The increase in prepaid payment instruments transactions could lead to higher than expected growth in wallet transactions and revenue for Paytm, says a Goldman Sachs report
The Reserve Bank of India (RBI) on June 24 released its 'Payments Vision 2025' report, which talks about the way forward for the Indian digital payments industry. With this comes a big boost for digital payments, which will be a positive for listed players like Paytm.
The RBI expects more than 3x increase in digital payment transactions, an increase in PPI (prepaid payment instruments) transactions by 150 percent, an increase of payment transaction turnover vis-a-vis GDP to 8, an increase in debit card transactions at PoS by 20 percent, card acceptance infrastructure to increase to 250 lakh, increase of registered customer base for mobile-based transactions by 50 percent CAGR and more.
This overall growth will be beneficial for Paytm as it has established itself beyond UPI, and created a full-stack payment ecosystem. Paytm, which introduced India to digital wallets and the QR code, has a host of flexible payment instruments -- Paytm Wallet, Paytm UPI, Paytm Postpaid (Buy Now, Pay Later), Debit Cards, Credit Cards, NetBanking, and EMI and is also a leader in the offline payments market with its devices like Smart PoS and Soundbox.
A Goldman Sachs report dated June 19 notes that this will translate to $98 billion in value of transactions in FY25 (wallet+ cards) vs $39 billion in FY22. Additionally, it is expected that full KYC wallets only will be on UPI rails, where Paytm is a market leader.
"We note that digital wallets formed 77 percent of total PPI transaction value in FY22, a segment where Paytm has 67 percent market share (April 2022). We estimate wallets made up roughly one-third of Paytm's payments revenues in FY22, and a higher than expected growth in wallet transactions could positively impact the market leader Paytm," said the report.
The RBI's vision also states that there will be increased regulations for the fintech sector.
However, companies like Paytm being listed are already aware of regulatory measures and adhering to digital banking guidelines.
So, while it might be disruptive for the industry but it might be immaterial for Paytm.
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