Who doesn’t know about PayTM? I can even go ahead and say, as you read this, PayTM app is lying on your phone in some unused corner. It is the forsaken application that is installed in your phone, but now, it’s not cool anymore. But things were a little different in the past. The uncle which introduced most of us with the world of paperless money transactions is now living a solitary life. Okay, I might have been exaggerating a tad bit at this point. But, yes, PayTM is struggling at the moment. The Soft Bank funded firm is yet to make money and is constantly burning cash. As of FY20, PayTM reported that it had cut down it’s losses by 30% from Rs. 4217 Crores in FY19 to Rs.2385 Crores. (source).
While there is a definite trend reversal here and PayTM may be on it’s road to recovery and hence profitability, but how did it get here? What happened to the pioneers of digital payments in India? So in the blogpost, let’s understand how new age counterparts have beaten this fintech giant black and blue.
History and Rise of PayTM:
Paytm was founded in August 2010 with an initial investment of $2 million by its founder Vijay Shekhar Sharma in Noida. It started off as a platform to facilitate mobile recharges, DTH recharges etc. Topping up balance in your phone without visiting a physical retailer was a big deal at that time. (I wonder how 15 year olds reading this would feel). Later, services like postpaid/landline bill payment, were added.
In 2014, Paytm came up with Paytm wallet, which would become a huge hit in the coming years. Around the same time, you could also book train, flight tickets with Paytm. An year later in 2015, it came up with metro card recharges, electricity, gas, and water bill payments. This time around, payment gateways started having ‘PayTM’ as a mode of payment.
Then came 2016, when Modi government announced demonetization. That’s when hell broke lose and the likes of PayTM were turning out to be the only options to transact. PayTM soon became the India’s first application to cross 100mn downloads.
Soon this boat was steered into an additional direction. You could now buy Gold on PayTm using Gold Locker. In 2018, PayTM forayed into UPI payments. You could now transfer money into someone’s bank account directly with 0% fees.
Somewhere around this time, e-commerce leg of Paytm was re-designated as PayTM Mall.
It also launched the ‘Paytm for Business’ app which is now called Business with Paytm App, allowing merchants to track their payments and day-to-day settlements instantly. This led its merchant base to grow to more than 7 million by March 2018. And as per now Paytm became India’s most popular payment app.
Fall of the Giant:
Well, everything seems to be working out for PayTM. They are nailing one business after the other. Then why isn’t the company profitable yet. Why aren’t the investors making any money on their capital employed? Here’s a summary of what I think:
1. Regulations around KYC:
While PayTM had first mover advantage in their domain, they had to face some teething issues because of that. Earlier, you could simply do P2P transactions on PayTM. Soon enough, you were asked to do a KYC. Then there was something called Minimum KYC which was supposed to be a makeshift arrangement until you got a Full KYC.
Although it was clarified that merchant payments did not require KYC while P2P payments did, onus of differentiating between the two was left on the user. Eventually, it led to confusion. I heard so many people saying that PayTM won’t work each time they tried. There were assumptions that payments are capped basis the amount per day, per month, number of payments in a month and what not. As a customer, neither do we get it, nor do we have time to read about it.
For most of us, PayTM just stopped working, out of the blue one day because of KYC issues (because no one paid attention to the KYC requests and warnings). Also, you had to visit a store physically to get this KYC done. Although, they did give a facility of KYC at home but that was limited to Tier 1 cities. Also, I didn’t find it worth my time.
Finally, when PayTM adopted UPI technology, they had to advertise that they don’t need KYC anymore.
Even today, when I open my PayTM application, it is full of clutter. We always thought that everything under one roof would be a great proposition. But PayTM overdid it. There’s just too much going on with promotions as well. There are some IPL stickers, some PayTM first, Spin the wheel.
If you still don’t get what I am talking about, I will just list some services that Paytm offers. You can see for yourself if you were aware of them or not:
- Fantasy Cricket that lets you bet on cricket matches. A concept similar to Dream11.
- Checking Credit Score.
- PayTM Credit Card. They offer a card in association with SBI.
- Nearby Stores. It helps you locate places nearby. When did Google Maps go out of business?
- Events near you. Bookmyshow FTW right?
- PayTM Mall. Amazon: Are you kidding me?
And finally, if you don’t know, on February 19th, PayTm just forayed into brokerage services as well. You can now buy and sell stocks, mutual funds on their platform. This brings them in direct competition with the likes of well established players like Zerodha, Upstox etc.
While Paytm was busy becoming the jack of all trades, for each of it’s offerings, a master was in making. Payments were synonymous with “PayTM karo“ at one point. However, I see people saying “GPay Karde“ now. Phonepe in fact has become the market leader in this space and PayTM is a number 3 player trailing with a huge margin.
In almost every business they entered, there was someone else who could do it better. For me, Paytm lost it’s niche and tried everything possible under the sun, just for the sake of it.
4. Poor Strategy of Cashbacks:
We love cashbacks. Everyone does. But that is not the only way to go about it.
I recently attended a keynote session in Amazon Smbhav. There were a few use cases shared on how Amazon leverages machine learning to enhance the customer experience of the app. So, if you are coming from a poor network area, the home page will tweak itself so that your load time is not slowed down. If you are historically someone who hails from a poor digital savvy background, the home page will show you more tutorials, options to switch to native language etc.
The point here being the focus on customer centricity and comfort. Imagine if such minute details are taken care of, how would they streamline their major processes.
On the other end, PayTM focused too much on cashbacks and discounts alone. I am not saying that they are not customer centric, but as they jump into stock brokerage, there strategy is still centered around price war (they offer the lowest commission on intraday trading).
Not to mention that my experience with PayTM mall has been pretty bad one or two times I have used it.
Despite all that has been said and done, Paytm still has a very large active customer base. Can they turn things around? Will the management change their vision and focus on removing dead businesses out of the ecosystem? Only time will tell.
Until then, you share your thoughts about this.
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Until next time..
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