Decrease in Digital transactions Using Paytm

Scenario:
More than half of the India’s population now have debit or credit cards for doing the
transactions. After demonetization there has been substantial growth of digital payments in
India. People from smaller cities and town are using non cash payment mode like Paytm,
Google Pay etc for purchasing goods and services. According to RBI, there has been sharp
increase in digital transactions over last couple of years. Recently, there was news that
Paytm is going to make money transactions chargeable very soon. This will reduce
transactions done through wallets.
This will help Paytm to recover MDR that bank and card companies charge by covering this
cost from customers. If Paytm puts charges in effect then customers will do transactions
through debit cards and UPI to avoid charges. This will lead to decline in transactions made
through wallets.

Digital Transactions Share Market

Effects on Paytm:

Analysis:
1) Opportunity Cost:
 If Paytm starts charging per transaction, customers will switch to other digital
payment modes like UPI and Debit/Credit Cards.
 Google Pay, Phone Pe and Amazon Pay are entering the Indian market and
are dominating the digital transaction through wallets.
 According to Razor Pay report, in 2019 Wallet transactions have been
reduced from 6.3% to 1.8%. UPI transactions have increased from 1.6% to
17%.
 Also, card transactions have dominated digital market with 56.48%. It is
followed by net banking which has a market share of 23.8%.
 Hence, one doesn’t need to go through the tedious process of loading money
into Paytm wallets

2) Incentives:
 Google Pay and Phone Pe are giving exciting cashback offers if one transacts
using these apps.
  Credit/Debit card payments are also incentivized using payback points. Once
the required pay back points are filled up, it can used as a cash for future
transaction.

3) Trade-off:
 Paytm might temporarily increase its revenue in short term but it will lose its
customer base.