Paytm is leaning on the merchant edge while PhonePe is scaling volume, say brokers

As PhonePe prepares for its much-awaited IPO, the domestic digital payments industry is witnessing a strategic gap between raw transaction volume and merchant monetization. While PhonePe currently commands a massive 51 percent share of the Unified Payments Interface market, compared to Paytm’s 6 percent, recent insights from leading broker Investec suggest that the battle for profits is being won on the merchant side.

Another global brokerage organization, Bernstein, highlighted that the net revenue pool for the payments ecosystem currently stands at around 150 billion euros and is expected to grow 20 percent annually to reach 385 billion euros in fiscal year 2030.

According to Bernstein, the core of this profitability lies in merchant payments, which represent 75 percent of total industry revenue. This is an area where Paytm, already a publicly traded company, currently has a notable lead. Bernstein estimates Paytm’s net payment margin at around 9 basis points, a figure that includes significant revenue from an installed base of more than 13 million payment devices such as loudspeakers.

In contrast, PhonePe’s margin is estimated at 4 basis points, largely because its sheer scale leans heavily toward peer-to-peer consumer transfers.

Paytm reported higher total revenue of ₹38.6 billion for the first half of fiscal 2026, compared to PhonePe’s ₹31.6 billion. Investec analysts pointed out that Paytm’s first-mover advantage in deploying merchant devices and established leadership in trade loan distribution have enabled it to deliver revenue and EBITDA results comparable to PhonePe, despite having a much smaller consumer footprint. Although PhonePe has about three times as many monthly active customers as Paytm, its EBITDA of ₹2.5 billion for the first half of the year lagged slightly behind Paytm’s ₹2.8 billion.

Looking ahead, Bernstein has noted that the industry will see a significant increase in credit-based payments, such as lines of credit and credit cards on UPI, which have the potential to increase industry-wide margins by offsetting pressure on existing payment methods. However, both companies remain exposed to regulatory risks, particularly the potential discontinuation of government incentive programs that currently support the ecosystem’s zero discount rate. As PhonePe approaches its stock market listing, Investec expects a new era of price discipline to emerge across the industry.

While PhonePe offers significant future opportunity through its massive transactional user base, Paytm’s more diversified presence in physical vending machines and payment gateways gives the company a clear advantage in leveraging growing digital payment margins.

Published on February 19, 2026