Bofa Research: Paytm Soundbox, First To Bring Audio-Based Payments Confirmations, Dominates The Market

-    Target price remains unchanged to Rs 1,020, with an upside of 20.1%

-    Soundbox is a popular product with smaller shops shows BofA’s primary market research

-    Paytm is India's leading digital ecosystem with 90 mn MTUs and 33.5 mn+ merchants

Paytm, India’s leading payments and financial services company and the pioneer of QR and mobile payments, has been racing ahead with its top performance in the Soundbox segment. In its recent report, global brokerage firm BofA has reiterated the dominance of Paytm pioneer product Soundbox. Paytm was the first to launch audio-based confirmations with Soundbox.

“We are optimistic on fundamentals and see room for Paytm to scale up aggressively without taking any balance sheet risks. Paytm has key differentiating factors versus peers, and overall competition remains benign. In our view, the lending business provides an upside optionality to Paytm giving it room to scale up subject to execution. Paytm's business model continues to show good traction and cross-sell helps improve profitability,” the global brokerage firm said.

Maintaining the ‘Buy’ rating, BofA has kept the target price unchanged to Rs 1,020, with an upside of 20.1%. To better understand Soundbox utility, the firm conducted offline primary checks across 50+ merchants/retail chains across Mumbai. In its findings, Paytm appears to dominate the Soundbox market in Mumbai with 85%+ merchants using the device. “Soundbox is a popular product with smaller shops. These merchants don't mind paying Rs 100-150/month as they're happy with Paytm,” the report said.

“Merchants said in their feedback that they are happy with quality, battery, and reconciliation,” it mentioned. Most retailers are paying Rs 125-150 per month subscription rental, and few merchants, who are early adopters, got free device and are not paying monthly fees, BofA said in the report.

The brokerage firm shared that most of the devices were installed in small Kiranas, sweet shops, cigarette kiosk, salons, small mobile merchants, bigger shops. A common theme was these outlets had fast shopper intensity at a limited store size/area. “During peak load hours, it became easy for shopkeepers to keep a tab on payments. Not many were savvy in using mobile phones and hence preferred this,” it added.

The report also highlighted that most merchants said these devices were installed without an initial setup fee. Retailers are now paying only monthly rental. Also, all daily transaction are bunched up and reflected in the bank account on the next day. “Most merchants are not willing to switch device as it involves hassle. Serviceability did not appear a concern as sales personnel are available at a call/ visit even after sales,” BofA said.

Paytm is India's leading digital ecosystem with 90mn MTUs and 34mn+ merchants. The Paytm ecosystem covers payment services for consumers and merchants, financial offerings like mobile banking offerings through Paytm Payments Bank, lending, insurance, and wealth management/ broking services. Paytm platform enables commerce for small merchants and distributes various financial services offerings to its consumers and merchants in partnership with financial institutions.