Have you ever had a DISH that left you speechless?
Do you agree that the perfect blend of flavours played a crucial role in creating a delicious masterpiece?
Well, just like how a chef uses the perfect ingredients to create a delicious dish. Similarly, in entrepreneurship, one must carefully select the most important services and combine them into an easy-to-use platform that meets all of your needs.
Just like that, Paytm has cracked the code of successful fintech, offering best-in-class financial services on a single platform. From digital payments and banking to investment options, Paytm provides users with a wide range of services, allowing for seamless and efficient transactions.
So, are you ready to take a closer look at the recipe behind the business model of Paytm and how it has revolutionized the financial landscape of India & transformed the way Indians manage their finances?
Paytm started the Digital Revolution in India and went on to become India’s leading Payments App. Today Paytm empowers more than 20 million merchants & businesses by allowing them to accept payments digitally.
Nevertheless, more than 300 million Indians use Paytm to pay bills, do recharges, send money to friends & family, book movies & travel tickets.
The business model of Paytm runs by giving financial services through their super app which includes the following products:-
- Paytm Payments Bank
- Paytm Insurance
- Paytm First Credit Card
- Paytm First Games
Journey of Business Model of Paytm: From a Startup to a Financial Services Powerhouse
Let’s unveil the fascinating journey of Paytm in chronological order:-
- 2000 – Vijay Shekhar Sharma founded Paytm’s parent organization One97 Communications by taking a loan of Rs 8 lakh.
- August 2010– Paytm was founded with an initial investment of $2 million.
- October 2011– Sapphire Ventures (aka SAP Ventures) invested $10 million in One97 Communications Ltd.
- 2013-Paytm started offering prepaid mobile and DTH recharge, later added data card, postpaid mobile and landline bill payments.
- January 2014– Launched the Paytm Wallet, with the Indian Railways and Uber added as a payment options.
- 2015– Paytm added academic fees, metro recharges, electricity, gas, and water bill payments. Between August 2014 and August 2015, Paytm’s registered user base grew significantly from 1.18 crores to 10.4 crores. They also received a substantial investment from the Chinese e-commerce giant, Alibaba Group.
- August 2016– Paytm raised funding from Mountain Capital at a valuation of over $5 billion.
- August 2018– Berkshire Hathaway invested $356 million for 3%- 4% stake in Paytm.
- 2017– Reached milestone of India’s first payment app to cross 10 crore app downloads.
- March 2018- Paytm launched two new wealth management products – Paytm Gold Savings Plan and Gold Gifting. Paytm Money was started with an investment of ₹9 crores.
- May 2019– Paytm partnered with Citibank to launch Paytm’s First credit card.
- June 2019– Paytm First Games was launched.
- November 2021– IPO of Paytm launched, raising ₹18,300 crores ($2.3 billion) at a valuation of $20 billion, the largest ever IPO in India.
- December 2021– Paytm launched Paytm Wealth Academy.
Revenue Model of Paytm : Cracking code of Paytm’s profit
The revenue model of Paytm revolves around its bill payments app, which provides a wide range of services such as mobile and DTH recharge, utility bill payments, movie and travel bookings (including train, flight, and metro), as well as financial solutions to customers.
Originally designed to facilitate online money transfers for merchants and customers, Paytm expanded its offerings to include wallet services, banking facilities, e-commerce, and more, with the goal of making life easier for Indians.
With over 58 million account holders, Paytm has the largest digital bank in the country. Paytm Money, its investment platform, enables users to buy and sell shares, mutual funds, and digital gold. It is considered the industry leader in systematic investment plans (SIP) for mutual funds.
Paytm’s revenue from operations skyrocketed by 2.5X from March 2021 to a staggering ₹2,062 crore, showcasing an impressive 42% YoY and 8% QoQ growth.
This isn’t the only good news for the digital wallet giant – in Q3 FY 2023, their EBITDA before ESOP (if you don’t know its basically a company’s operating income before accounting for the expenses related to an employee stock ownership plan) profit surged to ₹31 crores, a major improvement from the loss of ₹ 393 crores in Q3 FY 2022 and ₹166 crores in Q2 FY 2023.
With an impressive 32% YoY growth, user engagement on the Paytm Super App continues to soar, with an average of 85 million monthly transacting users for the quarter that ended December 2022.
Paytm’s merchant payment volumes (GMV) for the same period stood at an impressive ₹3.46 lakh crore ($42 billion), reflecting an astounding 38% YoY growth.
The business model of Paytm focuses majorly on P2M transactions which are instrumental in generating revenue through government incentives, device sales, and merchant subscriptions, as well as by offering financial services like business loans.
The company estimates that it will receive ₹130 crores in UPI incentives from the government for the January-March quarter, covering the first three quarters of the fiscal year.
Additionally, Paytm Payments Bank, which owns Paytm UPI, boasts a 40% market share and is India’s largest UPI merchant acquiring bank, the biggest UPI beneficiary bank, and a leading remitter bank.
Shareholders of Paytm
Now let’s know about the Post-IPO shareholding of Paytm (as of June 2022).
Founder Vijay Shekhar Sharma holds 8.92% shareholding in the company as a shareholder.
Ant Group, a financial technology company, holds a significant 24.88% shareholding in the company.
SVF India Holdings (Cayman) Ltd holds 17.46% shareholding in the company. It is an investment firm that specializes in providing growth capital to companies in India.
Saif lii Mauritius Company Ltd holds 10.59% shareholding in the company. It is an investment firm that primarily focuses on early and growth-stage companies in emerging markets.
Axis Trustee Services Ltd holds a 4.77% shareholding in the company. It is a wholly-owned subsidiary of Axis Bank and provides trustee and other related services to mutual funds and alternative investment funds.
Saif Partners India lv Ltd holds a 4.5% shareholding in the company. It is a private equity and venture capital firm that invests in the technology and healthcare secto₹.
Bh International Holdings holds a 2.41% shareholding in the company. It is a diversified investment holding company with interests in various sectors such as real estate, energy, and hospitality.
Canada Pension Plan Investment Board holds 1.71% shareholding in the company. It is a professional investment management organization that invests the funds of the Canada Pension Plan.
Paytm IPO Journey : From Wallet to Wall Street
Paytm’s IPO(Initial Public Offer) was listed in the share market on November 18, 2021. The IPO was priced at ₹ 2,150 per share, and the company aimed to raise around ₹ 18,300 crores ($2.5 billion) through the issuance of new shares and the sale of existing ones.
Breaking the record of Coal India’s Rs 15,200 Crore public offer in 2010, Paytm’s IPO was the largest ever offered in the country.
Despite being a debutant, Paytm soared high, surpassing the coveted milestone of Rs 1 lakh crore market capitalization with a staggering Rs 1.19 lakh crore valuation on the BSE.
On the first day itself, the shares closed 27 % lower at ₹ 1,564. On november 24, 2021, the company’s shares hit a new low of ₹ 1,308.85, which was a decline of nearly 40% from the IPO price.
This was partly due to a broader sell-off in Indian stock markets, but also reflected investor doubts about the prospects of business model of Paytm. Its stocks were traded as low as ₹ 441.05 on November 24, 2022.
The current price of Paytm’s share is ₹ 645 (as on Feb 14).
You can also read: Top 11 Successful Indian startup
Paytm Investments and Acquisitions
The major Paytm investments and acquisitions over the years for expanding its services and consolidating its position in the market have been the key strategy in the business model of Paytm which started with the acquisition of Plustxt in 2013.
Paytm also invested $5 million in Jugnoo, an auto-rickshaw aggregator and delivery firm. This was just the beginning, as Paytm went on to acquire consumer behaviour prediction platform Shif and local services startup Near.in, followed by investments in logistics startups LogiNext and XpressBees.
As the company diversified its portfolio, it also entered the healthcare sector, investing in QorQL, which leverages AI and big data to assist medical care.
Paytm continued to make significant acquisitions, including online ticketing and events platform Insider.in, and marketplaces Little and Nearbuy.com in 2017.
In 2018, Paytm acquired Cube26 and, in 2019, the hotel booking platform NightStay and, in a recent move, Paytm acquired digital lending company CreditMate in October 2021, solidifying its position in the financial services space.
Paytm’s growth story is a testament to the company’s ability to identify opportunities and make strategic investments to stay ahead in the game.
Paytm Goes Global: Expanding Its Reach Beyond Borders
Paytm, the Indian digital payments giant, has been on a global expansion spree, spreading its wings far beyond the subcontinent.
In Japan, Paytm formed a formidable alliance with SoftBank and Yahoo Japan, and together they established PayPay Corporation. Paytm launched its flagship PayPay app in Japan, a QR-based payment settlement service, on 22 October 2018, disrupting the traditional payment methods prevalent in the land of the rising sun.
Meanwhile, in Canada, Paytm Labs Inc. has been quietly making waves in the fintech industry since 2014. The R&D division recently unveiled its latest product, Pi, a fraud risk management platform aimed at fintech and digital marketplaces where transaction value is high.
With these strategic moves, the business model of Paytm is set to become a global force to be reckoned with in the world of digital payments.
Future of Paytm: Redefining Digital Payments Landscape
Speaking at the company’s first annual general meeting, Paytm’s MD and CEO Vijay Shekhar Sharma answered questions on the company’s depressed stock price, when the company’s shares will reach the issue price of ₹2,150, and when it will achieve profitability.
Sharma said “There is a difference between a small company becoming profitable and a big company becoming profitable. Our ambition is to be a large-scale company and become profitable”
Paytm’s efforts to become a one-stop shop for financial services have paid off, as the company has seen significant growth in its user base and transaction volume. Its wealth management platform, Paytm Money, has become one of the largest in India, and its buy-now-pay-later service, Paytm Postpaid, has gained popularity among users.
The top five catalysts for achieving a profitable and thriving business model for Paytm that will fuel its revenue growth in the immediate future.
- Growing UPI adoption in the country.
- Rising demand for Merchant-based Services.
- India’s growth potential as a Digital Economy.
- Growing partnerships with banks on many financial fronts.
- Financial services gaining momentum.
Additionally, Paytm is investing heavily in technology to enhance the user experience and ensure the security of transactions. With a focus on innovation, customer-centricity, and financial inclusion, Paytm is well-positioned to lead the digital payments revolution in India and beyond.
Battle of the Wallets: Paytm’s Fiercest Competitors
The top competitors of Paytm are:
- PayPal
- Google pay
- Amazon Pay
- MobiKwik
- Freecharge
One of the key factors is the early-mover advantage that Paytm enjoyed in the Indian digital payments space.
Another key factor that has helped Paytm is its focus on user experience and convenience. Additionally, Paytm has partnered with a wide range of merchants and service providers, which has helped it to build a large and loyal user base.
Paytm has also launched several value-added services such as Paytm First, which offers cashback and discounts on a variety of services.
In summary, the business model of Paytm is to use early-mover advantage, focus on user experience and convenience, wide network of partnerships, and ability to innovate and evolve its services have helped it to beat its competitors in the Indian market.
You might also like: Unacademy subsidiary: every acquisition that unicorn made
FAQs
1. Who is the owner of Paytm?
Founder and CEO– Vijay Shekhar Sharma
Parent organization– One97 Communications
2. When was Paytm founded in India?
Paytm was founded in August 2010.
3. How does Paytm generate revenue?
Paytm generates revenue through commissions, convenience fees, merchant discount rates, advertising, promotions, cross-selling, and interest arbitrage.
4. Why is Paytm currently at a loss?
Paytm is at a loss due to high operating costs, difficulty persuading investors of its value, providing large cashback offers, and high advertising costs. However, Paytm plans to become profitable by September 2023, and its earnings have improved by 61% YoY.
