India’s leading digital financial services platform Paytm is increasing sales and reducing losses year after year. The company also has a huge advantage in its Super App UPI game where it is among the top players. However, unlike its competitors PhonePe and Google Pay, Paytm doesn’t rely on cashbacks and incentives to drive growth. While competitors are bleeding out money, Paytm is adding real value with revenue and is poised to break even soon.
According to a Bernstein report:
1. Paytm is building ‘real revenue’ as its competitors continue to spend big bucks on cashbacks and incentives to attract users: The Bernstein Report said, “PhonePe and Google Pay continue to invest in providing customer incentives and spending on marketing spend with the 2nd .5 to 3.0 times sales (FY20 MCA filings). Paytm has streamlined its marketing spending – from 1.2x in FY17 to 0.4x in FY20 and is now 0.2x of sales (FY21).
2. NPCI 30% market capitalization will cost PhonePe heavily: NPCI has already placed a 30% market share cap for UPI Third Party Aggregator Apps, which does not apply to Paytm Payments Bank. “This would mean that PhonePe and Google Pay would have to reduce their customer incentives in order to gradually bring their market share to the upper limit of 30%,” said the Bernstein report. The report continued, “The battle for super apps goes beyond just squeezing marketing dollars for market share (PhonePe and Google Pay spend 2-3x revenue when UPI market share caps kick in. What matters is the monetization of financial services, including the provision of credit on the app and the development of a financial services suite – for both in-shop and online retailers “
3. Paytm’s strategic and investment focus has shifted to two areas:
a) Development of a full-stack payment suite beyond UPI – point-of-sale, Paytm payment gateway, Paytm Payments Bank
b) Development of a financial services platform e with a focus on pay-later loans (Paytm Postpaid) and asset management / insurance (Paytm Money)
4. Paytm Payments Bank continues to be the largest recipient bank in the UPI area with over 430 million transactions. It is ahead of institutional banks like SBI, HDFC, ICICI, Yes Bank, Axis Bank among others.
5. Paytm has a solid presence in the P2M space: In addition, the largest transaction driver in the UPI space is the P2M segment, in which Paytm has consolidated its lead. Paytm has “increased the proportion of merchant payments via wallets, UPI, PoS and online payments,” the report said.
6. Paytm’s proprietary user base and active monthly users have grown year on year.
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