The growing popularity of payment solutions on our platform has led to a 27% year-over-year increase in our average Monthly Transacting Users (MTU) for three months ended March 2023, reaching a record 90 million. MTU refers to unique users with at least one successful transaction in a particular calendar month. As we expand and fortify our ecosystem through the acquisition of both consumers and merchants while granting them better access to cutting-edge technology and financial services, the Paytm Super App is exhibiting a significant surge in user engagement.
Consumers are attracted to our platform for the diverse range of payment use cases and the extensive array of payment instruments available. The growing consumer base of the Paytm Super App and Paytm Payment Instruments prompts merchants to embrace these payment methods, thereby enhancing their appeal. Our ecosystem comprises multiple interlocking, mutually reinforcing flywheels, which fuel both consumer and merchant engagement and drive growth within our ecosystem. Payment categories like Paytm UPI, money transfers, in-store payments, and bill payments are highly relevant and high-frequency use cases that are both efficient and a preeminent means of acquiring consumers for our company. These categories are also characterized by low Customer Acquisition Costs (CAC).
During the third-quarter earnings call, our Founder and CEO Vijay Shekhar Sharma stated that the growth in MTUs is driven by effective marketing, particularly referral marketing and exceptional product initiatives, rather than cashbacks. These efforts have allowed Paytm to more effectively convert users who have downloaded the app into active customers through their first transactions. The company uses a first transaction-focused hawkeye view of the customer, combined with retention technologies, to drive this success. He further said the company will not hesitate to invest in consumer growth when it presents outlier profit opportunities. Currently, the driving factor for growth is product technology.
Utilizing our extensive distribution network and the insights gained from our payments and commerce services, we are able to effectively upsell high-margin, low-CAC financial services to both our consumers and merchants.
Paytm management during the earnings call said the company ramped up indirect expenses a few quarters ago in three main areas – technology, sales, and marketing. Over the last three quarters, Indirect Expenses (excluding ESOP cost) have remained flat and were ₹1,016 Cr in Q3 FY 2023 quarter, growing 20% YoY. As a percentage of revenues, it has gone down to 49% in Q3 FY 2023 from 58% YoY. “So as monetization is kicking in, we might increase this number over the next few quarters but not at the expense of increasing profitability and free cash flow,” President and Group Chief Financial Officer Madhur Deora said. “Our learning is that customers stay with you long-term for the product and when the product is improving,” he further said, adding that Paytm has room to raise cashbacks to acquire users if needed.
We recently launched Paytm UPI Lite, which allows instant multiple, small-value UPI payments. We believe UPI Lite will lead to an increase in the adoption of digital payments. We also launched credit cards on UPI, which enables users to link their RuPay credit cards to UPI.
Our emphasis is on the expansion of our payments network through the acquisition of customers and merchants who exhibit high levels of activity. The growing engagement on our platform provides monetization opportunities across payments, lending, and commerce.