After consumers, Paytm is now offering cashback to woo merchants

The idea is to use attractive cashback offers to build a relationship with merchants and eventually offer them business loans, said a top executive

Fintech giant Paytm has resumed offering cashbacks. This time, money is being offered to merchants instead of consumers, as reported by The Economic Times (ET).

In the upcoming months, Paytm wants to onboard as many merchants as it can, giving them access to credit that they can both use and extend. The selling point was the competitive pricing of payment terminals and transaction fees, with cashback as the cherry on top, people aware of the matter said.

The way the company has designed these cashback schemes encourages merchants to offer customers the "buy now, pay later" option or simple EMI plans for their purchases. And in this way, Paytm will be able to promote consumer loans, sources said.

"The idea is to use attractive cashbacks to build a relationship with merchants and eventually offer them business loans and also get their customers to start using Paytm Postpaid," said a top executive at a fintech company on the condition of anonymity.

This plan aligns with Paytm's larger objective: to dominate the offline payments market and use the channel to attract new customers for credit.

According to Paytm, its payment solutions are used by about eight million merchants and have about 92 million monthly active users.

People cited above also claim that it intends to control both of these channels of the merchant payment ecosystem.

It can then extend credit to these merchants, cross-sell other financial services, and generate enough income from core payments to support its top line, they added.

In a sense, offline is the company's only avenue for new business at the moment, as the Reserve Bank of India has halted Paytm's online merchant acquisition business due to issues with its payment aggregator licence application.