Session -3

• Economic and Technological Environment

• Case Study:
Paytm: Building a Payments Network
Paytm: Building a Payments Network
~ Sunil Gupta; Das Narayandas; Rachna Tahilyani

• PAYMENT THROUGH MOBILE ~ paytm

• By September 2017,
 Paytm, a mobile payments company that started in 2010, became India's largest
mobile payments platform with over 142 million users and $5 billion valuation.
 Could Paytm become a $100 billion company its founder Vijay Shekhar Sharma
envisioned it be?
• Serving this country ~ cashless economy
 Bring half a billion Indians to main stream economy.
• By April 2017,
 Currently 215 million subscribers, 200 million transactions (every month)
 Valuation – 6 Billion Dollars
• Establishment, Business Model, and its sustainability
• Competitive landscape
• Impact of Government Policy (Demonetization)
• Next transition to Payment Bank and way forward
Timeline
• 2000 ~ ONE 97 Communication
• 2009/10 ~ Paytm
• 2011 ~ Aggregators
• 2013/14 ~ PPI License
• 2014 ~ Began SA
• 2014 ~ Market Place (Paytm Bazaar)
• 2015 ~ P2P, Offline payments
• 2015 ~ Payment Bank License
Establishment, Business Model, and its sustainability

• Mobile Wallet/ Payment Industry (Exhibit 3)

• Timeline (Exhibit 1, 2, 4, 5)
• Business Model (Exhibit 6)
• Is it sustainable (Exhibit 7)
Competitive landscape

• Industry dynamics
• Number of Players
▫ Paytm ~ (Exhibit 8, 9 , 10, 11)
• Porter’s ‘Five Forces’:
➢Current competitors
➢New entrants
➢Substitutes
➢Power of buyers
➢Power of sellers
Impact of Government Policy (Demonetization)

• Nov 8 – Dec 30 2016

• Strategies adopted
Next transition to Payment Bank and way forward
• License from RBI
• RBI objective ~ innovation for bottom of pyramid
• Way forward
The Economic and Technological Environment
• The various dimensions of economic environment

• The nexus between technology and business

• Contribution of technology in growth

• The choice of technique

Nature of the Economy
• The nature of an economy is the reflection of its natural and man-made
resources, their utilization pattern, the stage of its growth, and the trickle-
down effect on different classes of consumers.

• The level of income generated at the individual and national levels will
entitle an economy to be placed at a particular category among the world
economies

• Growth vs Development

• Economic Policies
Resources and Commodities
Limited Resources of:
• Labour
• Land
• Capital
• Enterprise
• These combined to produce commodities
 Scarcity

• Unlimited Needs
and Wants
• Limited Resources
The Economic Problem
• Allocation Problem - what to produce?
• Opportunity Cost - the cost of the next most
desirable alternative
• Production Problem - how to produce?
• Distribution Problem - who gets what is
produced?
For a decision to be efficient
• Allocative efficiency - “value for money” or “in accordance with
consumers’ preferences Consumer Sovereignty
• Productive Efficiency - producing at lowest cost
• Distributive Efficiency - achieving equity
What is technology?

• Invention/ innovation/ growth theories

• Product innovation
• Process innovation
• Application of knowledge to production
 Productivity
• A change in technology can increase
productivity
• Can allow a country to achieve economic
growth through shifting out its production
possibilities
Law of diminishing marginal returns
• At any one moment in time if a business fully employs its
resources it will still suffer from the law of diminishing marginal
returns
• This arises because of capacity constraints
• Productivity will decline as we reach capacity and so costs
increase
• Technology allows a business to lower costs and so production
increases even if resources do not ~ efficiency is improved
Technology and national competitive advantage

• Combination of internal and external factors that enables

economic growth to occur as a result of technological change

• Entrepreneurial activity in response to external environmental

changes

• Industrial revolution provides historical evidence as to how

change occurred
Neo-classical Perspectives
• Role of entrepreneur
• Markets allow specialisation and division of labour
• It is individual business entrepreneurial activity in
response to markets that promotes technological change
Structuralist/institutionalist perspective
• Role of government in boosting capital growth
• Changes in the political and social structures needed if
markets are to grow
• Role of Education and Training (Human Capital)
New Growth Theory
• Brings together these approaches
• Growth occurs through trade and diffusion of technology
through education
Porter’s diamond model
• Firm Rivalry
• Firm Responsiveness
• Clusters of Firms
• Role of Governments in supporting business through
infrastructure and education provision
Technology and business competitive advantage

• Porter also examines business competitive advantage

• Technology can either reduce costs
Or allows a business to differentiate
• Businesses can obtain technological change across the value
chain of the business
The technology debate
• Technology has obviously transformed our world
• Industrialisation Revolution provoked debates
• Gave rise to immense economic growth
Costs of technology-ethical questions
• Cost to human welfare-will technology improve this in general?
• Will technology favour certain groups over others?
• Costs to the environment?- the precautionary principle
• Will technology allow businesses to gain monopoly power?
 Appropriate technology

• High Tech solutions not always appropriate

• Technology needs to be appropriate to local conditions

• Technology can be simple or complex

• Successful technological improvement increases productivity
• At the national level it is a combination of external environmental factors and individual business
enterprise that spurs technological change
• Technological change can occur across the value chain of a business