Founded in 2010, Paytm has come a long way to become India’s most valuable start-up today with a valuation of $16 billion. Starting out as an e-commerce company, Paytm was focused on providing a platform for online mobile recharge and bill payment services in the early years. In 2014, the company launched its mobile wallet, enabling people to conduct peer-to-peer transactions and pay at merchant shops that accepted digital payments. While the company did well, hitting the 100-million download milestone within a year of operations, the watershed moment came in late 2016, when the government demonetised more than 87 per cent of the cash in circulation. This presented a great opportunity to Paytm and similar companies to plug the cash gap by offering digital payment solutions to people who had no other way to pay for their day-to-day needs. Paytm was quick to tap this opportunity and came out with various incentives and offers to acquire new users. Consequently, the digital payment vendor recorded around 1 billion transactions that year. Moreover, as per media reports, it went from 125 million wallet customers before demonetisation to 185 million three months later, and has continued to grow ever since. At present, Paytm has around 350 million active users.

Paytm has forayed into various business segments such as the cloud business for merchants, Paytm First Games, Paytm Money, Unified Payments Interface (UPI) and merchant payments. While the company is delivering a stellar performance across some segments, it is lagging behind in others. The way forward for the company thus, is to tap its existing strengths in order to expand its new business offerings and drive profitability.

A look at Paytm’s performance in key segments, its new focus areas as well as future plans…

UPI payments

Since 2016, when digital payments became a buzzword in the industry, a lot has changed. The UPI platform has come into existence, which enables users to perform mobile bank-to-bank transactions. As per media reports, UPI payments account for a significant share of the overall transactions through digital wallets. Taking a cue from this trend, Paytm has forayed into this space. The company performed well in its initial days, but recent trends show that its share has been dwindling in the UPI payments segment.

The company reportedly accounted for around 37 per cent of the overall UPI transactions in October 2018. It continued to maintain its dominance until March 2019. However, subsequently, its share went down considerably. In July 2019, out of the 822 million transactions recorded on the UPI platform, Paytm accounted for 133 million, comprising only 16 per cent of the total market share. Meanwhile, Google Pay and PhonePe recorded around 300 million transactions each, garnering 36 per cent market share each. This change in market dynamics can be attributed to the aggressive marketing strategy adopted by Google Pay and PhonePe. Large-scale promotions and cashbacks seem to have worked for these players.

That said, Paytm continues to be a leader in the mobile wallet and merchant payment segments. During July 2019, Paytm recorded over 600 million transactions, which included payments through Paytm wallet, Paytm UPI, credit and debit cards and net banking. The company accounts for nearly 55 per cent of the total merchant payments in the country. As per Paytm, over 16 million merchants, both online and offline, use Paytm’s business platform.

Merchant payments

Having already established a stronghold in the peer-to-peer transactions segment, the company is now working towards strengthening its merchant partnerships, one of its strong points. To this end, the company recently unveiled innovative technology solutions to enhance its merchant payment offerings. This includes the all-in-one Android PoS device, an all-in-one QR, the Paytm for Business app and the Paytm Business Khata.

The company’s Paytm for Business app is a breakthrough in merchant payments that enables large and small businesses to track and make all their payments from one place. With this, Paytm is attempting to simplify and digitise payments for both B2B and B2C players who make regular payments to a large number of people.

Meanwhile, through the Paytm Business Khata, merchants can set payment due dates for credit transactions, and send automated reminders and payment notifications, further improving the efficiency of their business. Created to cater to all kinds of businesses, the Paytm Business Khata saves merchants the trouble of chasing customers for timely payments by sending them reminders via SMS and tracking payments that are due.

As far as Paytm’s all-in-one QR offering is concerned, the product has made the process of receiving payments easier and hassle-free for shopkeepers. Merchants no longer need to keep several QRs from different companies, as customers can simply scan the Paytm all-in-one QR to make payments through any of their preferred payment platforms.

Likewise, the all-in-one Android PoS, a hand-held device, empowers merchants to make payments from all UPI-based apps, the Paytm wallet and Rupay cards. It accepts cash payments and helps businesses keep track of their currency transactions, making it easier for them to maintain accounts and enabling cash reconciliation.

Commenting on the recent launches in the merchant payment space, Sajal Bhatnagar, vice-president, Paytm, says, “Our team has put a lot of effort into understanding the merchants’ requirements for digital payment acceptance at their stores. Paytm has pioneered QR-based payments in India and we are now taking the next leap by introducing a bouquet of services for our merchant partners. Our ambition is to increase digital payment acceptance and it is our utmost responsibility to offer seamless payment solutions that support each of the payment methods. We are a technology company and have utilised it to build an array of new products such as the Paytm for Business app and the Paytm Business Khata. At the forefront of the Digital India mission, we have revolutionised merchant payments with the all-in-one QR and the all-in-one POS device that allows merchants to accept payments from Paytm wallets, all UPI apps, cards and, most importantly, cash. Our technology teams invest a lot of time in understanding customer behaviour to build superior and seamless products.”

Future plans

The engine of Paytm’s growth has been its zero service charge strategy. Paytm does not levy a service charge from small merchants for its payment services. This enables the company to acquire new customers and merchants swiftly and  then tap this large user base for other financial services offered by it to merchants, such as banking, lending, insurance, wealth and software services. This helps Paytm convert its users into paid customers.

Moving forward, the merchant payment space will continue to be a key focus area for the company. Paytm will focus on financial services to drive further business growth. While the past few years were focused on building a large user base, the next few years will be focused on monetising this user base to drive profitability. Thus, a push towards monetisation, increased focus on financial and cloud services, especially to offline merchants, and the addition of 10 million merchants will be the core focus areas for Paytm in the near term.

Moreover, the company  intends to  invest around Rs 7.5 billion to acquire new customers and on-board new merchants in small cities and towns in order to double its monthly active user base on mobiles to 250 million by March 2020. Also, the company expects its Paytm Inbox service, which has garnered 27 million monthly active users, to accelerate its growth.

Further, Paytm plans on filing India’s first technology payments IPO. The company has set a target of reaching 500 million customers by 2025. Once this is achieved, it will focus on expanding its services to the international markets as well.

As far as the consumer business is concerned, Paytm plans to further expand its offerings. UPI is another platform that Paytm can improve its performance in. As per industry analysts, this segment is yet to mature and thus offers immense growth potential.

By Diksha Sharma