Data, a key moat of Paytm ecosystem, is getting democratised and it's not a good thing for the company

• RBI aims to make financial data much more accessible through the Account Aggregator Network.
• Under the new initiative, no one company would hold greater authority over the customer’s financial or other data.
• ICICI Securities has issued a buy call for Paytm, at a target price of ₹1352.

A latest report by ICICI Securities has listed out the Reserve Bank of India (RBI)’s ‘Account Aggregator Network’ initiative as one of the major challenges that financial services firm Paytm could face in the years to come.

The investment bank has noted that data, which is a key moat of Paytm’s entire digital payments and ecommerce ecosystem, is getting democratised and that may not be such a great thing for the company at this point.

It is important to note that the RBI aims to make financial data much more accessible through the Account Aggregator Network. It aims to empower customers by giving them greater control over their data, and create one central source for all financial data.

For example, a lender will require previous financial statements of the borrower before offering any loan. This information lies with Financial Informational Providers (FIU) like banks, digital banking platforms and other such businesses. The lender will have to request this data on Account Aggregator, which will further seek consent from the said borrower.

The Account Aggregator system is said to be a big step towards a connected financial ecosystem, but it also means that no one company would hold greater authority over the customer’s financial or other data.

“With access to richer, wider, consented and verified sets of data, lenders can assess credit worthiness more efficiently and seamlessly and take informed lending/investment decisions. It will reduce acquisition/transaction costs and turnaround time enabling low-ticket offering and more tailored products and services to customers [in the industry]. Paytm’s key moat is access to behavioral data and customer insights that may get democratised or the ability to leverage on the same may come with a lower sharing cost,” ICICI Securities said.

Business Insider has reached out to Paytm seeking their response on the same.

Besides this, ICICI Securities has also highlighted that Paytm's scale comes at the cost of profitability and it needs to fix that to strengthen itself. “It has consistently been in an investment and scale up mode that led to cumulative operating revenue of ₹140 billion [₹14,000 crore] since FY14. Post demon [demonetisation] and with digital push by government as well as regulator (UPI launch), it has spent aggressively on marketing to the extent of ₹70 billion [₹7,000 crore] during FY17-20, ICICI Securities added.

The company will spend another ₹4,300 crore on marketing, hiring talent and other aspects from its recent fundraise, the report noted.

ICICI Securities has issued a buy call for Paytm, at a target price of ₹1352. Global investment bank Macquarie, on the other hand, had slashed Paytm’s target price to ₹700.

Notably, the company’s shares were trading at ₹821.70 at 10:44 a.m., on Monday. The company has witnessed erosion of nearly $13 billion in valuation since its listing in November 2021.

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