Merchant loan business to do heavy lifting for Paytm

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Subscribe to enjoy similar stories. MUMBAI : Paytm parent One 97 Communications Ltd’s stock rose 8% on Wednesday. While the September quarter (Q2FY25) earnings had a few positives, such as improved traction in merchant loan disbursals and visible cost control efforts, much of this exuberance stemmed from the company receiving the National Payments Corporation of India’s (NPCI) approval to onboard new customers for its unified payments interface (UPI) application.

In early 2024, the Reserve Bank of India (RBI) suspended this fintech from boarding new users, citing compliance issues. With the ban lifted, Paytm can now expand its consumer UPI business while its merchant UPI operation is getting better. The company’s merchant subscriptions grew 22% year-on-year (y-o-y) to 11.2 million subscribers in Q2FY25, which resulted in a 9% y-o-y uptick in merchant transactions at ₹991 crore.

Paytm plans to capitalise on its growing merchant base to expand its financial services operations, which currently contributes 23% of the company’s revenue and has a higher profit contribution margin compared to its payments services business. As of Q2FY25, it has 600,000 financial services customers, including consumers and merchants. The lending service provider (LSP) has also started extending merchant loans under the RBI’s revised first loss default guarantee (FLDG) norms that require LSPs to pay 5% of the loan portfolio to creditors in case of defaults.