Paytm ramps up AI capabilities to build software stack for quick credit

Payments firm Paytm, run by One97 Communications, has sharpened its focus on its AI capabilities and is building an Artificial General Intelligence software stack.

Following this news, the company's shares opened at Rs 844 and reached an intra-day high of Rs 861 apiece on the NSE. The shares were Rs 857 apiece at the time of writing this article.

"Paytm is investing in AI with an eye on building an Artificial General Intelligence software stack. We believe by building it in India we are not only making our country's tech capability but also creating something that could be leveraged outside India," said CEO Vijay Shekhar Sharma, in a letter to shareholders, in its Annual Report 2023 released on Monday.

Paytm's next endeavour involves providing small mobile credit with high credit quality.

India is expected to reach 500 million payment consumers and 100 million merchants in the near future, the founder said. To support this growth, Paytm has invested heavily in IoT devices, launching products such as Pocket and Music Soundbox, enabled by 4G technology.

In its annual report, the company said its revenue grew at a compound annual growth rate of 69% from Rs 2,802 crore in FY21 to Rs 7,990 crore in FY23, with payment accounting for 62% and both financial services and commerce and cloud services accounting for 19% each.

Revenue from payment services grew 44% to Rs 4,930 crore in FY23 from Rs 3,432 crore in FY22. 

The company reported significant improvement in payment contribution margins, growth in high-margin financial services, and increased margins in commerce and cloud services.

Notably, Paytm achieved an operating breakeven (EBITDA before ESOP cost) ahead of the previously shared guidance of September 2023.

Under the commerce and cloud segment, Paytm offers an array of services designed to capitalise on its vast consumer traffic. These services include ticket sales, deals, and gift voucher offerings, in addition to advertising and loyalty services. Within the commerce business, Paytm typically reaps a 5-6% take rate on GMV.

One of Paytm's key focus areas has been monetisation, coupled with cost management.