There was a stir in the Indian digital payment ecosystem and fintech market when the National Payments Corporation of India i.e. NPCI took a very big and far-reaching decision regarding UPI transactions. To make digital transactions in the country more robust, self-reliant and commercially sustainable, the government and regulators have clarified the roadmap for charging fees on merchant transactions. The biggest and positive impact of this policy change has been seen on the shares of the country’s leading fintech company One 97 Communications, i.e. Paytm Share Price. As soon as the news spread in the market that Merchant Discount Rate (MDR) was being implemented on select merchant UPI payments, investors started buying Paytm shares heavily. Due to this heavy buying, the company’s stock started running fast like a rocket as soon as the market opened and it touched a new 52-week high (52-Week High) on Dalal Street, breaking all its previous records.
The main reason behind this entire market surge is the new directive of NPCI under which a provision has been made to impose a nominal MDR charge of 0.4 percent on person-to-merchant (P2M) UPI transactions of more than Rs 2,000. It is worth noting that till now all merchant payments through UPI were completely free under the Zero-MDR policy, due to which fintech companies were having limited earning opportunities despite having very high transaction volumes. But with the implementation of this new framework, major payment aggregator companies like Paytm have got a new means of earning a huge and regular revenue from merchant business. Financial experts and market analysts believe that this step will prove to be a milestone in bringing Paytm’s business model out of long-term losses and onto the track of strong profitability, as it is expected to lead to a huge increase in the company’s income.
The effect of this step taken by the regulatory body was directly visible in the trading session of the stock market. Shares of Paytm’s parent company One 97 Communications witnessed a huge surge on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Leaving behind the old phase of selling, investors expressed confidence in this giant stock of the fintech sector, due to which Paytm shares jumped by more than 7 percent during intraday trade to reach its new 52-week all-time high of Rs 1,855.50. Although some investors also booked profits at the upper levels, yet the investor sentiment regarding this counter in the market remains very strong and bullish, which points towards the strong position of the company in the future.
The biggest doubt that was in the minds of the general public and retail consumers regarding this new change has been completely clarified by the Finance Ministry and NPCI. The government has clearly stated that customers will not have to pay any additional charges from their pocket on any UPI payment made by common consumers, and this facility will remain completely free for the customers. Apart from this, money sent from one person to another (P2P Transfers) and small merchant transactions of less than Rs 2,000 will remain completely free as before. This means that there will be no financial burden on the common man on about 96 percent of daily UPI transactions in the country, but this new MDR charge of 0.4% will be applicable only on large merchants and select merchant payments, the full benefit of which will directly go to the companies running payment gateways and apps.
This historic rise in Paytm shares has once again proved that the Indian stock market is now adopting a more positive attitude towards the strong and sustainable business models of fintech companies. This regulatory change is being seen as a big turning point for Paytm, which has made deep inroads among small shopkeepers and big merchants through QR code and Soundbox. Brokerage firms and market experts believe that a clear impact of this new income will be visible in the financial results of the company in the coming quarters. Although there are ups and downs in the stock market, but after this policy support, the long view of the investors is filled with a lot of expectations about Paytm, due to which the market will keep a close eye on this counter in the coming days.