INTERNATIONAL MANAGEMENT INSTITUTE

KOLKATA

COURSE: Strategic Management

Course Code: SIE1101

PGDM: 2021-23

END–TERM EXAMINATION

Date: January 11, 2022

Time: 90 mins.
Full marks: 50

Instructions

1. Answer all questions (as instructed).

2. The examination start time for each course will be available in the examination schedule
and the google calendar sent to you by the academic office. The same will also be available
in the google calendar for your ready reference. Each examination will have:
 15 minutes of question paper downloading/viewing time.
 2 hours of writing time and
 30 minutes of answer script submission /uploading time.
Please note google form will stop accepting answers after the scheduled time is over for
the examination. For starting the examination log into OLT then click on Assignments and
click download and the question paper will be available to you. Once you are ready to
upload your answers, click on the google link provided to you and upload your document.

3. You are expected to spend the same amount of time as you would for an invigilated in-
person exam to read the exam paper, plan your answers, and type (or handwrite) your
response. The technical time allowance must be reserved to work with the new format and
technological steps involved such as reading the instructions in, OLT/Question paper
opening, or downloading the exam paper at the start and then submitting your response. If
you need to handwrite all or some of your exam responses, you will need to scan each page
that you would like to submit as part of your overall response. Compile all your content
into one document so you can submit all your content as a single exam response document
as a PDF with a maximum size of 10 MB (or as instructed by the programme office).

1. Please ensure you check that all pages are included as expected as part of the PDF before
you submit the document. Do not wait until the very end of your exam time to start
submitting your response as you may go over your allocated time and the google
form will stop accepting responses once the allocated time is over.

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1. Explain the meaning and application of uniqueness drivers. (10)
(Suggested length – one page)

2. Where is the McKinsey 7 S Model used and how? (10)

(Suggested length – half page)

QUESTION 3 and 4: Please refer to the brief case for answering the questions below. (15+15)

3. Carry out an analysis of the mobile payments industry in India. You may choose to use any
applicable model. (Suggested length – one and half pages)

4. What is your advice to Paytm while revisiting its strategy for maintaining its position in the
Indian mobile payments industry? Will Strategic Group Mapping be useful?
(Suggested length –one and half pages)

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Paytm: Playing in the Indian Marketspace
The mobile payments industry in India was
expected to grow from $10 billion in 2018 to
around $200 billion by 2023, while the digital
payments industry was expected to grow from $200
billion to $1 trillion in the same period, according
to a Credit Suisse report. The growth in the mobile
payments space was fueled by several factors that
included growing smartphone user base, increasing
mobile internet penetration and usage volumes,
supportive regulatory framework, ease of use, the
growing presence of non-banking firms offering
mobile payments solutions that provide attractive
offers, the introduction of UPI (Unified Payments
Interface) and UPI 2.0 platforms by a national body
NPCI (National Payments Corporation of India),
and others.
The mobile payments industry may have received a
further boost from the demonetization exercise.
This may have led to rapid growth in the adoption
of mobile payments products in India. A year later,
mobile wallet payments had doubled to $1 billion
per month; and by 2018, transactions through
mobile wallets contributed 12.8% by volume and
0.04% by value of the total money transactions in
India.
THE MOBILE PAYMENTS ECOSYSTEM
The mobile payments ecosystem in India consisted
of multiple entities such as payment gateways,
mobile wallets, UPI-based payments systems,
financial banks, payments banks, customers (or
users), merchants, telecom operators, internet
providers, smartphone manufacturers, operating
system developers, regulatory bodies, and others.
These entities helped facilitate the transactions
between the customers and the merchants, or
between the two users. The two transacting bodies
used either the mobile wallets or the UPI-enabled
payments system for making payments. The
transactions passed through the payment gateways
for authentication and authorization. The real
money transactions happened through banking
institutions. The transactions ecosystem worked on
the support of players such as telecom operators,
internet providers, smartphone manufacturers, and
others. Regulatory bodies monitored and regulated
the overall working dynamics of the ecosystem.
REVENUE MODEL
Paytm had multiple revenue channels. It earned
revenue from its mobile payment product, recharge
services and bill payments, Paytm Mall platform,
Paytm Payments Bank, Paytm Money, and others.
The revenue model for Paytm was primarily built
around charging commissions and service fees.
Service Fees
Paytm charged a 3-layer flat service fee (Merchant
Discount Rate) to the business incorporating either
of their mobile e-wallet, Payments Bank, or UPI
based-payments solutions. It charged a flat
transaction fee of 1.75%+GST for large businesses,
1%+GST for sole proprietary firms, and zero fees
for small start-ups and businesses. Paytm charged a
2.7% fee on the selling price for financial
transactions occurring via Paytm Mall’s payments
gateway.
Commission charges
Paytm charged commission fees from the listed
utilities and recharge services. It also charged
commissions from the sellers on the Paytm Mall
marketplace depending on the category of products
sold. Additionally, it earned a commission through
the sales of financial products on its Paytm Money
platform. Other than the service fees and the
commission charges, Paytm earned through the
means of investing. The money deposited in the
Payments Bank was invested by Paytm in several
government bonds that yielded a higher rate of
return than what was provided to the customers.
FUNDING
Paytm was well funded by marquee investors such
as Ant Financial Services Group, Alibaba Group,
SAIF Partners, Softbank, Ratan Tata, Berkshire
Hathaway, among others. Alibaba and Ant
Financials (Alibaba’s affiliate), with the virtue of
their $680 million in September 2015, owned a
40% stake in Paytm’s parent organization – One97
Communications. Estimates suggest that, as of
August 2018, Paytm was valued close to around
$10 billion, making it one the highest-valued
internet companies in India.
COMPETITIVE LANDSCAPE
Paytm’s mobile payments business faced
competition from players such as Amazon Pay,
WhatsApp Pay, PhonePe, MobiKwik, Itzcash,
ICICI Pockets, SBI YONO, BHIM, Freecharge, Jio
Money, Google Pay, Vodafone M-Pesa, Airtel
Money, Samsung Pay, Ola Money, Apple Pay, and
several others.
The Reserve Bank of India has, in a statement,
commented on the competition paradigm in the
retail payments segment. With the maturing of the
retail payments market, the concentration risk in
retail payment systems must be minimized from a
financial stability perspective. The Reserve Bank
plans to encourage more players to participate in
and promote pan-India payment platforms to give a
fillip to innovation and competition in the sector.
The players in the mobile payments industry may
be classified into several different categories. They
may be categorized based on their (or their parent
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company’s) backgrounds, on being private or
public entities, on the use of technology, on the
type of mobile payments system offered, and many
others. Based on the backgrounds, players may be
classified into belonging to the telecom industry
(Vodafone, Reliance, Airtel, etc.), banking industry
(ICICI, SBI, etc.), technology industry (Google,
Facebook, Samsung, etc.), e-commerce industry
(Amazon, Flipkart, etc.), core fin-tech industry
(Paytm, ItzCash, Mobikwik, etc.), and others.
Among the competitors, a few of them expanded
into the mobile payments domain as an extension
of the products and services offered previously
(utility companies such as ICICI, SBI, Vodafone,
Airtel, Ola, etc.), while the others ventured as
independent business units (core-fin tech
companies, technology companies, etc.). Further,
quite a few of the players were private entities
(Google, Facebook, Reliance, ICICI, Flipkart,
Paytm, etc.) where market dominance and profit-
making prevailed as primary objectives, while
some of them were from government backgrounds
(BHIM, SBI, etc.) where financial inclusion was of
utmost priority. Based on the technology used, the
wallets may be classified as QR-based, NFC-based
(Near Field Communication), MST-based
(Magnetic Secure Transmission), etc. RBI
recognized the potential of QR-based technology as
a fast and cost-effective solution for digital
expansion and in October 2016 directed the
companies to evolve a common standard towards it.
Based on the type of mobile payment system
offered, some players offered a mobile wallet-only
based payment system, some offered a UPI-based
payment system, and others offer a combination of
both. UPI growth and acceptance resulted in huge
market share loss for the mobile wallet only players
and hastened the move towards adoption of UPI.
Additionally, a classification may also be done
based on the nature of the wallet – closed, semi-
closed, and open wallet.
Paytm has been leading the mobile payments
industry in terms of the user base, the number of
total transactions, and other parameters. In January
2019, Paytm led the number of UPI transactions
with 221 million, while Google Pay and PhonePe
closely followed with 220 million each. With
WhatsApp having a monthly user base of 210
End of END TERM Question Paper
million people in India, it was poised to give a stiff
competition to Paytm as well.
The fight for market dominance led to increased
spending on the marketing and advertising
activities for merchant and customer acquisition,
which led to mounting losses for the mobile
payments players. In FY 18, PhonePe’s losses
amounted to $113.7 million on its revenues of $6.1
million, up from the losses of $18.5 million in the
previous year. It is estimated that a whopping 72%
of the expenses was incurred for marketing
purposes. Paytm also reported a loss of $230.8
million, up from $129.8 million in the previous
year due to increased marketing and advertising
expenditures for its mobile wallets business.
Additionally, Amazon Pay reported a loss of $48.1
million in FY 18, which doubled from the losses
incurred the previous year while its revenue shot up
nearly 100 times to $56 million in the same period.
The customers in India were flushed with a wide
variety of mobile payment products. This provided
them the flexibility to compare and choose the
product that suited their needs of convenience,
functionality, and security of payments. The
increased competition also resulted in customers
benefiting from the various incentives, offers, and
discounts.
FUTURE FOR PAYTM
Paytm had been growing extremely fast and
expanding rapidly. It expanded its product portfolio
to become more of an ecosystem player rather than
an individual mobile payments entity. It made
strides on the technology front by partnering with
Samsung. Further, massive investments from the
likes of Softbank, Alibaba, and others provided
deep-lying financial support to the company.
However, the entry of some major players in the
market, such as Google, Amazon, WhatsApp Pay,
etc., interrupted the ride.
Paytm would need to revisit its strategy in the face
of evolving competition. With the industry looking
towards a mobile payments product with common
presence across various payment outlets and with
the big technology firms putting in huge capital to
grow their products in the market, was there a
possibility of a dominant player emerging in the
industry? Will it be Paytm?
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