Paytm’s merchant ecosystem is expected to remain its biggest growth engine as deeper monetisation, improving payment margins and a larger merchant lending opportunity support the company’s next phase of growth, according to Antique.
The brokerage said merchant payments continue to outpace industry growth, while One97 Communications Ltd. is leveraging its payments network to expand financial services, strengthen lending economics and improve profitability. It added that the company’s focus on merchant monetisation rather than payment volumes alone positions it well as India’s fintech sector matures.
“Merchant ecosystem remains the core monetization engine,” Antique said.
Merchant franchise continues to strengthen
Antique said Paytm’s merchant business continues to deliver faster growth than the broader industry.
Merchant payment volumes grew about 35% over the past year, ahead of industry growth of around 30%, reflecting continued market share gains driven by technology, distribution and service quality.
The brokerage noted that Paytm has onboarded around 15 million merchants, representing nearly 15% market share. However, only about 2 million merchants, or roughly 13% of the base, currently use financial services, leaving significant headroom for cross-selling.
Management estimates India has nearly 100 million merchants, with around 50 million likely to adopt technology-led payment and commerce solutions over time.
Merchant lending remains the key earnings lever
Antique said merchant lending offers significantly better economics than consumer lending because Paytm controls both customer acquisition and collections.
The brokerage noted that merchant loans generate sourcing fees comparable to consumer loans while also earning an additional 2-3% from collections. Merchant loans typically carry interest rates of 15-20%, translating into an internal rate of return of around 30% because repayments are deducted daily from merchant settlement flows.
It also highlighted that daily collections improve asset quality by aligning repayments with merchant cash flows, reducing operational friction and lowering credit risk.
Payment margins continue to improve
Antique said merchant payment margins have strengthened steadily as pricing discipline improves across the industry.
The brokerage noted that payment margins have expanded from around 3 basis points to approximately 4 basis points and could improve further to nearly 5 basis points over the next few years as merchant monetisation deepens.
Management also expects revenue to grow 20-25% in FY27 while maintaining contribution margins in the mid-50% range.
Consumer business supports cross-selling
Antique said consumer payments remain important for customer acquisition, although monetisation depends largely on cross-selling higher-value financial products.
The brokerage noted that Paytm commands more than 50-60% share of the UPI-linked postpaid segment despite having only around 8% share in consumer payments.
It also said the company’s RuPay Credit Card on UPI business has crossed its March milestone ahead of schedule and continues to grow at 20-25%, strengthening its financial services ecosystem.
Conservative approach supports asset quality
Antique said Paytm has adopted a disciplined strategy in merchant lending by focusing primarily on enterprise merchants and established offline businesses.
The brokerage noted that the company entered the enterprise merchant segment only three to four years ago but has already reached roughly half the scale of the market leader, while maintaining a conservative risk framework.
Despite a 20-30% increase in merchant acquisition costs over the past two years, management believes customer lifetime value remains attractive because merchants can be monetised through payment devices, Soundbox subscriptions, merchant loans and other financial services.
Conclusion
Antique believes Paytm’s next phase of growth will be driven by deeper merchant monetisation rather than payment volumes alone. The brokerage expects merchant lending, improving payment margins, stronger cross-selling and continued expansion of the merchant ecosystem to support earnings as the company builds a broader financial services platform around its payments business.
Disclaimer: The research insights and data points detailed above are sourced from a third-party brokerage report and do not reflect the independent views or recommendations of this publication. This content is intended for informational and educational purposes only and does not constitute financial advice, an investment recommendation, or an offer or solicitation to buy or sell securities. Investors should be aware that the fintech and digital payments sector involves regulatory and market risks, and they should consult a SEBI-registered financial advisor before making any investment decisions.
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