Paytm’s wallet is moving to a new company – Paytm Payments Bank Ltd. The company’s blog says that the move is an outcome of directions received from the Reserve Bank of India. It has sought to allay apprehensions by publishing FAQs on the wallet business move and what the shift will mean for customers. However, the blog and the company are silent on critical aspects that concern customers. The ownership pattern of the new payments bank also raises a lot of very interesting questions. All this comes at a time when the mobile wallet company is witnessing a huge surge in use and customers because of Modi government’s post demonetisation cashless push.
In a blog posted on December 6, Paytm informed its customers that it will be moving its wallets business to a payments bank. The blog mentioned that it is doing this as per ‘directions’ given by the central bank. Most of the blog is devoted to FAQs around the transfer of the wallets business –essentially, all wallets will move seamlessly to the new payments bank, unless customers decide to opt out. Customers will have the option of opening an account with the payments bank and of moving their money to this account or any other bank account. The blog mentions that money will be moved free of charge to the payments bank account. Curiously, it is silent on whether any charges will be applicable on moving the money to a bank account other than the Paytm Payments Bank account.
The ownership structure of the new payments bank also raises some very interesting questions. These questions become relevant at a time when Paytm is keen to position itself as an Indian company; many critics have sought to draw attention to its ‘Chinese ownership’. While the ownership structure is perfectly in compliance with FDI rules relating to payments banks, it is just the positioning as an Indian company that is being questioned. Significantly, it is unclear why dominant foreign stakeholders of One97 Communications, the company that currently runs the wallet business, are now okay with a diminished role in the wallet business and new payments bank.
Watch: Vir Sanghvi in conversation with Paytm founder Vijay Shekhar Sharma over demonetisation
These are important questions that must be answered by the company in the interest of transparency and for the benefit of millions of its customers. Paytm is rapidly emerging as the face of the less-cash drive in India; it will only strengthen people’s faith in the new economic system if a company as dynamic as Paytm is forthright about critical questions posed to it. We, at FE Online, had sent a number of questions to Paytm founder Vijay Shekhar Sharma and to Alibaba & SAIF partners – the significant foreign shareholders in One97 Communications who collectively hold almost 70% of the business that currently owns the Paytm wallet business.
Here are the questions that Paytm, Alibaba and SAIF Partners must answer in the interest of complete transparency:
1) Why is Paytm wallets shifting from One97 Communications to Paytm Payments Bank Ltd? The Paytm blog says it is as per RBI directions. What are these directions and why were these issued to Paytm? Do these directions apply to other mobile wallets like Mobikwik, Freecharge and others as well? Is this move to payments bank mandatory?
2) Is it accurate to position Paytm Payments Bank as an Indian company when it is not 100% Indian? One97 Communications is 70% owned by Alibaba, Ant Financials and SAIF (Hong Kong based venture capital firm). 49% stake of One 97 in Payments Bank, makes Alibaba, Ant financial and SAIF around 35% owners of Paytm Payments Bank.
3) The Paytm wallet business is the biggest business of One97 Communications. Today, Alibaba owns 40% of this business. In the new scheme of things, Alibaba will own around 20% in the payments bank. It will be interesting to know why Alibaba agreed to a move in which their ownership will be reduced to half in the new company. Similarly, for SAIF Partners. Why have they agreed to own half of what they own now in wallet business?
4) Who will finally own the Paytm brand name? One97 Communications or Paytm Payments Bank?
5) Transferring money from Paytm wallet to any bank account has zero charge as of now. In the proposed scheme of things, when Paytm wallet moves to Paytm Payments Bank, it is not clear if the charge will be “zero” for all banks. It will be zero, if you open an account with Paytm Payments Bank and transfer Paytm wallet money to your Paytm Payment Bank account. In case the money from Paytm wallet needs to move to other banks, like HDFC, ICICI, IDBI – it is not clear.
6) The opt-out (not moving wallet from One97 to Paytm Payment bank) option has not been communicated to each user via SMS and email as of now. It has been communicated through a public notice. Why haven’t individual notifications been sent so far?
7) A Medianama article: (http://www.medianama.com/2015/08/223-payments-banks-vijay-shekhar-sharma-airtel-ril-vodafone-fino-among-11-to-get-rbi-approval/), claims the following – “Vijay Shekhar Sharma informs us that it is Paytm that has received the license (for Payments Bank), and not Sharma, in his individual capacity.” However, Vijay Shekhar Sharma now says that it is in his name, an Indian citizen. Is the stake in individual capacity or not?