Paytm and PhonePe’s ‘Sound Devices’ creates battle ground for the two payment agencies

Sound devices by electronic payment companies are creating market clashes between them. QR code pioneer Paytm and UPI leader PhonePe is undergoing cold war because of its Sound devices. These sound devices acts as savior of major payment pitfalls for the payment gateway agencies. 

Previously, amidst the rush of payments at a merchant corner, it was difficult for a merchant to confirm the received payments through QR codes of every customer. In such a situation, they used to face instances where the customer leaves and later the merchant realizes that they never received the payment in the first place. 

Paytm launched a sound device in the year 2020 to solve this issue. This sound device announces success of a transaction, i.e., receipts of payments. This sound device also turned out to be an option to increase revenue generation as UPI didn’t generate any revenue. It also helped the company to keep their merchants hooked with them. Around 85% merchants remained active after the first six months of using the sound device, whereas the same for QR codes was just 25%. 

It was all fine until rivals, BharatPe and PhonePe launched their respective sound devices too in the year 2022. These two companies have successfully deployed their devices to a high number of merchants at lower prices. This lowered down pricing turned out to be a battle stroke for Paytm. Soon they had to lower down their rental From Rs 125 to Rs 49 and even zero in some cases after PhonePe’s launch. 

Making this free will initiate losses of over Rs 7 cr. This is because the capex per device is Rs 2000 with additional servicing costs. Whereas the recurring cost is just Rs 25. In such a situation, Paytm might even have to shut down the option than to run it at a loss. 

Previously there was also an instance where PhonePe alleged some Paytm employees to have burnt PhonePe QR codes. Paytm later asserted that the employees were ex-PhonePe employees and thus the matter was between them and PhonePe. Paytm dismissed those employees at the rise of the matter.