Money & Banking

Merchant payments are the primary business model of Paytm: Founder & CEO

K Giriprakash Bengaluru | Updated on February 11, 2020

Vijay Shekhar Sharma talks about Paytm’s latest initiatives, its revenue growth, and how it plans to take on Flipkart and Amazon


Paytm’s founder and CEO Vijay Shekhar Sharma ushered in the mobile payment revolution. The company is now entering new business avenues. In an interview with BusinessLine, Sharma shared Paytm’s vision, and how it plans to take on Amazon and Flipkart. Excerpts:

How big is the threat from UPI-based products for Paytm, a later entrant to the platform?

The biggest challenge we face is that people assume that Paytm does not have any payment vertical other than a wallet, which is not the case. We have a wallet, a UPI and a card, all combined into one. People assume that KYC is necessary for authentication. The wallet may require KYC but you don’t require KYC for all other instruments because Paytm is an app. The RBI has already clarified that one doesn’t require KYC if one loads money through a bank account.

We were a late entrant as the Payments Council Of India blocked us and did not allow us to launch a UPI. We have invested a lot in marketing our UPI, and we have an over 50 per cent market share in the segment. Most of the UPIs are P2P (people to people) but we have focussed on merchant payments and retailers. We have also added more features now.

Of late, you have been reducing your marketing budget and cashback offers...

We have not reduced our marketing budget but have cut down on cashback on P2P. This budget will go towards onboarding merchants. We expect to onboard an additional 10 million merchants and we believe that is the primary business model of Paytm.

First, we launched an all-in-one QR in the beginning of the year, which allowed merchants to remove all the clutter from the desk. It is the only single-QR which can take wallet, card and UPI payments. There has been very good acceptance and traction for this. We extended this to two IoT devices, one being a soundbox. Here, the merchant does not need a phone nearby to get notifications — he/she can keep this device on the counter and anybody can pay (using it). And whosoever is a cashier can do the transaction. Another one is a full-blown Android machine. It includes a printer scanner and allows people to take UPI, wallet and any card payment. It includes cloud software for billing, GST, etc.

Do you see a threat from WhatsApp?

We decided not to pursue P2P money transfer, which is what WhatsApp does. We want to focus more on merchant payments. We have stopped spending money on P2P since the last two quarters and WhatsApp is all about P2P.

What will be the spend on gaining merchants and when will the company turn profitable?

Our EBITDA loss has halved year-on-year. It has happened because we stopped spending money on P2P and also grew our revenues. So, the Paytm business model was three years of product-market fit and three years of revenues and profitability. The next phase is expanding the business. That is why our revenues increased and our losses decreased. We believe that our spend on merchant acquisition will go as high as $50 million from the $16 million now. We remain committed to expanding our offline payments.

How will the merchant discount rate (MDR) waiver impact the payment industry?

We have been a big supporter of MDR and we believe that zero MDR will have a force multiplier impact on the market for the acceptance of digital payments. As an industry, we have to discover new business models. We have been requesting banks to support the industry. Paytm Group has a bank of its own. It has 52 million customers with revenues of ₹1,500 crore. During the last nine months, it has made a profit of ₹100 crore. Our bank has served customers without requiring bank branches. About 60 per cent of our customers are very active.

You had mentioned some time ago that you plan to enter the US market...

I had always said I wished I could go into the US market. We would rather expand our presence in the Indian market. It has always been my aspiration to go to the US market.

You have a good presence in the e-commerce market but the growth has not been as fast as Flipkart or Amazon...

We raised $160 million last August. We have more than $200 million in the bank. We spend $1 million every month and have a GMV of $1.5 billion. As far as Flipkart and Amazon are concerned...if you spend $5 billion and we spend $1 million per month, then obviously...

So, what plans do you have to scale up your operations to a level where you can compete with the top e-commerce players?

If they stop spending money recklessly, only then... But we have the money and a robust business model. We have been able to build a legitimate marketplace, and it has done very well for us. In a year-on-year basis, revenues have been growing 100 per cent. Our losses have reduced.

Where do you see Paytm in the next five years?

In 2010 we started Paytm. Between 2011 and 2020, we have been a payment company and a bank. This decade will see us as a large financial services company from being an internet company.

Published on February 11, 2020

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