Amassing 100 mn mobile wallet users won’t be easy for Paytm

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New Delhi | Published: March 14, 2015 1:03:54 AM

Paytm, the mobile wallet company owned by One97 that has got a small investment from Ratan Tata, is looking at a bigger bouquet...

Paytm, Paytm fund, Paytm fund acquisitions, Ratan Tata, mobile walletPaytm, which has applied for a payments bank licence, plans to treat every bank as partner.

Paytm, the mobile wallet company owned by One97 that has got a small investment from Ratan Tata, is looking at a bigger bouquet of financial services to hit the 100-million-mobile-wallet mark, said Amit Lakhotia, vice-president – payments at Paytm. During its last round of funding, from SAIF Partners and China’s Alibaba, the company was valued at $1.5 billion, but Tata has picked up a stake at a higher valuation — just under $2 billion.

The money the company is raising will be used to scale up the business, build new technology platforms enabling more banking services, creating infra and winning customers. Lakhotia said the company will be “a one-stop destination for all banking and related services.”

Paytm, which has applied for a payments bank licence, plans to treat every bank as partner. It wants to be a banking correspondent, which is essentially a partner that offers the bank’s services to end-users. Besides, it will offer all the services a payments bank can offer.

However, for services such as cash disbursement, loans and credit cards, it will have to partner a bank(s).

Lakhotia said it will partner as many banks as possible and not limit itself to one partner. That is a herculean task — creating a platform that is scalable enough to accommodate various banks and their services.

“We are looking at a model that will reduce costs for banks,” said Lakhotia.

Analysts say it won’t be easy to hit the 100-million-user mark, which Paytm intends to do in two years. It would amount to quadrupling its wallet base from 25 million right now. And only getting wallets is not enough — Paytm will also have to offer services for users.

The company has 18,000 merchants at present and it offers services like mobile recharges and payments. It also has an e-commerce marketplace. It does more than a million payments every day, which is double of what IRCTC does. Every user does a Paytm transaction four to five times a month.

According to RBI rules, a payments bank licence owner will have to build a physical distribution network, 25% of which will have to be in rural areas. Companies like Paytm, essentially technology firms,  don’t have that expertise, said an analyst with a consultancy firm.

What goes in Paytm’s favour, however, is the large number of mobile phone users and the rising smartphone base. Over 40% of India’s population is unbanked, but more than 80% of the population uses mobiles. That said, only 200 million access the net on mobile. For Paytm to quadruple its base, the number of mobile net users needs to surge — at least double.

The compamy will also face tough competition from telcos that have applied for a payments bank licence. Vodafone has M-Pesa and Bharti has Airtel Money. These have already partnered banks to offer partial banking services. Telcos also have a large network in rural India, with about 43% of all operators’ subscriber base in villages, something that Paytm lacks.

However, Paytm has managed costs well. Its customer acquisition cost is a tenth that of e-tailers, which spend about Rs 600 per customer. In 15 months, Paytm has amassed 25 million users. The journey ahead will be tough. Lakhotia says a huge part of the new customer base will be unbanked users.

“There is obviously cost involved in building the infrastructure for this.”

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