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Mini-Project II
Challenges and issues faced by Fintech company Paytm.
K.LALNUNTLUANGA
MBA II Sem
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Table of contents
Serial no. Contents Page no. Signature
1 Introduction
2 Objective
3 Analysis
4 Finding
5 Suggestion
6 Methodology
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Brief Introduction of Paytm
What is Paytm ?
Paytm is an Indian multinational financial
technology company specializing in digital
payment system, e-commerce and financial
services. The company offers mobile
payment services to consumers and enables
merchants to receive payments through its QR
code, point of sale and online payment
gateway offerings.
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In partnership with financial institutions, Paytm offers financial services such
as microloans and buy now, pay later to its consumers and merchants.
Apart from bill payments and money transfer, the company also
provides ticketing services, retail brokerage products and online games.
As per the company, more than 2 crore merchants across India use its QR
code payment system to accept payments into their bank accounts.
Its gross merchandise value in FY 2020–21 across all platforms was
over ₹4 lakh crore (US$52 billion).
In 2020, Paytm's brand value was estimated to be US$6.3 billion, making it
one of the top 10 brands in India
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Users Analysis
170
218
274
341
Users
2017 2018 2019 2020
In Millions :
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Objective
The objective of this Mini-project is to have an observatory report on
the systematic and how it works on the fintech companies sector. To
know more, and deep dive into the field of online payment system on
the industrial revolution of this decade rather than which already
known physical commercial industries. This mini-project also include the
project report and the markets of the IT sector which mayly focuses on
online payment system.
To find and explore the issue and the challenges faced by the Paytm app
, how we could improve the IT sector and what is needed to be fulfill
technologically, what can we improve from the users side .
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The idea of this project is also that to find the benefit of the online
payment app Paytm, what have been implemented to improve the
customers benefit .this mini-project will also include on solving the
problem and survey from the users using a questionnaire. This will
eventually provide a data or information needed. The perspective of the
Indian industries and companies , how is it different from traditional
commercial industries on the field of marketing, customers, to the
modern world . If possible this project is also projected to finding
solution for any problem or error that may occur on the project. To
construct the methodology of the process and to eliminate them if
necessary. Particularly help to focus on the users problem thoroughly
and help them to eliminate them.
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Factor Analysis
• Thirteen questions relating to pros and cons in using Paytm app were factor
analysed
• using principal component analysis with Varimax rotation. As evident from the
Scree plot
• which levels off to a linear decreasing pattern and the analysis, five major factors
were
• elicited (See Figure 1). The five factors elucidated for selected criteria of Eigen
values greater
• than 0.1. Each factor contains factor loadings greater than 0.05. These 5 extracted
factors
• explained a total accumulated variance of 74.19 % for pros for use and consumer
identified
• cons of the Paytm app
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Findings
• Disadvantages of Paytm
• It's quick and easy.
• No problem of change
• No problem of money stolen or fallen
• No problem of forgetting wallet
• Don't need to carry wallet everywhere
• It's cashless
• Now real disadvantages -
• Poor internet connection may consume more time.
• Currently some merchants aren't accepting online payments
• Carelessness may led to online fraud
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Benefits of using Paytm
• Varied Options: You can use the PayTm wallet for a number of things such
as bill payments, booking bus tickets, recharges, shopping, etc. Some of the
popular websites that are usually used by people with PayTm wallet are
Zovi, Healthkart, Ola Cabs, Uber, Makemytrip, Fab Furnish, HomeShop18,
etc.
• Money Transfer: You can use this wallet to send money to your loved ones
and receive it from them too. It’s quick and as safe as online banking so you
can trust it without a doubt. It’s also approved by Reserve Bank of India
which ensures that it’s working as per the financial regulations.
• Best for “On the Move” Payments: You can use PayTm mobile website or
the app to pay bills or recharge when you are on the move. If you don’t
have internet access, they also allow you to pay via an SMS on
09880001234 or a call on 1800-1800-1234.One call and you are saved from
the hassle of the consequences of not paying a bill on time. Isn’t it great?
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• Money Saving: The wallet also allows you to save your hard earned money by
offering various cashback schemes on a regular basis. These offers are totally
trustworthy as thousands of people use them every day.
• Guaranteed Refunds: If for any reason, you are not satisfied with the PayTm
wallet services, you can get your money back within a few hours. You will have
the option of not even telling them why you were dissatisfied which gives you
total control over your money.
• Expansive Services: Though the company is earning huge profits, it’s still focused
on making your experience better. They have recently tied up with DMRC to allow
customers to recharge their Delhi Metro Card via PayTm wallet only. This is a
great service that will be available soon and it will allow you travel as much as you
like in Delhi Metro. By using this option, the fare of the travel would be
automatically deducted from your PayTm balance. It will save you from frequently
recharging a Metro card.
• Offers more Convenience: The website is also working rigorously to expand your
payment routes. They recently liaised with Bank of Maharashtra and it now
allows the customers to use their debit card to top up their PayTm wallet. You can
do it just by walking into any one of over 1,800 ATMs across the country. They
plan to tie up with many other banks too.
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Paytm overview..
• Paytm is a 2-sided business - consumer + merchant. The company has built
its distribution around various payment use cases - ranging from phone/
DTH recharges to e-wallets, e-commerce, movie/ flight bookings, UPI &
other payment use cases like fees, utility bills, etc. Payments are seen to be
a high frequency use case that drive engagement and stickiness for their
customer base. In addition, the 2-sided aspect creates a strong network
effect: more consumers = more merchants accepting Paytm and vice versa.
• Of course, payments isn't the end game here. Payments are the foot in the
door with the customer that not only creates highly engaged users on both
sides (merchant & consumer) but also generates rich data. This in turn
could open up various monetization opportunities for the company across
fintech and commerce. Hence, Paytm has tremendous potential.
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to assess Paytm's future monetization potential, let's evaluate a few important operating
metrics for this business.
But before that, let's take a look at Paytm's standing in the UPI ecosystem. While UPI is only
one amongst various payment modes, it is by far the largest driver of payment volumes in
the country and a strong indicator of user engagement.
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PhonePe, Google Pay and Paytm essentially control the majority of the UPI
market, with Paytm coming in at # 3 fairly behind PhonePe and Google Pay.
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• Paytm: Financials
Paytm has 5 lines of business -
1. Payments (consumer): payment services for consumers - bill
payments utility, MF, insurance etc.
2. Payments (merchants): includes payment gateway and POS devices
3. Financial services: loans to consumers and merchants
4. Commerce: travel, movies, ticketing
5. Advertising: advertisements on the platform.
• In Q2 FY22 (Q3 results are yet to be published), Paytm posted a
revenue of ~1100 crores.
•
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The chart below shows the distribution of revenues across the
5 business lines.
Clearly, all these verticals are unique and have massive potential. To value Paytm, we will attempt to
value each of these verticals separately and then do a sum of the parts (SOTP). Please note that we
have limited data at this point and will make various assumptions to arrive at valuation estimates.
If you want to read the full detailed, data driven analysis, which includes a valuation framework
please see the full article on Z-charts
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Suggestion and thinking
Finding the source of the pain
The first pain point the company solved for India's consumers was
around pre-paid mobile top-ups: Paytm allowed customers to top their
accounts up instantly on their phones rather than going to a store,
buying a top-up card and struggling with an extraordinarily long
password. That allowed it to build brand awareness and a loyal
customer base.
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• Fixing the system
• The company's next objective was much more ambitious — to make
India's payment system more inclusive, more efficient and more
reliable. It was an audacious goal.
• When the company was founded, the vast majority of India's
population had no access to formal banking services at all. Those that
did have bank accounts often struggled to use the instruments
available to them. Less than 2 percent of the population had a credit
account. Cash and cheques were the norm.
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• A super-app in the making
• Over the next few years, Paytm added dozens of new use cases for its
technology. Paytm's mobile payment platform was, for a time, the
only payment method accepted by Uber in India. It partnered with a
wide range of transport, utility and entertainment companies to
create digital payment systems. And it launched an e-marketplace
where customers can find almost any item or service available in
India, often at a discounted rate.
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• Creating markets
• While it may seem as if Paytm is taking on the traditional banking
system, it is not. In fact, as Harinder is quick to note, Paytm is
providing a pivotal intersect between India's population and the
established banking order.
• “We see Paytm as a way to bring half a billion unbanked Indian
consumers into the formal banking system,” noted Harinder. “People
who work in the informal economy or in rural areas have pretty much
the same financial services needs as everyone else. But they are often
left out of the system because they are not on anyone's radar.”
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• Driving customer acquisition
• Yet Paytm's goal is not just to sell products to users. It's also to help users
achieve their own goals. That often means helping them establish
themselves in the mainstream economy.
• In a cash economy, small businesses and merchants are often overlooked
by the traditional banks due to a lack of reliable records and credit history.
Paytm helps to solve that pain point by using its technology to create a
robust and reliable view of its business users — their cash flows, their
customers, their daily balance sheet status and so on. And they use that
view to help the business establish their credit-worthiness.
• “More often than not, we'll then help that merchant find a bank that wants
to work with them based on the data we have collected,” added Harinder.
“We are helping banks acquire new, credit-worthy business and personal
customers that simply didn't exist in the mainstream economy before the
digitization of payments.”
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Methodology
• The questionnaire method was used for the survey. Based on the literature and the
• researcher’s understanding of the concept, a questionnaire was developed. However,
• preliminary several times checked the questionnaire to ensure the reliability. The
• questionnaire consisted of 5 demographic questions and 13 questions related to pros and cons
• of using Paytm app. The 5 point Likert scale with the anchors being “Very low influence” and
• “High influence” was used for framing the questions in the questionnaire. The reliability of
• the questionnaire was checked by calculating the Cronbach’s Coefficient Alpha value. The
• Cronbach’s Coefficient Alpha of the overall scale for this study was calculated to be 0.810.
• This confirmed the current study validity and reliability. Two variables, pros of Paytm app
• and cons of Paytm app were considered. The alpha values were separately calculated for both
• the variables to check for the reliability of the further study. To verify the measurement
• scales, their validity and reliability were analysed by SPSS 23.0 for exploratory methods. The
• H1 and H2 are accepted. The Cronbach’s coefficient alpha value for pros and cons in using
• Paytm app were found to be 0.80 and 0.71 respectively
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Quetionaire Items Alpha
M-wallet Indian thinking
Pros 8 Items 0.80
Cons 5 Items 0.71
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RESPONDENTS AND RESEARCH APPROACH
In this cross-sectional study, common people from India were requested to
participate in
the study. Male and female respondents were included in the study. The
random sampling
techniques were used for collecting the data. The researcher ensured
anonymity and respondents need not to write their names and
identification.
DATA SYNTHESIS
We first data synthesized the factor structure of Indian consumers
towards Paytm app
items using the KMO and Bartlett’s test was conducted for quantifying
the sampling
adequacy. This is the important step as help to quantify the samples.
The next step was
determining the factor analysis with principle component Analysis
(PCA) with SPSS 23.0.
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Conclusion
• The present study has revealed the opinions of Indian consumers about the
mobile
• wallet app, Paytm in the wake of termination of physical money to unravel the
issues being
• sweet-faced by common public. Paytm app is a familiar app used for e-
transactions. The app
• has both pros and cons. Two unrelated patterns of responses were obtained on
the Paytm app
• when a questionnaire was distributed among common respondents.
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