PayTM Case Study

Team: Tartarus - Pooja & Nishanth

History

PayTM was founded in August 2010 with an initial investment of $2 million by Vijay
Shekhar Sharma in Noida, New Delhi. It started off as a prepaid mobile and DTH recharge
platform and later added data card, postpaid mobile, and landline bill payments. Now, being
majorly backed by Alibaba Group (42% stake) and One97 Communications Ltd.
(38% stake), it offers a variety of services from insurance to e-commerce (PayTM Mall).

Current Market Scenario

On a year-on-year basis, the value of UPI transactions soared over 3X from Rs. 585,710.45
crore in 2018 to Rs 1,836,638.18 crore in 2019.
It depicts how people find digital payments very useful and comfortable nowadays.
PayTM clocked less than 140 million transactions (17%) on UPI, a big drop from its
leadership position just a few months ago. On the other hand, Google Pay and PhonePe
registered around 300 million transactions each in August’ 19.

Analysis of the business model (SWOT)

Strengths:
 First mover advantage: PayTM was the first online payment company to set up
operations in India at the right time, when the smart phone revolution began.
 Tie-ups with merchants: PayTM can be used to transact with more than 7 million
merchants across India and the number is said to be growing every day.
 Bucket of services: Most of what one desires to do online can be done through
PayTM. In addition to the PayTM Wallet, today the brand has online reservation
facilities, PayTM mall, and many more.
 Strong investments from Ratan Tata, Alibaba group, etc have strengthened PayTM's
position.
Weaknesses:
 Need for KYC: Customers have to get their documents verified in the nearest center. It
has become an overburden with the upcoming UPIs not requiring such verification.

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  No actual use for the PayTM wallet.
 Lack of awareness amongst users: Most users are unaware of what PayTM can do for
them and are confused about how the app needs to be used.
 Poor customer care: One major criticism levelled against PayTM is its poor customer
service.
 Failure of PayTM Mall: It could not compete with heavily backed Amazon & Flipkart
and lost its purpose.
Opportunities:
 The surge in the use of e-commerce and online food delivery apps: All these apps give
way to cashless transactions.
 Offline merchant transactions: PayTM can cater to a larger audience with some offline
presence as well.
 PayTM has the potential to expand banking services and redeem PayTM Mall,
especially with the COVID -19 pandemic creating a surge in demands for online
goods.
Threats:
 Major Banks like ICICI, HDFC & SBI are offering e-wallets on their savings
accounts.
 Security and privacy of the user is a concern for PayTM.
 The growing popularity of UPI based transactions through G-Pay, PhonePe, and the
like.

Why did the PayTM Mall initiative fail?

The PayTM Mall app was too diversified. It had too many options and services on the same
app which made it complex for common people to use. Despite the backing of heavyweight
investors, PayTM mall was driven by a short-term vision largely dependent on cash back.
They lagged behind in overall customer support and service which ultimately impacted the
stickiness of the platform.

Plans for PayTM regain its top position:

1. Providing EMI/Pay later options in major E-Commerce websites:

According to Razorpay, a major payment gateway in India, a majority of transactions are

EMI oriented.

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PayTM should partner with major E-commerce sites and other major off-line retailers to
provide a variety of EMI options including the 0% interest and other plans that are
competitive with the existing financial service companies.

Cons: With incremental payback options, the merchant fees charged tend to be more
expensive than that of other standard credit providers. Therefore, during the initial stages
PayTM needs to be careful in ensuring that it is equipped to handle the excessive fee.

2. Increased use of Data Analytics:

Trendsetting e-wallet giants like Paypal, Alibaba, and Google-Pay have recently acquired
machine learning & analytics companies to use the data they accumulate for enhancing the
performance of their services.
With analytics, the user experience can be enhanced according to their sector, region,
frequency of use, and a lot more. This could also give PayTM insights on where and how to
expand the business.

3. Redeem PayTM Mall with lockdown opportunities:

PayTM Mall has recorded a surge in demand (over 2 lakh emails and 3.5 lakh requests) for
items like mobile phones, laptops and academic material. PayTM should use this opportunity
to regain trust from customers by delivering non-essential electronics with fast and reliable
delivery. It should invest in simplifying the website to make it more user-friendly.

Cons: Pre-existing successful competitors like Amazon and Flipkart are a major threat to this
initiative. The advent of platforms like Amazon Pay makes it harder for PayTM to flourish in
this respect.

4. Contactless credit/debit card pay through NFC:

It is a secure and easy-to-use mobile payment service. You can add the Credit Cards &
Debit cards of participating banks on your smartphones which allows you to make
purchases almost everywhere by just hovering your smartphone over the NFC readers.
Cons: It poses a security threat, thus making it difficult to acquire people’s trust.

Expected Outcome:

The no cost EMI/pay later venture is expected to increase the user base of the PayTM app.
With an increased number of users, analytics will provide much better predictions on
customer usage, which will in turn help the app customise offers & bring in new ventures for
better growth.
Reviving the PayTM mall will give people an incentive to use the PayTM wallet, with
increased offers for wallet users. Contactless NFC pay will attract people as it is a seamless,
easy and advanced payment method.

Stats source: RBI, NPCI, RazorPay

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