Harnessing the power of advancements in financial technology, we’ve evolved from a simple payments app into a comprehensive service provider. In a competitive payments landscape, our distinctive edge lies in our multifaceted business model. Unlike competitors focused solely on UPI payments, we’re expanding into diverse sectors, inspired by the success of platforms like Paytm.
Though UPI payments offer slim profit margins, they are a crucial channel for user acquisition and engagement. This platform also provides opportunities to monetize through loan promotions and payment device sales.
Our core payments sector is growing rapidly, with payment processing and subscription revenues driving primary margins. We achieve a net payment margin of 7-9 basis points (bps) of gross merchandise value (GMV) through processing. UPI contributes 3-4 bps, while other payment instruments yield 15-18 bps. With UPI leading in growth, we anticipate a blended margin stabilizing between 5 to 7 bps.
Although there is no Merchant Discount Rate (MDR) for UPI transactions, we capitalize on this by driving device subscriptions among merchants. This supports our subscription-as-a-service model, with an average monthly fee of ₹100 for active devices and ₹250 for high-end models. We expect this approach to generate substantial cash flow to fund capital expenditures within 12-18 months, considering the rapid depreciation of our Soundbox and EDC devices.
With a network of over 30 million merchants, we tap into a large total addressable market (TAM) for digital credit distribution. We partner with leading financial institutions to offer small personal and merchant loans, while our Postpaid service enhances credit volumes with quality small loans. We earn 2.5-3.5% of the loan value upfront and 0.5-1.5% upon collection, with expectations for increasing margins as we grow.
We also leverage app traffic to provide marketing services through our Commerce and Cloud business. Additionally, our co-branded credit cards with SBI and HDFC generate revenue from upfront distribution and lifetime usage fees. By September 2022, we had around 300,000 activated cards, with average monthly spends between ₹22,000 and ₹24,000. Both the number of activated cards and spending have shown strong growth, with about 48,000 new cards activated in October 2022.
Our commerce business operates with cash profitability, achieving 6% revenue in Q2FY23 with a GMV of ₹2,021 Cr. We support our merchant partners with coupons, deals, marketing, and loyalty programs, boosting revenue for both our commerce business and our partners.
Our resilient business model generates revenue from both UPI and non-UPI payments. While UPI is still developing, with approximately 25 crore registered customers and 1 crore devices in circulation, its growth potential is significant. The market for payment subscriptions and other services is substantial, with India’s potential including an estimated 10 crore merchant entities and over 50 crore payment customers in the near future.