- Top Payment Apps In India such as Paytm, PhonePe, Google Pay & Amazon Pay spent around $995 million or Rs 7,050 crore on advertising, marketing & promotional expenses.
- Cashbacks on your online shopping, utility bills and even on money transfers haven’t come cheap for the country’s top payment apps, who are battling it out to gain a share of the country’s financial transactions.
Cashbacks on your online shopping, utility bills and even on money transfers haven’t come cheap for the country’s top payment apps, who are battling it out to gain a share of the country’s financial transactions.
The top four payment services and e-wallet providers — Paytm, PhonePe, Google Pay and Amazon Pay — spent around $995 million or Rs 7,050 crore on advertising, marketing, and promotional expenses in the last fiscal year show data compiled by BloombergQuint from the annual filings of the four companies. Spends in the advertising, marketing, and promotional expenses categories doubled from Rs 3,400 crore in FY18 to Rs 7,050 crore in FY19.
These categories include traditional advertising but also cashback and other promotional schemes intended to get a larger share of financial transaction volumes. “Discounts and promotions are key ways to acquire new customers and also increase transactions per customer.
These spends are linked to the overall discount-led growth models of many players,” Mahesh Makhija, partner, and leader, digital and emerging technologies at EY, told BloombergQuint. “While the payment business may not be profitable on a standalone basis, if a good payment experience helps increase the proportion of completed transactions, that is very useful,” Makhija added.
Paytm spent the most in absolute terms but the least as a percentage of total expenses. One97 Communications Ltd., the parent company of Paytm, spent Rs 3,451 crore on advertising and promotional expenses. These marketing and promotion costs account for 47 percent of all of Paytm’s total expenses. Paytm has accounted for these costs under ‘marketing and business promotion expenses’ and advertisement expenses.
PhonePe spent Rs 1,296 crore or 60 percent of total expenses on advertising and promotions. Amazon Pay spent 64 percent or Rs 1,277 crore on ‘advertising and sales promotion’ expenses.
For Google Pay, such spends stood at Rs 1,028.6 crore. Google Pay has recorded these costs under its ‘advertisement and promotional expenses’ as well as under ‘other expenses’ which includes the ‘cost of rewards,’ according to the auditors’ notes in its filing to the Registrar of Companies.
One97 Communications’ marketing and promotion expenses are not directly comparable, to that of its competitors, as it has 33 subsidiaries under its ambit. These include Paytm Money, Paytm Financial Services, Paytm Payments Bank and others
Each of these individual payment services has stepped up spends to try and garner a larger share of the UPI or Unified Payments Interface segment. Payments made via platforms built on UPI have surged ever since it was introduced in 2016
By design, UPI is interoperable which means that any merchant or payments service provider can access the network with ease and barriers to entry are low. Further, customers do not incur a charge for using the UPI system for person-to-person transactions, while there is a small fee to be paid when they make a person-to-merchant transaction
As a result of this design, payments companies have little to no room to earn a profit on the transactions themselves. Nearly 90 percent of all UPI transactions are P2P. Hence, payment firms try to garner a larger market share and hope to use customer data to be able to market third-party products
Let’s see after burning so much cash how much profit these players earn?