Paytm plans to sell internal AI tools to merchants within a year while investing ₹100 crore into its wealth management arm, Paytm Money. These moves follow a recent rise in quarterly profits, as the company seeks to improve margins and diversify income beyond payments.
Detailed Coverage
Paytm is shifting its strategy to turn internal artificial intelligence capabilities into a new revenue source. The company plans to market these AI tools to other businesses and merchants within the next 12 months. According to management, the company has already piloted these products, recording modest initial revenue. These tools focus on core business operations, including customer engagement, merchant acquisition, and optimizing payment collection processes.
Impact on Profitability and Margins
The company is using open-source AI models on its own servers to lower costs, particularly in customer support and call center operations. By reducing these expenses, Paytm aims to improve its overall profitability. Management indicated that revenue growth is currently rising faster than operational expenses, which supports their goal of reaching a 15% to 20% EBITDA margin in the medium term. Notably, the company’s EBITDA margin, excluding government-backed payment incentives, increased to 8% in the latest quarter compared to 1% in the same period a year ago.
Expanding Wealth Management and Lending
Beyond AI, Paytm is ramping up its focus on financial services. The company plans to grow its equity broking and mutual fund distribution business over the coming year. To support this, the board has approved an investment of up to ₹100 crore in its subsidiary, Paytm Money. This capital is intended to upgrade technology, satisfy regulatory requirements, and support the expansion of its investment platform.
Meanwhile, the company’s 'buy now, pay later' service, Paytm Postpaid, continues to see high activity. Management expects credit lines on the Unified Payments Interface (UPI) to become a more significant driver of revenue and earnings starting in the 2027-28 fiscal year.
Regulatory and Market Context
Paytm’s business model has faced scrutiny in the past regarding profitability and regulatory compliance. The company has clarified that its current forecasts do not rely on the potential reintroduction of the Merchant Discount Rate (MDR) on digital transactions. If MDR is brought back, it would provide an additional boost to earnings, but the company is building its core business to succeed independently of such policy changes.
Investors should monitor how quickly the company can scale its AI product sales and whether the increased investment in Paytm Money successfully translates into a larger market share in the competitive wealth management sector. The sustainability of margin improvements will also depend on the company's ability to keep operational costs low as it expands these new business lines.