Linking credit cards to UPI platforms to be beneficial for Paytm, says Goldman Sachs; sees 72% potential growth in share price

The Reserve Bank of India’s (RBI) decision to link Credit Cards (CC) with UPI (Unified Payments Interface) will have a positive impact on the new-age companies, including One-97 Communications (Paytm), a global brokerage firm Goldman Sachs said in its note on Monday. 

The central bank on June 8, 2022, allowed credit cards to be linked with the unified payments interface (UPI), starting this facility with Rupay cards. At present, UPI facilitates transactions by linking savings or current accounts through users' debit cards.  

"It is proposed to allow linking of credit cards to UPI," RBI Governor Shaktikanta Das said while announcing the regulatory moves, along with the bi-monthly policy review.  

Goldman Sachs gave a Buy rating on Paytm and see around 72 per cent potential upside in the stock. It expects a positive impact on the company’s payments vertical, while there could be some increase in competitive intensity for Paytm’s BNPL (Buy Now Pay Later) product. 

The brokerage forecast 16 per cent of the company’s revenues from lending in FY26, or about 6-7 per cent from BNPL. It believes the use case remains relevant for BNPL, particularly on platforms such as Paytm given its higher convenience (one-click payment). 

In Goldman Sachs’ view, the linking of CC to UPI could potentially increase credit card penetration and expand the scope of digital payments in India. 

The possible monetisation opportunity will depend on the fine print of the execution and there is also the question of potentially different target universe for UPI and credit card payments, ICICI Securities also said in its report. 

It said the key questions involve: what will be the charges involved for UPI in CC considering UPI has zero charge currently? Whether it will also be gradually allowed for Visa/Mastercard and on successful adaptation, can the entire point of sale (PoS) infrastructure face a threat? 

Paytm shares slipped nearly 4 per cent to touch the day’s low of Rs 578.5 per share as compared to 3.2 per cent fall in the BSE Sensex at around 02:00 PM. The counter has been corrected over 73 per cent from its issue price of Rs 2150 apiece, and over 70 per cent from listing price of Rs 1950 apiece.