Paytm expects blended payment margin to stabilise

Digital financial services firm One97 Communications, which operates under Paytm brand, expects its blended net payment margin to stabilise at 5 to 7 basis points due to an increase in the share of UPI in the payment business, according to the company's founder and CEO Vijay Shekhar Sharma.

Net payment margin or net contribution profit is defined as payment revenues less payment processing charges.

According to a presentation made before analysts, One97 Communications (OCL) said the company at present, earns a net payment margin of 7 to 9 basis points (bps) of gross merchandise value (GMV) on processing.

"Of which UPI gives us 3 to 4 bps and other instruments give us 15 to 18 bps. Since UPI is growing faster than other instruments, we expect the blended margin to stabilize at 5 to 7 bps," Sharma said during the presentation.

Paytm's payment charges will trend lower as a percentage of GMV because of higher UPI in mix and routing and rate optimisations, the company explained.

During the September 2022 quarter, the total merchant GMV, which is the total payments volume processed by the merchants, of Paytm grew by 63 per cent to an aggregated value of Rs 3.18 lakh crore on a year-on-year basis.

The company's net payments margin grew manifold to Rs 443 crore in September 2022 from Rs 84 crore a year ago.

Sharma said that the current phase is the early days of payments in India.

"UPI has about 25 crore signed-up customers, and there is only a total of approximately 1 crore devices in the market.

"We believe overall subscriptions for payment and other services will be a large market. India could have a potential of 10 crore merchant entities and more than 50 crore payment customers in the near term. Expanding merchants' business by offering coupons, deals, marketing and loyalty will create more revenue and profit for our commerce business," Sharma said.

The company sees great opportunities in bank partnerships to sell its products.

"EMI aggregation on PG, remittance among others could be next. In financial services, we will focus on growing loan and stock brokerage offerings," Sharma said.