New Delhi, February 19 India's digital payments ecosystem is moving beyond a focus on scale, with merchant payments emerging as the primary driver of revenue, accounting for nearly three-fourths of the industry's net revenue pool, according to Bernstein's latest sector analysis.
The brokerage estimates the current payment revenue pool at approximately Rs 25,000 crore in gross revenue, or about Rs 15,000 crore in net revenue. This is projected to expand to nearly Rs 65,000 crore in gross revenue and approximately Rs 38,500 crore in net revenue by FY30, as digital adoption deepens and monetization improves across all payment layers.
Merchant ownership allows platforms to monetize across multiple payment processing layers, including online gateway charges, device rentals, credit card acceptance, and credit distribution. Platforms with stronger merchant ecosystems, therefore, generate higher yields.
Within this merchant-led framework, Bernstein identified Paytm as a leader in monetization. The brokerage estimates Paytm's net payment margin at around 9 basis points, more than double that of its closest competitors, including revenue from device rentals.
This margin differential reflects Paytm's larger share of merchant payments and its larger installed base of payment acceptance devices.
While other platforms processed over four times Paytm's transaction value, a significant portion of that volume came from peer-to-peer payments, which have limited monetization potential.
The revenue impact is evident. Despite lower overall payment volumes, Paytm generated around 20 per cent higher revenue in the first half (H1) of FY26 compared to its competitors, driven by stronger merchant monetization and cross-selling of lending products across its ecosystem.
Device deployment has emerged as a critical lever. Payment devices such as POS terminals and Soundboxes generate recurring rental income, typically ranging from Rs 80 to Rs 300 per month, creating subscription-like revenue streams independent of transaction volatility.
Paytm's device footprint has expanded at over 40 per cent CAGR (faster than the industry's 20 per cent growth) over the past three years, strengthening its recurring revenue base and supporting blended margins.
Bernstein notes that as the industry matures, competitive advantage will increasingly hinge on monetization depth rather than transaction scale.
With merchant payments forming the bulk of the profit pool and higher-margin categories such as credit-linked payments and bill payments gaining traction, platforms with stronger merchant engagement are better positioned to capture the expanding revenue opportunity.
The sector's transition, the analysis suggests, marks a shift from headline transaction market share to revenue efficiency, and within that shift, Paytm's merchant-heavy mix positions it favorably on monetization metrics.