PhonePe Vs Paytm: BofA Takes A Look At Who's Winning The Soundbox Game

Paytm appears to dominate the soundbox market in Mumbai, with some competitive pressure from PhonePe due to better pricing, according to BofA Securities India Ltd.

The brokerage conducted offline checks across over 50 merchants in Mumbai to understand the utility of the soundbox. It is a relatively new electronic hardware offering from the fintech giants that has also become a key revenue stream.

The soundbox acts as an instant audio payment confirmation device and is beneficial, especially in places that witness a high frequency of customers that generally perform smaller ticket value transactions—such as small kiranas, sweet and tea shops, and cigarette kiosks. The device takes away the hassle of having to verify the transaction repeatedly using a phone.

"Paytm appears to dominate the soundbox market in Mumbai, with over 85% of merchants we visited/spoke to using a Paytm device," BofA said in a note released on June 29.

The feedback on the device's quality, battery, and reconciliation was "overall positive," and most retailers end up paying Rs 125–150 per month for subscription rental, it said.

PhonePe said it had deployed 32.5 lakh SmartSpeakers—its version of the device—within 10 months of launch.

Paytm only provides a total number of subscription devices deployed, which also includes the point-of-sale machines it retails. The number of merchants paying subscriptions for all payment devices has reached 75 lakh as of May 2023.

In several shops, PhonePe's soundbox was cheaper than Paytm's, BofA said. "Merchants using PhonePe devices were paying Re 1–49 per month as rental with a free device. These merchants, in most cases, were using Paytm Soundbox earlier and shifted for a cheaper alternative," BofA analysts led by Sachin Salgaonkar wrote.

Some merchants also liked the PhonePe device better, in terms of form factor as it is relatively smaller, it said.

Very few merchants used both Paytm and PhonePe devices, according to BofA. "Merchants reasoned saying it helped during peak hours when users could use one of the devices; leading to faster sales velocity. Such merchants didn't have a preference of one device over another."

The brokerage has a 'buy' rating on One97 Communications Ltd., the operator of Paytm, at a price objective of Rs 1,020, implying an upside of 20.1%.

BofA is "optimistic on the fundamentals" of the Vijay Shekhar Sharma-led fintech and sees room for Paytm to scale up aggressively, without taking any balance sheet risks.

However, it noted two downside risks:

• Regulatory headwinds.

• Overhang from large float being owned by private equity and Chinese investors.