Our Business Model Explained – Driving Revenue Growth Through High Engagement Payments Business and Cross-Selling Financial Services

We have filed our Annual Report for FY2021-22, our first as a listed company. In the report, we have shared key insights into our business model which has contributed to our strong revenue growth momentum in the previous financial year. As pioneers of India’s QR and mobile payments revolution, our business model focuses on driving financial inclusion through a wide range of payments and financial services. Here is a quick summary:

1. Our Business Model: We offer a comprehensive suite of payments services to acquire consumers and merchants, as well as leverage our two-sided, consumer and merchant ecosystem and rich insights from our platform to cross-sell high-margin financial services and merchant services (commerce and cloud). UPI has emerged as one of the key low CAC customers and merchant acquisition channels for us.

2. Empowering Consumers With the Widest Range of Payments Services: We provide a wide selection of payment instruments, both third party like cards, net banking as well as Paytm Payment Instruments like Wallet, Paytm Postpaid (BNPL), UPI, Fastag to make online payments for Mobile Recharge, Utility Bills, Rent, Tolls, Education, Wallet top-ups and money transfers using the Paytm app. Consumers can also make online payments on third party apps and in-store payments through QR codes and devices.

3. Leveraging Platform Engagement to Enable Merchant Partners’ Growth: Consumers come to our platform for a variety of payment use cases as well as the comprehensiveness of available payment instruments. High consumer adoption encourages merchants to join our platform, and also use our commerce offerings to leverage our consumer traffic to grow their business. This creates a self-reinforcing loop, which demonstrates high frequency, high repeat rates, and leads to powerful consumer stickiness and retention.
   
   Similarly, leveraging Paytm’s consumer traffic, we enable our merchant partners to grow their business by offering services like ability to sell tickets, advertising, loyalty solutions like deals and gift vouchers. We also provide software and cloud services to enterprises, telecom companies, and digital and fintech platforms to track and enhance customer engagement, build payment systems, and unlock customer insights. Our commerce offerings provide a lifestyle destination for consumers to avail services such as travel and entertainment ticketing, gaming and more. Easy access to such services within the Paytm App environment plays an important role in user engagement and retention.

4. Driving Subscription-led Ecosystem for Merchants: On the merchant side of our platform, we enable our partners with tech solutions that allow them to accept payments through a wide variety of instruments and by deploying subscription-based devices that help with reconciliations. Entry level merchants can use a free Mobile QR to accept payments, typically using Paytm Payment Instruments or UPI. Small retailers can upgrade to Soundbox devices which allow real time voice verification and better reconciliation for merchants, hence enhancing their trust in digital payments, and generating subscription revenues for us. Our mid-sized and large retailers also use our POS devices which enables them to accept mobile and card payments, thus generating both subscription revenues as well as MDR for us. For Online and Omni channel merchants we offer a robust payment gateway product allowing merchants to reliably accept payments across all channels, thus generating MDR revenue and platform fees. As of March 2022, our merchant base has grown to 26.7 million, with deployed payment devices increasing to 2.9 million from 0.8 million in FY 2021, thus accelerating our subscription revenues.

5. Using Our Two-sided Ecosystem and Insights to Upsell High-margin Financial Services: Our large distribution, and insights from our payment and commerce services, enables us to upsell high margin and low customer acquisition cost (CAC) financial services to our consumers and merchants. We have pioneered in distribution of innovative small ticket lending products which were not existent earlier, thus creating new markets which are possible only digitally. For consumers and merchants, we offer various lending products, with our financial institution partners, such as Paytm Postpaid (BNPL), Personal Loans and Merchant Loans. Our lending business continues to scale providing attractive upsell revenues. Our lending partners disbursed over 15.2 million loans through our platform in FY2022, a 478% growth over FY2021. The value of loans grew 441% to Rs. 7,623 cr in FY2022, from Rs. 1,409 cr in FY2021.