Banks to face new challenges?
Mobile payments and commerce platform Paytm plans to launch a series of new products, including insurance, wealth management services and loans through its new payment bank that aims to open for business in August.
Amongst other services, the bank will offer customers the option to invest as . 1in a money market fund, buy little as ` daily insurance to underwrite movie tickets or buy travel tickets at nominal costs said founder Vijay Shekhar Sharma in an interview with Aditi Shrivastava. At the backend there will be tie-ups with other banks and financial institutions. Sharma said the bank will retain the Paytm brand name and identity when it is launched after receiving final regulatory approval.
Last year, the Reserve Bank of India granted “in-principle“ approvals to 11 applicants including Paytm, Reliance Industries, Bharti Airtel, and Vodafone among others to set up payment banks.These ventures can accept deposits, convey remittances and dispense payments and financial services with a focus on the unbanked segments including migrant workers. They cannot lend to their customers, though.
Sharma believes there is a high level of dormancy in the bank accounts of lower-income group, as traditional banks treat these as additions and not the “core“ of their portfolio. Paytm’s approach according to him will mark a “fundamental shift“ as the core of its business is keeping active users in the lower income group.
Why have some of the others in the running to launch a payment bank dropped out of the race?
With payment banks, deposits can’t be used to lend money, and that idea itself is why people are having a little bit of cold feet. (This) is because they have a business model approach which is built on credit and lending. I believe payment banks offer an incredible new opportunity of building a business model based on lower cost of distribution and that is the differentiation.
What are your top priorities in the next six months?
First, build a legacy in payments. We have to build a massive O2O (online to offline) structure.
We (have a) target of (reaching) a million merchants offline. Second, building distribution of the bank and third, seamlessness between the three entities -marketplace, the payment system and the bank. To do that, the marketplace is now gearing up to offer financial services so that our interest will move from being just a brand store to a long-tail merchant (more) than even mom and pop shops
How will Paytm differentiate itself?
Paytm will allow customers to move money to an instrument where it will earn more than it earns in their savings account but the extra element is that it will be available when needed at that instant.
Do you plan to make acquisitions and investments this year?
If there is an opportunity for us to acquire a vertical which exists independently and our business model can give them the necessary push.
For example, Paytm deals with a lot of traffic -two million checkouts a day is not a small number and anybody who can build a massive company will be a vertical that we are interested in. We don’t need to always build or acquire. With Uber we have a strategic partnership, so the sequencing goes -partner, build and buy.
Will you scale down the mobile marketplace?
No, in fact we will make the marketplace another app over time. If you see, even now, there is a very subtle statement that our new app has -that our marketplace is like a mall, a destination that popped out of the existing one, just like messenger popped out of Facebook. Marketplace came as a by-product of payments for us.
Other marketplaces used cash on delivery as their USP and we wanted payments system to grow.
Paytm is the only marketplace which has grown year-on-year which has done business ten times more business in one and half years than (others) have in five years.
For an 18-month old entity, the numbers that we are speaking are better than the traditional established marketplaces and the reason is that we never had inventory from day one. We will always be a platform for SMEs to use Paytm payments and financial services.
Last month, we did 2-billion orders.Our average order size is small, at a GMV level we are right now doing about . 52 ` ` . 55 crore a day.
What are your thoughts on cashbacks?
Anything which is predatory pricing must go away. Less government, more Governance -that is a space where cashback is right now. Traditionally, financial institutions have always incentivised their financial instruments to promote use cases.
For us, cashback is an instrument use case like a financial instrument. It is similar to a loyalty card, the point system is nothing but cashback.
We are doing it for payments. Marketplace is a way for us to plant and grow our payment system.