The recent report by the Reserve Bank of India's (RBI) working group on digital lending, which looks to disallow credit risk-sharing with unregulated players under the First Loss Default Guarantee (FLDG) model will be good for the ecosystem and for Paytm's business model, the company's management said during their Q2 earnings call with analysts Saturday evening.
"It is important that digital lending space gets further organised. We are completely aligned with regulations. If the new guidelines get implemented, it will strengthen how Paytm has been doing business compared to others, especially with FLDG," the management said.
"It will be positive for our business model, and it will remove so-called smaller players in the ecosystem. The RBI has called out FLDG. We work complementarity, that is why the scale and revenue growth," CEO Vijay Shekhar Sharma told analysts. "The number of partners queuing up to join our platform to offer credit is so high that we are looking to hire more engineers for the integration," he added.
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The management was asked whether the guidelines could impact the company's business, especially around its Buy Now Pay Later (BNPL) product.
"Our lending partner BNPL disbursal is directly with the merchant's account. The working group has observed that a lot of BNPL disbursals happen to prepaid products. The BNPL business we run is in line with what is being recommended," the management said.
Analysts also asked about the penetration of the financial services business is among the company's 63 million monthly transacting users.
Paytm's management said penetration among monthly transacting users on lending is 2 percent on BNPL products, while on equity trading business, the penetration is less than 0.5 BNPL. The company also added that when the user of a payment moves to wealth or lending, there is no incremental customer acquisition cost.
(Edited by : Jomy Jos Pullokaran)
