Paytm's superior product & tech continue to drive robust user growth

The growing popularity of payment solutions provided by India's mobile payments pioneer Paytm has led to a 27 per cent year-over-year increase in its average monthly transacting users (MTUs) for three months ended March 2023, reaching a record 90 million. Paytm said in a recent blog that its app is exhibiting a surge in user engagement as the company expands and fortifies its ecosystem through the acquisition of both consumers and merchants while granting them better access to the latest technology and financial services.

The fintech giant in the blog said it attracts users with its diverse range of payment use cases and the extensive array of payment instruments. The growing consumer base of the Paytm Super App and Paytm Payment Instruments prompts merchants to embrace these payment methods, thereby enhancing their appeal. Paytm's ecosystem comprises multiple interlocking, mutually reinforcing flywheels, which fuel both consumer and merchant engagement and drive growth. Payment categories like Paytm UPI, money transfers, in-store payments, and bill payments are high-frequency use cases that are both efficient and a preeminent means for Paytm to acquire consumers. These categories are also characterised by low Customer Acquisition Costs (CAC), according to Paytm.

"Paytm has consistently pioneered mobile payments in India through ground-breaking tech innovations. They're constantly innovating, adding new features like UPI Lite and credit card integration with UPI. The trust that comes with the Paytm brand also adds to its popularity," said Avinash Gorakshar, Head of Research, ProfitMart Securities. He said the company's recent reporting of a record 90 million monthly transacting users in the fourth quarter (Q4), coupled with an increase in device deployment and gross merchandise value (GMV), indicates healthy growth of its ecosystem and business. During the third-quarter (Q3) earnings call, Paytm management had 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. Avinash Gorakshar believes that the driving factor for growth is Paytm's product technology and strong network.

Paytm utilises its extensive distribution network and the insights gained from its payments and commerce services to effectively upsell high-margin financial services to both consumers and merchants. During the last earnings call, Paytm management had said the company ramped up indirect expenses a few quarters ago in three main areas -- technology, sales, and marketing.As per the company's filings, over the last three quarters, indirect expenses (excluding employee stock ownership plan or ESOP cost) have remained flat and were Rs 1,016 crore in Q3 FY2023 quarter, growing 20 per cent year-on-year (YoY). As a percentage of revenues, it has gone down to 49 per cent in Q3 FY 2023 (third quarter in fiscal 2022-23) from 58 per cent YoY. Paytm continues to innovate as it recently launched Paytm UPI Lite, which allows instant multiple, small-value UPI payments that never fail through an on-device wallet.

Paytm believes UPI Lite will lead to an increase in the adoption of digital payments. The fintech giant also launched credit cards on UPI, which enables users to link their RuPay credit cards to UPI. The growing engagement on Paytm provides monetisation opportunities across payments, lending, and commerce for the company.