Paytm to add 1.5 million PoS devices every quarter, bets big on merchant lending
Paytm is planning to significantly expand its offline point-of-sale (PoS) device network over the next 18-24 months. According to the company’s group chief operating officer Bhavesh Gupta, they aim to add approximately 1.5 million such devices every quarter, including soundboxes and card machines. This move reflects their emphasis on enhancing their physical presence in the market, catering to the increasing demand from their merchants for advanced technology products.
In the second quarter of the financial year ending in September 2023, Paytm’s consolidated revenue surged by 32 percent to Rs 2,519 crore compared to Rs 1,914 crore during the same period last year. This growth is attributed primarily to the improvement in payment processing margins and an increase in loan disbursements.
As of September 2023, Paytm boasts a substantial merchant base of about 3.8 crore. Additionally, the number of merchants paying a subscription for Paytm’s devices has seen substantial growth, reaching 92 lakh, which marks a year-on-year increase of 44 lakh and a quarterly increase of 14 lakh.
The data suggests that Paytm’s strategy is centered around capitalizing on the growing demand for digital payment solutions and ensuring its continued dominance in the market by expanding its physical infrastructure. This expansion seems to align with the broader trend of digitization and the shift towards cashless transactions in the economy.
The dynamics within the point-of-sale (PoS) device market in India have been rapidly evolving, as indicated by the introduction of new devices and the expansion of offerings by leading players such as Paytm. With the launch of their multifunctional PoS device during Q2, Paytm has demonstrated a strategic focus on not only facilitating secure and convenient payment transactions but also on providing additional value to their merchant partners through innovative features.
The newly launched Paytm PoS device, which serves as a hybrid platform for accepting various forms of payments including cards and UPI, while also acting as a soundbox with audio-assisted functionalities, underscores the company’s commitment to enhancing the merchant experience. The integration of a SIM-based connectivity option further amplifies the accessibility and usability of the device, potentially catering to a broader market segment that may not have easy access to stable internet connections.
By emphasizing the potential impact of these launches on expanding their total addressable market (TAM), enhancing merchant engagement, and promoting card acceptance, Paytm is clearly aiming to position itself as a comprehensive solutions provider for the evolving needs of businesses across various sectors. This strategic move aligns with the company’s broader vision to strengthen its foothold in the competitive PoS device market and solidify its position as a leading fintech player in India.
The presence of dominant players like Pine Labs, Razorpay, and Paytm in the PoS device market underscores the intense competition within the industry. These players are continuously striving to differentiate themselves by offering unique features, user-friendly interfaces, and secure payment processing, thereby enhancing the overall payment experience for both merchants and customers.
Moreover, the recent entry of PhonePe into the PoS device market indicates the growing attractiveness of this segment and the recognition of the immense potential within India’s rapidly expanding digital payment ecosystem. As a new entrant, PhonePe’s foray into the market is likely to intensify competition further, compelling existing players to innovate and improve their offerings to retain their market share and stay ahead in the race.
Considering the substantial number of approximately 79 lakh PoS devices across India as of May 2023, as reported by the Reserve Bank of India (RBI), the market presents significant growth opportunities. As digital payment adoption continues to surge across various sectors, including retail, hospitality, and e-commerce, the demand for sophisticated, secure, and user-friendly PoS solutions is expected to rise. This trend is likely to fuel further innovations, collaborations, and investments within the PoS device market in India, ultimately contributing to the continued transformation of the country’s digital payment landscape.
Paytm’s recent focus on merchant loan disbursal has been underscored by the company’s strategic decision to prioritize this segment over personal loans. According to statements made by Gupta, the sentiment surrounding personal loan growth has remained muted, as indicated by the company’s lending partners. Despite this, Paytm has observed robust growth in its post-paid and merchant loan businesses.
In the September quarter, Paytm’s overall loan disbursement witnessed a substantial surge, reaching Rs 16,211 crore, which reflects a notable increase of almost 122 percent. Within this figure, merchant loans contributed Rs 3,275 crore, while personal loans accounted for Rs 3,927 crore. Additionally, the value of postpaid loans distributed stood at Rs 9,010 crore.
Paytm currently operates with four distinct credit portfolios, namely, Paytm Postpaid, personal loans, merchant loans, and co-branded credit cards, which collectively contribute to the company’s comprehensive financial services offerings.
Despite the current muted outlook for personal loans, Gupta emphasized that the company remains optimistic about the potential for significant growth in the merchant loan segment. He projected a moderate year-on-year growth rate of approximately 30-40%, indicating a more stable outlook compared to the exceptional growth rates observed in the previous year. In contrast, the company remains bullish about the potential for a blended credit growth of 40-50% over the next two to three years, underscoring their positive outlook for the merchant loan business.
Paytm’s strategic shift towards prioritizing merchant loans aligns with the company’s efforts to leverage its robust merchant base and cater to the evolving financial needs of businesses. By emphasizing this strategic direction, Paytm aims to consolidate its position as a key player in the fintech industry, leveraging its strong technological infrastructure and customer-centric approach to deliver tailored financial solutions to its diverse user base.
Bhavesh Gupta’s insights shed light on Paytm’s strategic approach within the postpaid loan business, emphasizing the company’s significant merchant base and its approach to offering tailored financial solutions. According to Gupta, out of the 40 million merchants in the postpaid loan business, approximately 20 million have already enrolled in Paytm’s postpaid product. Among these, less than 1 million merchants are currently paying the Merchant Discount Rate (MDR).
Gupta further clarified that Paytm does not enforce MDR charging on offline merchants whose post-paid transaction percentage on the Paytm platform exceeds double digits in a month. This approach underscores Paytm’s efforts to support and incentivize its merchant partners, especially those demonstrating a significant reliance on Paytm’s postpaid services.
In line with its commitment to expanding its financial services offerings, Paytm has recently forged a partnership with Tata Capital, adding them to their list of lending partners. This collaboration follows Paytm’s earlier announcement of a partnership with Shriram Finance Limited, one of the largest retail non-banking financial companies (NBFCs) in India. By teaming up with multiple financial institutions, including banks and NBFCs, Paytm aims to enhance its lending capabilities and broaden its overall financial service offerings.
Gupta’s assertion that Paytm will continue to onboard new lending partners, with plans to add 2-3 additional partners, reaffirms the company’s strategic focus on building robust partnerships within the financial sector. By expanding its network of lending partners, Paytm aims to strengthen its position as a comprehensive financial services platform, catering to the diverse financial needs of its growing user base. This approach is in line with Paytm’s commitment to delivering accessible and innovative financial solutions, fostering financial inclusion, and supporting the evolving financial landscape in India.
