Paytm aiming to have close to 10% of the global population

No joke, the company targets to bring 500 + million Indians into digital mainstream by 2018; that’s roughly 1/10th of the world population

Ramprasad sells bhajias (bread pakodas, samosas etc.) in a small cart in HUDA Sector 31 market in Gurgaon. On an average, he makes about 1.5-2k every day. That was till November 8, unfortunately. The day demonetization was announced his clientele dropped by 90%. With his family of four daughters, wife, parents and a non-working brother-in-law to support in a remote Haryana village, there was absolutely no way he could make his ends meet. Till his village sarpanch and other elderlies told him to ‘paytm karo’ (thanks to local vernacular ads in regional newspapers).

Or take the case of Babulal who sells vegetables near Noida Atta market. Before demonetization, his daily earning was in the range of 4-5k which came down drastically to less than 1k. And he cannot blame his clientele either. With no cash in supply (or very little if you stand in a war-zone queue), there was little chance of people spending short changes in cash to buy vegetables. His savior also turned out to be ‘paytm karo’

Moving up the social hierarchy, now let’s hear from Guptaji, the owner of Sampurna General Stores in posh South Ex, Part 1 in South Delhi. He has been earning 60-70k daily (that’s the official count, not questioning the money his wife buys her gold jewellery and his daughter her Clavin Kleins, Victoria’s Secrets and iPhone 7s). Drastically, that too came down to a tenth; the bigger irony was that though Guptaji owned a PoS machine, he was loathe to use it. His official excuse: “network theek se chalta nahi” (unofficial, obviously remember those Calvin Kleins). Well ‘paytm karo’ (on the advice of his daughter Honey) has for the time being definitely stopped the gold and Calvins, but it has at least restored sanity in the Gupta household for the time being.

The last story is of Saira Bano, a resident of Nuh who works as a maid in the plush apartments of Gurgaon Sohna Road. Now, how much the ‘plush’ residents of these plush apartments might be flush with cash, after November 8, they were all in the same boat as Saira. Result: no one is willing to pay her salary in cash. With five kids to feed at home, what would Saira have done? Thanks, again to some local vernacular radio ad, ‘paytm karo’ has come to her rescue.

All stories have a common thread and I am sure bound to pose a common question. Well ‘paytm karo’ helped Ramprasad, Babulal, Saira Bano and Guptaji, but how? After all, while people have started understanding how to use Paytm to buy, these are all sellers who are receiving money from buyers in lieu of products or services delivere.

The answer is the Paytm app launched for Point-of-Sale (POS) capabilities. This reformed app allows all small and medium merchants to accept all card payments including Rupay, Visa, MasterCard and Maestro. Under ‘Accept Payment’ icon on the new updated app, small shopkeepers and businesses can self declare their details and give bank account details to start receiving payments instantly.

So Ramprasad, Babulal and Saira (as well as Guptaji) self declared them as merchants and without even PoS machines have been able to win back their customers as well as add new clientele. And thanks to the Jan Dhan Yojna, the first three already had opened bank accounts earlier. This was not just a boon, but virtual life-saver for them, considering they never heard what a POS is (whether it is eaten or applied on hair).

A merchant has a limit of Rs 50,000 per month on transactions (enough for Ramprasad, Babulal and Saira) after a self declaration as a merchant as per RBI’s latest guidelines. However, according to Paytm, a merchant can increase the transaction limit after getting acceptance by Paytm as a big merchant, by doing due diligence with his eKYC norms. Which obviously Guptaji has already done and registered himself as a full-fledged marchant.

And the even sweeter news is Ramprasad, Babulal and Saira don’t even need to pay any charges or fees (applicable for all merchants with below 50,000 monthly transaction) till December 31. And with the Paytm payment banking (which already has the necessary RBI licnses) likely to be launched in January, this ‘freedom’ can extend for life if they become Paytm bank customers. Obviously Guptaji is being charged at the normal 2% banking rate.

With a move that has helped numerous such Guptajis (as well as the Ramprasads, Babulals and Sairas) from the uncertainties brought about by demonetization no wonder Vijay Shekhar Sharma, founder and CEO of Paytm is beaming his ’32 all out’. In his words, ““We are happy to announce this new updated feature to our app which empowers our country and also every merchant to accept all card payments from their customer. We are contributing our nation to digitize our economy.”

That he is doing no doubt (even if skeptics say that he is making money). With numbers like 40,000 merchants signing in a day since demonetization and increasing to 70,000 after this app launch, the numbers tell their own story. Paytm claims POS app will help rise to one POS for every 120 Indians whereas India has only 1.4 million POS machines till now and there is only one POS for every 1785 people in the country.

Talking about his business model, Sharma informs that Paytm is targeting tea stalls, milk booth, parking lots, auto rikshaws, grocery stores, petrol pumps, chemists and even street food small vendors with its built-in new feature. That’s exactly the strata where Ramprasad, Babulal, Saira and Guptaji belong to.

For now, especially to reach out to these digital ‘have nots’ Paytm is focusing very strongly on their marketing. Though the highest traction is in Hyderabad followed by Chennai, it is targeting Tier II and Tier III cities more now. Though this feature is focused and has been built for small shopkeepers and small businesses, the company is promoting it drastically in all regional newspapers in vernacular languages and also a strong and effective communication platform like online and social media. No wonder Ramprasad and Saira and even Guptaji (thanks to Honey) has come into these Paytm net thanks to these ads.

Looks like every penny of the Rs 500 crore marketing budget since demonetization has been well spent by Paytm (though the usage of PM modi’s picture in the ad was in bad taste, but then you forgive small transgressions). After all, it was not just to acquire merchants, Paytm overall in India today has 15.8 crore customers (mostly buyers, but now increasingly sellers too). The marketing spend of Rs 2546 crore in the last fiscal too seems to be well spent from that perspective.

With revenues in the range of Rs 1,000 crore, some financial analysts would object to the huge losses. In addition, when users transfer the Paytm money from their respective bank accounts, Paytm has to pay at least 2% to the bank. With the circulation of Paytm money within the Paytm world, the company gets nothing--neither do they pay nor do they earn. But talking about margins, when a user buys tickets, shop and purchase by using Paytm money, the company gets up to 15% on that particular transaction.

But Sharma is not even bothered with these nitty-gritties. Rather he laughs them off saying he is not even thinking of breaking even before five years And he has some really ambitious targets to meet his goal. Currently, there are 55 crore Indian bank holders owning a card (debit/credit) which translates into 74 crore cards (each person has multiple cards). With Paytm user base at 15.8 crore only, this is obviously the first low hanging fruit to pluck out. Then with a 40% increase in daily average transactions in the past 2 months, Sharma and his team are obviously playing for much higher stakes.

According to Paytm, people in metros have increased their daily transactions to an average of 3 per day, in the last fortnight. With daily user growth at 500%, the company is confident that it will do 2 billion transactions by the end of this year. “As digitalization is our only focus, we plan to bring 0.5 billion Indians into the digital mainstream by 2018. Earlier the target was by 2020, but we have now brought it down by 2 years”, exults Vijay Shekhar. Incidentally, this number translates into one-tenth of the world population.

Looks there are numerous Ramprasads, Babulals, Sairas and Guptajis who will soon be doing Paytm karo. And while the intended impact of Modi’s demonetization is highly debatable, at least one aspect of digital India might become real even before Modi ends his term. Then instead of Modi becoming Paytm brand ambassador, the government should make Vijay Shekhar Sharma the ‘Digital India’ brand ambassador.

Numbers in a Nutshell