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How Paytm has become the Xerox of mobile payments

By Shelley Singh, ET Bureau | Jan 04, 2017, 05.19 AM IST

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DELHI: For a startup synonymous with mobile

wallet payments, it's surprising when the
founder declares, "I confirm mobile wallets will
die! But I also confirm that winners will be
those brands who own consumers and
merchants." Vijay Shekhar Sharma, 43, who
saw the fortunes of Paytm gallop on the night
of November 8, when demontisation was
announced, believes the brand has to stay the
course whatever might be the payment option. To meet that goal, he is
trying to build brand Paytm to outlast any technology that enables
payments. "People should think of Paytm as a payments platform of
choice, not just a mobile wallet enabler," he says.
How Paytm has become the Xerox of mobile payments

The goal: For his firm to be like Oracle, Microsoft, SAP or Apple brands that survive technology changes by being part of the next trend.
More importantly to be unlike Nokia, for instance, which didn't re-invent
and collapsed. Says Sharma, "Some brands are change leaders, some
are change followers, some are change laggards and some don't
change and die. I see Paytm continue to change and be relevant for a
long time." Prasoon Joshi, chairman, McCann World Group Asia Pacific
adds, "There's lot of transfer of energy of the founder (Vijay) into the
brand. Paytm was in a state of readiness and that passion reflected
when the opportunity came on November 8."
A high voltage campaign since demonetisation has ensured Paytm is
the brand with most mindshare among wallet companies. But it started
earlier with a four year Rs 203 crore BCCI title sponsorship deal till
2019 which made it a household name in a cricket crazy country.
Partnering with cab app Uber also helped strengthen the brand among
corporate travellers.
Anant Bhagwati, partner, Bain & Company says, "Any company that
reaches 10% of the population benefits from network effect. We expect

reaches 10% of the population benefits from network effect. We expect

to see the same network effect play out in the case of Paytm and other
wallets." Growth has been unstoppable, with demonetisation acting as
a steroid. Paytm has clocked 173 million users by December, growing
at half-a-million per month. And it has been used across 350 districts,
1,000 small and big cities across the country. Since November 8,
Paytm has surpassed its metrics - tripling transactions per day to 7.5
million, more than doubling employees to 13,000, tripling ad spends.
Frauds have spiked almost three fold to Rs 11 crore a month. Available
in 11 languages, it claims to have sold Rs 18 crore worth of tickets (out
of a box office collection of Rs 106 crore) in the opening weekend for
Bollywood hit Dangal. "We clock 78 million active users a month
(Facebook India does 140 million) and could overtake social media at
our current growth rate," says Sharma.
When Paytm started, mobile re-charge was the biggest use case and
continues to be so. Transport and energy (paying for rides like Uber,
Delhi Metro etc and utility bills) round out the top three. But in last 50
days, Paytm has been used to buy milk and other daily consumption
items.
The hockey stick growth curve is the envy of companies - big, small or
startup - and its brand building exercise even before demonetisation
was a game changer. Sreedhar Prasad, partner, e-commerce and
startups, KPMG India says, "When there's confusion, whoever reaches
out first, gets the business." The ad campaigns only reinforced the
message - you don't have a choice but Paytm karo.
There have also been hurdles. Marketing consultant Harish Bijoor
questions, "Can Paytm go deep into hinterlands and offer fraud free
transactions?" While new users have come in truckloads, merchants
and users have abandoned the platform as well due to glitches ,
technical and regulatory.
On a few occasions, during peak times, users have been left stranded,
unable to confirm payments made to the merchants. Users have found
queries sent to update passbook to track transactions taking
inordinately long. Apart from the spike in fraud, some users reported
money disappearing at the time of loading wallets.
"There were glitches," admits Sharma, and adds, "We spotted flaws and
fixed them. System security is far more important for us than scale. We

fixed them. System security is far more important for us than scale. We
are now prepared for New Year weekend peaks and beyond." Paytm
traced some of the flaws in its iOS app, used by less than 10% of its
users, which impacted the platform at large. A new bug-free app has
been released.
The problem at the retail end is mainly with small merchants: corner
cigarette shops, fruit vendors, kirana stores. Regulations don't allow
merchants to take out more than ` 20,000 per month, while they need
money to manage daily cash flows. Says one merchant in Bajrang
market, Greater Noida, "I sold `2 lakh worth of goods in one week. But I
can withdraw only Rs 20,000 a month. And that after standing hours in
long queues. It's impacted my business and now I don't accept Paytm."
Sharma says regulations put a withdrawal limit on merchants who
don't have VAT, TIN. For verified merchant accounts, there's no limit.
He is now 100% focused on the wallet, which incidentally is still loss
making, thanks to carrots like cash backs. Besides if he aims to take
Paytm to the same league as brands that survive tech changes like
Microsoft or Apple, "Vijay will have to move out of harvesting the wind
and innovate. Paytm should be careful not to get into a growth trap,"
cautions Bijoor. As of now, Paytm is riding high. Sharma says, "We will
make money once the payment bank starts in March. People have
started calling us like Xerox for photo copying or Google for search. We
want to ensure we don't lose that. What the brand means to merchants
and users is the key."
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