Paytm To Exit Postpaid Loans; Pauses Small Personal Loans Indefinitely

Fintech giant Paytm has stated that it is pausing its small personal loans business including the Postpaid portfolio, due to a decline in asset quality across industry. 

Paytm Postpaid was the company’s buy-now-pay-later product, which had been transitioned to personal loans in December 2023. 

In its financial disclosures for the quarter ending on March 31, 2024 (Q4 FY24), fintech major Paytm reported an INR 304 Cr revenue from its financial service arm, marking a 36% year-on-year (YoY) decline from Q4 FY23’s INR 475 Cr and a steeper 50% sequential decline from last quarter’s INR 607 Cr. 

Interestingly, its personal loans distribution declined only 1% YoY to INR 3,408 Cr.  

The company has deferred the resumption of this vertical of its loan distribution businesses indefinitely, saying that it will not resume the business until “the credit cycle plays out.”

Overall, the fintech major’s losses widened 3X on a YoY basis to INR 550.5 Cr in Q4 FY24 from INR 167.5 Cr reported in the year-ago period. Its revenue from operations also decreased by 2.9% YoY to INR 2,267.10 Cr, compared to INR 2,334 Cr in the same period last year.

The company attributed the wider losses to poor performance of its loan distribution services. It marked a decline in all three of its loan verticals in the quarter. 

Paytm’s Lending Revenue Plummets

While postpaid loans distribution shrank 90% YoY to INR 720 Cr due to regulatory hurdles, its merchant loans declined 28% YoY to INR 1,671 Cr, and more than halved when looking at the Q3 numbers.

In December 2023, Paytm said it will “go slow” on sub-INR 50,000 loans and focus on high-ticket personal and commercial loans. This largely involved the Paytm Postpaid portfolio. 

The Vijay Shekhar Sharma-led startup reasoned that the small personal loans business involves distribution of the loans as well as collections and recovery, however, for other loans it only offers distribution. 

The company said that the distribution-only loans have continued to scale well and it has added more lending partners during the quarter, including pilots with banks. “For loan distribution, the majority of the loans were towards the distribution only model (where collection is done by the lender). We will continue to have a higher focus on these loans going forward,” the company said. 

Going forward, the company will be focusing on prime and super prime category customers for the lending business. It said that the segment of borrowers is more price sensitive, and thus is expected to result in lower take rates (distribution commission) for Paytm.

For its merchant loans, the company announced that it had resumed the business in March after temporarily pausing it in February following the Reserve Bank of India’s clampdown on Paytm Payments Bank in February. 

Post the resumption, Paytm claims it has seen a good demand for this vertical. “Going forward, we are also expanding by offering larger ticket business loans through a distribution only model where the lender is responsible for collections,” he said. 

Besides on the merchant front, it also noted that the active point of sale device base has plummeted by 10 Lakh (1 Mn) despite a marginal increase in the merchant base. The decline has come due to a higher attrition in February and March when Paytm was forced to transition its merchants from its payments bank to other bank partners.