There are 3 kinds of txns w.r.t. merchants:
Type 1. P2P - similar to the Phonepe 2020 case where consumers transact with other consumers
Type 2. P2M (soundbox) - consumer transacts with a merchant using UPI modality (~0% MDR but subvented by banks) - may be individual KYC necessary
Type 3. P2M (POS machines) - consumers transact with merchants (typically big box retailers) where alongside UPI, there are other instruments like CC/DC/EMI as well.
Paytm doesn’t divulge into each of the above categories. Overall there are ~40mn merchants (~10Mn having soundbox i.e. no. 2) and ~300 mn consumers.
Overall above 3 types of transactions accrue 7-9 bps at a net revenue basis with gross being around 30-35 bps which at the scale of Rs 5 trillion per qtr is decent at 25-30% gross margin.
My assumption is case 3 has to be re-KYC surely with there’s VISA/MC etc involved along with banks. Not sure about type 2 (maybe someone can shed some light).
So size and scale of Paytm might dampen their swift transition, which I believe Suresh is alluding to in fewer words.
That’s my 2 cents. Happy to be proved wrong and corrected.
Disc: no holding. closely tracking to see if the evidence so far merits an action.
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