Our Business
Enabling mobile payments forConsumers & Merchants and distributing financial services to them
Revenue Model
Payments Business
Paytm offers various payment solutions to the consumers, as well as merchants. On the Paytm app, there are various use cases of payments for consumers, such as Mobile Recharge, Utility Bills, Education, and money transfers etc. Consumers can make payments using a wide selection of instruments, such as UPI, cards, net banking etc. The company monetizes these payments by charging MDR from the merchants or by charging convenience fees from the users.
Net Payment Margin
Net payment margin is a sum of Payment Processing Margin and Merchant Subscription Revenue. Payment Processing Margin is derived by subtracting Payment processing charges from the MDR revenue. Payment processing charges are paid to financial intermediaries for completing the payment transaction. Typically, for completing a payment transaction, various institutions, such as card networks, issuing banks, acquiring banks, NPCI, etc., are involved. Charges paid to such entities are booked in the payment processing charges. Paytm makes 5 to 6 bps of GMV payment processing margin, including UPI incentive. As UPI incentive is typically received in the 4th quarter of the financial year, payment processing margin on a quarterly basis excluding UPI incentive would be above 3bps. On UPI, Paytm makes 2 to 3 bps & on Non-UPI instruments it makes 15 to 18 bps.
Financial Services & Others
Paytm’s Financial services offerings consist of mobile credit, insurance, and wealth management for consumers and merchants. Loan distribution is the key product in this segment. As part of the loan distribution business, Paytm operates a technology platform with capabilities across the entire loan lifecycle including origination, loan management and collection to provide credit access to consumers and merchants through financial institution partners. Paytm’s core value proposition is frictionless and instant disbursement of loans and end-to-end digital journey which lowers the operational costs. Paytm does not lend from its own balance sheet, but partners with financial institutions who enter into bilateral agreements with the customers, underwrite the loans and own the loan book. Financial institution partners are also responsible for a customer’s KYC, credit bureau reporting, as per the regulations.
Paytm, through its lending partners, offers working capital loans to merchants who are using Paytm devices for accepting digital payments. Device merchants tend to have higher engagement for digital payments resulting in higher payment volumes. These loans are offered to merchants who have high vintage and stable transaction history which offer comfort on the collectability of the loans. The USP of these loans is repayment by daily instalments. This significantly reduces collection efforts and merchants can also better manage the timing of their cash flows. Paytm is uniquely positioned to offer these loans on the back of 1.12Cr device merchants. Most of the merchant loans are distributed under the distribution and collection model. Over ~50% of disbursements are to merchants who have taken a loan before.
Paytm, through its lending partners, offers personal loans to its customers. The USP of these loans is 1. seamless digital journey, from loan application to disbursement, 2. Instant loan processing and approvals in minutes, and 3. No sales calls. Distribution of personal loans is primarily using distribution only model.
Other Financial Services
Apart from lending, financial services and others vertical constitutes equity broking, insurance and mutual fund distribution. Paytm’s philosophy is to leverage its customer reach to distribute various financial products.
Marketing Services
Cost Structure (Direct & Indirect costs)
Direct Costs
Payment processing charges
Payment processing charges are the charges paid by Paytm to other financial intermediaries for completing the payment transaction. Typically, for completing a payment transaction, various institutions, such as card networks, issuing bank, acquiring bank, NPCI, etc., are involved. Charges paid to such entities for completing payment transaction are booked in the payment processing charges.
Promotional cashback & incentives
Paytm offers various incentives to its customers/merchants to drive engagement, retention and transaction volume on the platform. This cost is recorded in promotional cashback and incentives.
Other direct expenses
Other direct expenses include other variable costs pertaining to business such as ticketing expenses, logistics & deployment costs, SIM Costs for devices, collection cost and DLG costs, etc.
Indirect Costs
Marketing costs
Marketing & promotional expenses comprise digital marketing, brand marketing, sponsorships, & other promotional expenses. Most of the costs can be attributed to costs pertaining to the customer acquisition & retention.
Employee costs (ex-ESOP)
Include all employee costs including outsourced sales employee costs. Employees for the organization can be broadly classified into sales, technology, and support verticals.
Software, cloud and data center costs
Primarily include costs for cloud & data center facilities, costs for technology licenses and technology subscription fees, and other related expenses.
Other indirect
Other indirect costs are G&A costs for the business.