Why Paytm Outperforms: Bernstein's Take On Future Of Indian Fintech

Bernstein concludes that Paytm is at the forefront of India’s transition from payment disruption to a monetisation-focused model. With its diversified revenue streams, operational efficiency, and forward-looking innovations, Paytm is shaping the future of Indian fintech. As Bernstein notes, Paytm is poised to maintain its leadership position and drive sustainable growth in one of the world’s most dynamic payments ecosystems.

Paytm is emerging as a cornerstone of India’s rapidly evolving digital payments ecosystem, according to Bernstein’s latest report, 'India Payments: From Disruption to Monetization – Can Payments Be Profitable?' The report assigns Paytm an "Outperform" rating with a target price of ₹1,100, citing its unique ability to balance growth, profitability, and innovation in a challenging zero-MDR environment.

A major driver of Paytm’s success lies in its ability to adapt to the growing demand for credit-based payments. RuPay credit card transactions on UPI have grown substantially, now accounting for 30% of all credit card transactions, up from 10% in FY24. Bernstein notes that this shift toward credit-based payments enables Paytm to benefit from higher margins, setting it apart in the competitive fintech space.

In addition to its strategic focus on credit, Paytm’s innovative use of device-based monetization has played a critical role in its growth. Products like soundboxes have become a key revenue stream, contributing nearly 50% to its payment margins, according to Bernstein. These devices demonstrate Paytm’s ability to combine hardware with service offerings to create a scalable and sustainable business model.

The report also emphasizes the significant growth in UPI payment volumes, which are expanding at an annual rate of 40-50%. With cashless transactions already making up 50% of private consumption expenditure in India, Bernstein predicts this figure could grow to two or three times private consumption expenditure in the coming years. Paytm’s established scale and reach position it to capitalize on this growth, mirroring trends observed in global markets like China.

Operating leverage is another key factor in Paytm’s success. Bernstein highlights how the company benefits from economies of scale as payment volumes rise. This efficiency allows Paytm to manage costs more effectively, translating into improved profitability. Such operational advantages reinforce Paytm’s ability to lead in a competitive payments market.

Beyond its focus on UPI and device monetization, Paytm’s credit-based solutions further underscore its innovative edge. Offerings like UPI-linked credit lines and Buy Now Pay Later (BNPL) products have expanded the company’s revenue streams while addressing the needs of India’s increasingly digital-savvy consumers. These initiatives highlight Paytm’s adaptability and commitment to meeting market demands.

Bernstein concludes that Paytm is at the forefront of India’s transition from payment disruption to a monetization-focused model. With its diversified revenue streams, operational efficiency, and forward-looking innovations, Paytm is shaping the future of Indian fintech. As Bernstein notes, Paytm is poised to maintain its leadership position and drive sustainable growth in one of the world’s most dynamic payments ecosystems.