Paytm’s Partnership With Other Banks De-Risks Its Business Model And Opens Long-Term Monetization Opportunities

One97 Communications Limited (OCL) the parent entity that owns brand Paytm, expects that transitioning its core payment business from Paytm Payments Bank Ltd to other banks will help it de-risk its business model and open up new opportunities for long term monetisation, said the company.

One97 Communications Limited (OCL) the parent entity that owns brand Paytm, expects that transitioning its core payment business from Paytm Payments Bank Ltd to other banks will help it de-risk its business model and open up new opportunities for long term monetisation, its founder and CEO Vijay Shekhar Sharma said in the company’s shareholder letter on Wednesday. 

Sharma’s comments come at a time when the company has become a Third-Party Application Provider (TPAP) with National Payments Corporation of India (NPCI) for the Unified Payments Interface (UPI) channel. It has partnered with – Axis Bank, HDFC Bank, State Bank of India (SBI), and Yes Bank and has started transitioning its UPI users to these banks.

“I am happy to share that we have successfully transitioned our core payment business from PPBL to other partner banks. This move de-risks our business model and also opens up new opportunities for long-term monetization, given our platform’s strength around customer and merchant engagement,” Paytm Founder & CEO Vijay Shekhar Sharma said in a letter to shareholders.

The company has also commenced onboarding new merchants, but is still awaiting the approvals for onboarding new customers. The company is in discussions with NPCI for confirmation of signing up new UPI consumers for its TPAP App.

The company has partnered with various banks for UPI customers and merchants, card acquiring and BIN sponsorship for card acceptance offering to merchants, nodal/escrow accounts for merchant fund settlement, FASTag distribution, and BBPS.

In February, the company partnered with Axis Bank for the nodal account and escrow account to continue seamless merchant settlements.

It resumed the merchant loan distribution towards the end-March post transition. Moving forward the company also said that it will focus on a distribution-only disbursement model, owing to a much bigger TAM (total addressable market), wider interest from large banks and non-banks, and easier tech integration and more regulatory clarity. The collections under this model will be managed directly by lending partners.

The distribution only loans have continued to scale well and the company has added more lending partners during the quarter, including pilots with banks.

The company’s operational revenue during the fiscal jumped 25% to ₹9,978 crore while its net loss narrowed to ₹1,423 crore, during the year.

Driven by growth and an improved contribution margin, FY24 also saw the company report  earnings before interest, taxes, depreciation, and amortization (EBITDA) before employee stock ownership plan (ESOP) of ₹559 crore.

Paytm has received Unified Payments Interface (UPI) incentives of ₹288 crore for FY24 (recorded in Q4 FY24), as compared to ₹182 crore in the previous fiscal.

One97 Communications Ltd., saw a marginal 3% decline in operational revenue for the fourth quarter of FY24 at Rs 2,267 crore, despite disruptions in payment and lending business lines after Reserve Bank of India (RBI’s) took regulatory action against its associate entity Paytm Payments Bank Ltd.

The company’s revenue from payment services grew by 26% on the year to ₹6,235 crore in FY24.  While, financial services and others revenue rose 30% YoY to ₹2,004 crore in FY24.