According to brokerage and global investment firm Morgan Stanley, digital payments and financial services company Paytm is anticipated to be a major beneficiary of India’s most recent UPI incentive program.
The company’s report came shortly after the Union Cabinet on Wednesday approved a financial investment of 26 billion to promote RuPay Debit Cards and low-value BHIM-UPI transactions (P2M) for the 2022-23 financial year, up from 15 billion in 2021-22.
“Paytm should be a major beneficiary of the above scheme, in addition to banks. The brokerage firm also mentioned that “paytm would have received 5-7 percent of the incentive for FY22, and assuming a similar share for FY23, this would represent 3-5 percent of our contribution profit estimate, which is 1 percent higher than what we previously assumed for FY23.”
Paytm Payments Bank, an affiliate of One97 Communications, is the primary beneficiary and remitter bank for UPI transactions.
Paytm Payments Bank is an acquirer of UPI transactions in addition to being an issuer and PSP Bank in and of itself. Financial incentives are provided to acquiring banks as part of the program for encouraging RuPay debit card and BHIM-UPI online and point-of-sale transactions.
Paytm’s founder, CEO, and MD, Vijay Shekhar Sharma, tweeted, “Huge commitment by GOI Cabinet to push Digital Payments through UPI and RuPay! Our economy will benefit in the long run from our government’s #DigitalIndia mission.
“UPI merchant payments (which are free for the merchant) have become revenue-generating given the government is encouraging digital payments in the form of incentives for UPI P2M transactions,” Paytm’s top management stated on its most recent earnings call. UPI enables us to better monetize our platform by upselling financial services and payment devices in addition to helping us acquire customers and merchants efficiently.
This incentive program will encourage RuPay Debit Card and BHIM-UPI digital transactions as well as facilitate the development of a robust digital payment ecosystem.
In accordance with the goal of “Sabka Saath, Sabka Vikas,” the program will also promote UPI Lite and UPI 123PAY as cost-effective and user-friendly digital payment options. It will also make it possible to deepen digital payments across all sectors and populations in the country.
Additionally, the government intends to maintain the financial support for digital payments that was announced in the previous Budget, with an emphasis on encouraging the use of cost-effective and user-friendly payment platforms. The plan has been developed in accordance with the announcement made in the budget.
In the meantime, consumer engagement with the Paytm Super App continues to rise, with 85 million monthly transactional users in the quarter that ended in December 2022, an increase of 32% annually. For the quarter that ended in December 2022, the total merchant Gross Merchandise Value processed through the platform totaled $42 billion, representing an annual growth of 38%.
Additionally, Paytm’s share price target was set at 695 yen by Morgan Stanley, up from 579 yen at Wednesday’s close. This basically indicates that investors stand to gain approximately 20% in return on their investments.
