Paytm Leads Merchant Payments Monetization as Profitability Strengthens in FY26: Bernstein Report

Merchant Payments Segment Emerges as Key Revenue Driver in Digital Ecosystem​

Merchant payments are increasingly becoming the most attractive segment within India’s digital payments landscape, with Paytm maintaining a clear edge in revenue intensity and profitability, according to a February 23 report by Bernstein.

The brokerage highlighted that merchant acquiring offers structurally stronger monetization compared to consumer payments. This advantage is driven by higher take-rate instruments such as credit cards and online payment gateways, device-led revenue streams, and the ability to cross-sell credit products.

In contrast, consumer payments, particularly peer-to-peer UPI transactions, continue to face monetization challenges. Take rates in this segment remain limited to under 0.4 basis points, with incentives forming a key revenue source. In payments terminology, a take rate refers to the percentage of transaction value earned as revenue by a platform, while a basis point represents one-hundredth of a percentage point.

Paytm Outpaces Rival on Revenue Intensity in H1 FY26​

Despite processing significantly lower total payment value compared to its larger rival, Paytm reported comparable revenue performance in the first half of FY26.

After adjusting for non-recurring payment categories such as rent-related payments, real-money gaming flows, and the RBI’s PIDF incentive, Paytm’s revenue was approximately 20 percent higher during H1 FY26, according to the report.

The Noida-based company reported revenue of ₹3,979 crore in H1 FY26, marking a 26 percent year-on-year increase.

Merchant Economics Strengthen Revenue Per Device and Active Merchant​

On the merchant side, Paytm earns more than twice the revenue of its peer. Bernstein attributed this to a larger installed base of payment devices, stronger lending penetration, and a higher share of high-margin products.

This has translated into higher revenue per device and per active merchant, reinforcing Paytm’s monetization advantage within the merchant acquiring ecosystem.

The report further noted that while consumer scale offers long-term optionality, the path to monetization is clearer and more predictable in the merchant segment. Cross-selling loans to merchants provides underwriting advantages due to visibility into transaction flows, making the segment structurally more attractive.

Profitability Milestone Achieved in FY26​

On the profitability front, Paytm has reached breakeven at the profit-before-tax level in FY26, while its rival continues to report losses.

The company has delivered three consecutive profitable quarters. It reported a profit after tax of ₹334 crore in H1 FY26, excluding exceptional items. For the quarter ended December 2025, Q3 FY26, Paytm posted a profit of ₹225 crore.

Bernstein attributed much of the profitability gap to elevated ESOP expenses at the competing platform. Currently, Paytm’s ESOP expense stands at 1.6 percent of its overall H1 FY26 revenue, reflecting tighter cost discipline.

Scale Alone Not Enough for Superior Monetization​

The brokerage concluded that scale by itself does not guarantee stronger monetization outcomes. Instead, merchant-focused economics currently offer a more dependable route to profitability within India’s evolving digital payments ecosystem.

As merchant acquiring continues to generate higher revenue intensity and lending synergies, the segment appears structurally better positioned to drive sustainable earnings growth.