Indias leading digital financial services platform Paytm is building revenue and also has been cutting down on its losses year after year. The company also comes with a big advantage in its Super App UPI play where it is one of the top players. However, unlike its competitors PhonePe and Google Pay, Paytm is not dependent on cashbacks and incentives to drive growth. While the competitors are bleeding money, Paytm is driving real value with revenue and is ready to breakeven soon.

As per a Bernstein report:

1. Paytm is building ‘real revenue’ while its competitors continue to spend heavily on cashbacks and incentives to acquire users: The Bernstein report said, “PhonePe and Google Pay continue investing in providing customer incentives and spend on marketing at 2.5-3.0x revenue (FY20 MCA filings). Paytm has streamlined its marketing spending from 1.2x in FY17, to 0.4x in FY20, and now stands at 0.2x of revenue (FY21) (Exhibit 8).”

2. NPCI 30 per cent market cap will cost PhonePe heavily: NPCI has already placed a 30 per cent market share cap on UPI Third Party Aggregator apps, which is not applicable to Paytm Payments Bank. “This would imply PhonePe and Google Pay would have to dial down their customer incentives to bring their market share gradually towards the 30 per cent cap,” said the Bernstein report. The report further explained, “The super-app battle is heading beyond just pushing marketing dollars for market share (PhonePe and Google Pay spend 2-3x revenue, as UPI market share caps kick in. What will matter is financial services monetization including delivery of credit-on-app and building a financial services suite for both in-store and online merchants”

3. Paytm’s strategic and investment focus has shifted to two areas:

a) Building a full-stack payments suite beyond UPI Point-of-sale, Paytm payments gateway, Paytm Payments Bank

b) Building a financial services platform with focus on Pay-later lending (Paytm Postpaid) and wealth management/Insurance (Paytm Money)

4. Paytm Payments Bank continues to be the largest beneficiary bank in the UPI space, with over 430 million transactions. It has grown ahead of institutional banks like SBI, HDFC, ICICI, Yes Bank, Axis Bank among others.

5. Paytm has a solid presence in the P2M space: Additionally, the biggest transaction driver in the UPI space is the P2M segment in which Paytm has solidified its lead. Paytm has been “growing merchant payments share across wallets, UPI, PoS, and online payments,” said the report.

6. Paytm’s captive user base and its active monthly users has been growing year-on-year.