Paytm defers launch of payments banking business
"Kill the financial services market in the country," was Alibaba founder Jack Ma's advice to Vijay Shekhar Sharma, founder of e-commerce firm Paytm, when the former visited the country for Paytm's board meeting on 31 January.
'"The market is huge. You should chase the business that has tons of profit, if you see the top 50 companies in the world, they will be dominated by banking and financial services industry. So that's where you should focus,"' Ma said, according to Sharma. China's e-commerce giant Alibaba Group and its affiliate Ant Financial have invested over $500 million in Paytm and hold around 40% stake in the company. However, the company's foray into the payments banking business has been delayed, with the company now looking at a launch timeline of second half of calendar year. Paytm was earlier looking at launch the business around April, according to various media reports.
"The launch will happen only after June and not before that," said Sharma, on the sidelines of the Nasscom India Leadership Forum in Mumbai, adding that the new deadline that the firm is looking at is based on the several lessons that it has learnt working on the ground. Sharma said that the company underestimated a lot of things that needed to be done. "By March first week we will announce the top leadership team of the payments bank vertical," said Sharma. In August, the Reserve Bank of India (RBI) gave in-principle approval to 11 entities to open payments banks that will widen the reach of banking services and push the government's goal of financial inclusion.
Apart from Paytm, the others who got licences include Aditya Birla Nuvo Ltd; Airtel M Commerce Services Ltd, a part of India's largest phone company Bharti Airtel Ltd; Cholamandalam Distribution Services Ltd; Department of Posts; FINO PayTech Ltd; National Securities Depository Ltd (NSDL); Reliance Industries Ltd (RIL); Tech Mahindra Ltd; and Vodafone m-pesa Ltd, a unit of telco Vodafone India Ltd and Dilip Sanghvi, founder of Sun Pharmaceuticals Ltd.
According to Sharma, Paytm will have an edge over the others as it's already well established presence in the payments business. "We believe that we have an edge, having built dominance in payments. We think that we can lead there and continue to get most of the payment business," he said. However, the marketplace operated by the firm will continue to remain an important part of the firm's strategy, despite its push for a bigger pie of the financial services industry, said Sharma.
"The marketplace is one of the most important use cases for us and we have been talking about how offline to online is a very critical component for us. It allows us to get the access to the merchant base which is a critical user of our BFSI services. It gives us insights to consumer and merchant behaviour based on which we are able to create and cater products, he said. Paytm plans to roll out its payments bank operations from the city of Meerut in the state of Uttar Pradesh and surrounding areas, after which the firm will look at expanding towards north-east India and central India.