem.

The company had a 8.4 per cent market share in the UPI applications’ ecosystem in April. The share has come down from 10.8 per cent and 9.13 per cent in February and March, respectively.

PhonePe and Google Pay continued to dominate the digital payment landscape by processing 6.5 billion and 5.0273 billion transactions, respectively, in April. Collectively, they account for 86.6% of the total transaction volume.