Case study on Paytm (Right from its Origin)

1. Paytm: Building a Payments Network
BG&S, 13TH JULY, XIME KOCHI
AAKRITI, TANYA, BABUL AND BIBHU

2. Introduction:
In fall 2016,vijay shekhar sharma,founder of paytm recieved “entrepreneur of the year” award.
Paytm was the consumer brand of One97 comuunications,a company founded by sharma in
2000.
One97 launched paytm to allow consumers to pay select services and products via their mobile
services
Paytm was india’s largest mobile payments and commerce platform with about 142 million
users and a $5 billion valuation.

3. Early days:
Sharma entered the college with the goal of becoming an engineer but was soon influenced by
silicon valley entrepreneurs
In december 2000,he cofounded One97 which provided mobile content to telecom
entrepreneurs such as airtel and vodafone
In pre-smartfone era when it was impossible to download content,customers could dial a
number and listen the song for small fee

4. Competitors:
One of the competitors of one97 was infosys,india’s leading software firm
By 2006,the revenue was down by 30% and they lost their biggest client to a competitor and
were wiped out of the business
One97 again transformed themselves using its paltform to sell existing telecom customers
additional operator offered services

5. Birth of Paytm:
In august 2009 one97 ventured into india’s $2.9 billion and one year later it launched
Paytm,consumer oriented internet and mobile payments platform.
Paytm initially collaborated with telecom operators to provide an alternative channel for
recharging or paying mobile phone bills.
Paytm automatically created a digital wallet which offered better user experience compared to
the wallets of telecom operators which were based on older technology

6. Paytm offering became popular among social media users and consumers who lived in large
cities
Customers who had to walk 100 metres in india’s hot and humid weather to the nearest outlet
could now recharge easily using their tip of the fingers

7. Competition:
One of the paytm biggest competitors was airtel which had launched its mobile wallet,airtel
money in february 2010
Airtel benefited by being the first telecom firm to receive a semi closed PPI license from RBI.
However by 2016,Airtel money had grown to only 2 million users

8. Growing into payments business:
In July 2011, Paytm added recharge to DTH. The DTH market was large and rapidly growing.
Subsequently paytm added bus tickets and added utility payments but it was not easy as many
were government owned entities
By 2013,Paytm was processing 6 million monthly transactions worth $11million

9. Turning point of Paytm:
The turning point came in august 2013 when paytm received a semi-closed PPI license and
paytm launched its semi closed wallet
After PPI license,paytm created a tie-up with uber which gained huge profits. Most of the
people opened a paytm wallet solely for uber payments
Then it collaborated with meru cabs,m-taxi and jugnoo

10. Expansion of Paytm:
In July 2015 Paytm launched peer to peer transfer service. The P2P service was convenient and
solved the problem looking for exact change
Paytm expanded its services to hotel, flight and railway bookings
In march 2016,paytm ventured into entertainment collaborating with leading multiplex chains
to allow users to pay for movie tickets

11. Paytm also looked for innovative ways to enter public and government sectors to offer cashless
alternatives to payments across schools and colleges
In august 2016 paytm started with 10 schools and 8 colleges
It also collaborated with NHAI to sell a radio frequency device that allows cashless toll payment
at 350 tollbooths across the country

12. Establishing a market place:
• Venturing into the E-Commerce Business
• Symbiotic relationship between Payments and Market Place

13.  Why a Paytm Marketplace made sense
 Vijay Shekhar Sharma faced resistance from his own investors
 February 2014 – Paytm launches its very own Market Place

14. How does it Work??
The Paytm Bazaar
The Paytm model held a complete advantage over the other e-commerce players
Multipronged approach for price reduction

15. Who’s who?

16. Enter the Paytm Force
Collaboration with third party firms and provide loans to merchants.
These efforts helped the Paytm Marketplace grow rapidly

17. Moving to offline payments:
Innovative use of P2P services led to the inception of the Paytm offline Payments platform
Why a digital solution for offline payments?
Vijay Sharma was originally against the idea

18. Paytm offline payment model:
Cost efficient
Easy to use
A nifty tool for customer retention

19. Focus on three main verticals:
Transportation Vertical
Groceries and other household necessities
Discretionary spending categories
How big is it’s offline network now
Where it could be headed

20. Venturing into payments banking:
In August 2015, Paytm received the license for “payments bank”
Whereas, Paytm Payments Bank launched by March 2017
Offering savings accounts, current accounts, deposits, remittance services, third party mutual
finds, insurance and pension products

21. Competitive advantage:
Competitive interest rates
Access to invested funds
No minimum balance required
Immediate credit of redemption proceeds
Low cost distribution model

22. Benefits:
Will tie up with the retail outlets and petrol pumps
Customers could withdraw money using their smart phones
If not, Paytm will issue debit cards with QR code

23. Challenges:
India’s traditional banks are major competitors
In August 2015, government awarded 10 other payments bank licenses (includes Vodafone,
Airtel and Idea)
India’s postal department has a country wide network
Of over 150,000 post offices of which 140,000 are in rural India

24. Add Ons:
Paytm has started with 3,000 ‘Paytm Ka ATM’ points in selected cities including Delhi NCR, Lucknow,
Kanpur, Allahabad, Varanasi and Aligarh
They get access to merchants who are a critical customer base for our BFSI
Paytm is planning to add over 100,000 Paytm Ka ATM banking outlets across India
 for which they have committed Rs. 3000 Cr over the next three years to expand offline distribution
network
(Source: https://blog.paytm.com/paytm-payments-bank-brings-banking-access-near-you-with-paytm-
ka-atm-d09afb35e1b0 )

25. Building a Brand:
Paytm believes that a business is credible only if it is established in the offline world
Paytm associated itself with cricket due to which their app download increased
They were able to win over the competitor like Freecharge
Paytm also ran promotions with companies like Coke and Hindustan Unilever

26. Customers who purchased the product received Paytm recharge voucher
Since Paytm paid the promotional recharges, Coke and HU’s cost of promotion got subsidized
In fact, brands used these saving to advertise the promotions which in turn saved Paytm’s cost
of advertisements

27. Funding:
Paytm’s investors were China’s Alibaba Group and Ant Financial Services Group
The investors have 40% stake in the company through investing whooping $680 million
The company raised $760 million to fund its growth
Other large investors include venture capital firms like Saif partners, Intel Capital, and Mountain
Capital; and the investment arm of Taiwanese semi- conductor firm Mediatek

28. Chen, Vice President of Alibaba said that Paytm has the potential to grow bigger than what
Alibaba had experienced in China
He says, “We should allow people in our organization to test the arrow. If it goes in the wrong
direction, it does not matter, you try something else and test again”

29. The future:
Paytm has emerged as India’s largest mobile payments and commerce firm
Has a 6000 member workforce
Processed 73 million monthly transactions across its 142 million wallet users
Sharma was convinced that he was on track in building India’s first $100 billion company

31. Alibaba Group
Ant Financial Services Group

34. Digital payments:

35. Cash and non cash transactions:

37. In the news:
Launches forex services on the platform
Reach a run rate of 05bn transactions in a year.
50 bn of transactions flowing through platform only.
Increase in number of women users have jumped over 100%

38. What were the key factors that have led to
Paytm’s success and specifically the impact of
external business environment?

39. Affordable smart phones & internet: Evolution of Telecom ecosystem, price war, cheap data
rates along with decrease in smart phone prices propelling to shift the access towards digital
payments.

40. 2. Demonetization: Post Narendra Modi’s announcement on banning Rs. 500 and Rs. 1000 notes,
had a string impact on mobile wallets. They were considered as the alternate sources of money.
From vegetable seller to shop keepers to petrol pumps almost everyone started accepting Paytm
for daily transactions. Paytm traffic increased by 435%, app downloads grew by 200% and 250%
rise in overall transaction value. Freecharge and Mobikwik as well benefited from
demonetization
3. Digitization of India Campaign: Efforts put by Government of India to create a cashless
economy fostering an environment for growth of Fintech industry. The Fintech market is
estimated to touch USD 2.4 billion in year 2020.

41. If most of the services are offered for free,
how does Paytm run a profitable business? Id
it sustainable?
Light asset model
Sales commissions
Primary source of revenue is Telcos
Advertisement sales