Paytm Soundbox Leads the Way in Audio-Based Payment Confirmations

• Target price remains unchanged at ₹1,020 for upside of 20.1%
• Soundbox is a popular product with smaller stores, according to BofA’s primary market research
• Paytm is India’s leading digital ecosystem with 90 million MTUs and 33.5 million+ merchants

Paytm, India’s leading payments and financial services company and a pioneer in QR and mobile payments, has been competing at the top 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 voice-based verifications with Soundbox.

“We are bullish on fundamentals and see Paytm as able to scale aggressively without balance sheet risks. Paytm has key differentiators compared to others and overall competition remains benign. In our view, the lending business offers an upside option for Paytm, giving it room to expand depending on execution. Paytm’s business model looks still good traction and cross-selling helps improve profitability,” the global brokerage firm said.

Retaining a ‘Buy’ rating, BofA has kept the target price unchanged at ₹1,020 for an upside of 20.1%. To better understand the Soundbox utility, the company conducted offline initial inspections of over 50 merchants/retail chains in Mumbai. According to their findings, Paytm seems to be dominating the Soundbox market in Mumbai, with over 85% of merchants using the device. “Soundbox is a popular product with smaller shops. These merchants don’t mind paying ₹100-150/month as they are happy with Paytm,” the report said.

“Retailers in their feedback said they were happy with the quality, battery and matching,” it mentioned. Most retailers pay ₹125 to ₹150 a month in subscription rent, and a few merchants who are early adopters received a free device and pay no monthly fees, BofA said in the report.

The brokerage company said that most of the devices were installed in small Kiranas, sweet shops, tobacco kiosks, salons, small mobile traders, big stores. A common theme was that these outlets had fast shopping intensity with limited store size/area. “During peak load times, it was easy for merchants to track payments. Many were not adept at using mobile phones, so they preferred this,” it added.

The report also highlighted that most merchants said these devices were installed without an initial installation fee. Retailers now only pay monthly rent. In addition, all daily transactions are compiled and appear on the bank account the next day. “Most merchants are not willing to replace the device because it is a hassle. Serviceability did not seem to be a concern, as sales personnel are available by phone/visit even after the sale,” BofA said.

Paytm is India’s leading digital ecosystem with 90 million MTUs and over 34 million merchants. The Paytm ecosystem covers payment services for consumers and merchants, financial services such as mobile banking through Paytm Payments Bank, lending, insurance and wealth management/brokerage services. The Paytm platform enables small merchants to trade and distribute various financial services to its consumers and merchants in collaboration with financial institutions.