After Mobile Payments, Paytm Wants To Disrupt Small Credit Segment In India

After capturing the payments market, fintech giant Paytm is now eying to disrupt the digital lending space. While the company has been focussing on small credit for some time now, it wants to lead the credit revolution with this offering.

“By helping enable digital loan collection on app, we are now creating a small revolution for financial inclusion, where a loan of as small as a few hundred rupees can be disbursed and collected at very miniscule cost,” Paytm founder and CEO Vijay Shekhar Sharma said in a letter to shareholders in its Annual Report.

“In India’s Digital revolution after mobile payments, Paytm’s next contribution will be – small mobile credit with high credit quality and fully compliant with the regulators guidelines,” Sharma added further.

Sharma added that the listed fintech company has created a successful template in the last two years of distributing small digital loans using payment relationships with consumers and merchants.

Paytm runs a Buy Now-Pay Later (BNPL) service as well, offered by its NBFC partners. Moreover, it also offers postpaid mini which provides loans as low as INR 250.

Paytm offers a digital loan disbursement platform to top NBFCs, enabling customers and merchants to apply for loans through its platform seamlessly. Paytm typically makes 2.5% to 3.5% of loan value upfront on the disbursement of loans.

The fintech major disbursed 1.28 Cr loans worth INR 14,845 Cr in Q1 FY24, up 51% and 167% YoY, respectively. In contrast, Paytm processed 85 Lakh loans worth INR 5,554 Cr in Q1 FY23.

The company claimed that the number of unique borrowers onboarded on Paytm stood around 1.06 Cr at the end of June 2023.

The fintech giant’s increasing focus on lending comes at a time when retail lending is expected to be a $1 Tn market, and within it, MSME lending’s share is estimated to be around $600 Bn market by FY26.

In the shareholder letter, Sharma also said that India can expect 500 Mn payments users and 100 Mn merchants soon.

Paytm is also investing in AI with an eye on building an Artificial General Intelligence software stack. The company is building an India scale AI system, as claimed by Sharma, which will help various financial institutes capture possible risks and frauds while also protecting them from new kinds of risks due to advancements in AI.