Emerging Profitability: Paytm's Merchant Payments Dominate India's Digital Ecosystem

Merchant payments in India are proving more profitable than consumer payments, with Paytm leading the charge. A Bernstein report highlights Paytm's stronger monetization through merchant acquiring, credit card instruments, and revenue per device. The company's focus on merchants offers strategic advantages, leading to profitability and a clearer path to revenue growth.

Merchant payments are rapidly becoming a promising segment in India's digital payments landscape, with Paytm emerging as a frontrunner in terms of revenue and profitability, according to a recent report by Bernstein. The analysis emphasizes merchant acquiring as a structurally stronger avenue for monetization compared to consumer payments.

The report notes that merchant payments benefit from higher take-rate instruments like credit cards and online gateways, as well as device-driven revenue channels. This is in contrast to consumer payments, especially peer-to-peer UPI transactions, which remain challenging to monetize, relying heavily on incentives for revenue.

Despite handling a lower total payment volume, Paytm has reported comparable revenue to its larger competitors, driven by its focus on merchant services. The company's robust installed base of payment devices and capacity to cross-sell credit underscore its monetization advantage. As a result, Paytm has reached a breakeven point at the profit-before-tax level, showcasing a successful strategy in navigating the digital payments sector.

(With inputs from agencies.)