Strong growth in merchant revenues thanks to rise in payment device subscriptions


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Fintech giant Paytm has reported financial results for the second quarter of the current financial year. The company’s revenue surged by 76 percent on a year-on-year basis to Rs 1,914 crore, while net losses have reduced by 11 percent sequentially.

Paytm, a leader in the offline payments space, said in its earnings release that it now has almost three crore merchants as part of its network. With this, the company’s revenue from payment services to merchants rose by 56 percent year-on-year to Rs 624 crore.

Paytm had earlier stressed upon its strong subscription-as-a-service revenue model, which has been driving growth. Payment services to merchants includes revenue from its comprehensive offerings comprising online and in-store payment acceptance services. Merchants pay a merchant discount rate (MDR) for card, wallet and net banking payments, and subscriptions fees for devices. The government pays incentives for UPI P2M payments.

Paytm is a pioneer in mobile payments and QR-based payments. The company introduced the revolutionary Soundbox payment device, which brought in the trend of instant audio notifications for payments at merchant outlets.

Paytm states that the strength of this device ecosystem is seen in the company’s financials. The company attributed strong growth in merchant revenues to high growth in the payment devices business, with over 3.5 million devices added in the last 12 months. This has taken the total deployed base to 4.8 million units and has further led to higher gross merchandise value (GMV) and subscription revenues.

Furthermore, on a quarter-on-quarter basis, Paytm’s revenue increased by 12 percent, primarily due to growth in the payment gateway business, with higher GMV from online merchants, particularly e-commerce, and growth in device subscriptions (which drives both subscription and MDR revenues).

The merchant payments business has also turned profitable, as per the company’s reported net payments margin. “Our net payments margin, defined as payment revenue plus other operating revenue, less payment processing cost, grew 15 percent quarter-on-quarter to Rs 443 crore, driven by growth in device subscription revenues as well as continued focus on transaction routing optimisation,” said the company in its earnings release.


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