Having started its model with just mobile recharge, Paytm expanded its services to provide mobile payments, banking services, bill payments, reservation and many others, becoming India's largest e-wallet platform. Paytm has transformed it's model to a marketplace and virtual bank model, also pioneering the Cashback Business Model.
Pay Through Mobile or Paytm with stakes held by big shots like Alibaba, One97, Tata Sons, Softbank, Ant financials etc. is a leading fintech company that has made the most of demonetisation. Over the years, this portal has expanded its scope and has brought about anything and everything under the ambit of its operations. What has made Paytm so successful? Let's understand Paytm's business model to unleash how Paytm earns!
Paytm started its operations in 2010 with mobile recharge service. Through this service, Paytm earns 2-3% commission from telecom operators, which was passed back to customers in the form of cashback. Over the years, Paytm evolved its gamut of services to facilitate payments for electricity, water, metro, insurance, college fees, gold and what not. To facilitate this, Paytm partnered with several education and financial organizations and acted as a portal to accept education fees and insurance installments, earning a commission of 2-3% from these organizations. However, with an intention to increase its customer base, Paytm facilitated payments for government services such as electricity, water etc for no commission from government. Paytm has partnered with gold refiner MMTC-PAMP to launch ‘Digital Gold’ that will allow its users to buy, sell, and store gold digitally without any additional cost.
A third aspect of Paytm's model is its ecommerce platform, where it allows sellers to sell their products for 5-20% commission from sellers on every product sold. Paytm has its own payment gateway to route payments on websites. Through this, paytm gets 1.5-2% of interest on every transaction done through its gateway. Paytm offers smart payment solutions for online businesses and charges 1.99% commission for every transaction.
Paytm is currently focusing its marketing strategy on digital currency prospects, hence pioneering the Paytm wallet which is a mobile wallet, pre-paid instrument (PPI). Wallet can be of three types- open loop, semi closed loop wallet and closed loop wallet. The one used by Paytm, Mobiquik, PayU and Freecharge is a semi-closed loop wallet through which one can make payment on different merchant sites, but cannot withdraw cash. Paytm will charge no transaction fee on loading money into wallet, purchase at merchant site or wallet to wallet transfer. But will charge if you make payment through this on bank transactions. As per the RBI guidelines, the money deposited by users in Paytm wallet is deposited by Paytm in an Escrow Account with a partner bank. This escrow account deposit fetches Paytm certain interest which is decided as per the contract between the bank and Paytm.
Is Paytm in Loss or profit?
Loss, currently PayTM is expanding its business by providing promotional codes, freebies, cashback leading it to suffer huge losses. Paytm’s annual loss increased twofold to $549M. Might need 3-4 more years to become profit making.
Unique things about Paytm's model
What is so unique about Paytm's model that has made it more successful than its competitors Freecharge, Airtel, Amazon, Flipkart, Google pay, Ola money etc.
- Paytm has tie-ups with even the smallest businesses. They have been able to reach the masses by tapping the smallest outlet.
- Paytm uses Verisign-certified SSL (Secure Sockets Layer) 128-bit encryption technology, which is not only secure but also robust with a capability to handle around 5000 transactions per second. Moreover, they have revolutionized the ease of making payment. Users can simply pay by either scanning a QR code of the shop or by entering the mobile number of the recipient.
- Paytm's data analytics will act as a strong USP for Paytm as well as a barrier preventing competing models to reach that level. Paytm, with its reach to the masses, will have complete data about which products are selling good on which websites, which hotels are earning more, on how much discount do people book tickets through transactions routed through its payment gateway. Paytm, in turn, uses this data for tie-ups with companies.