Raj N Phani, founder of Zaggle, a fintech company, says UPI has almost killed the wallet. “So no one is inclined to make a wallet payment and pay a commission. You (a fintech player) don’t make money on UPI transactions. Only cards are left then and hence the possibility of cornering significant revenues is really small.”
Sharma explains the card transaction math. For transaction worth every Rs 100 via card payment facility added in these devices, Paytm pockets 30 paise (barring RuPay card transactions which are free). “Also, it prevents the entry of our fintech competitors into those outlets for they are not providing an integrated payment solution that we are.” Again, the sheer number is where Paytm sees the opportunity but Phani fears it will not affect the coffers significantly as there are chances that the total number of those using PoS machines at present is a fraction of the one million that Paytm has in mind.
Then there is the mammoth challenge of convincing the one million small and medium enterprise (SME) owners to get these machines installed at their outlets replacing the earlier QR codes and in many cases, PoS machines made by other manufacturers. It may be added here that the merchant has to pay a certain amount (Rs 12,000-15,000) upfront to acquire one such machine. This covers the hardware and cloud software installed and additionally, brings in a subscription fee of Rs 500 per month to Paytm. A business owner is given the choice to pay the subscription fee either per month or make bulk payments in advance. Phani sees this as an additional deterrent and believes that the shopkeepers may be unwilling to pay and recommends that Paytm distributes these machines for free to start with.
Paytm feels that while peer-to-peer transactions widen the base, they don't bring much revenue. It also finds it tough to keep up with discounts offered by new players
It is offering the all-in-one machine to its merchant base. It aims to distribute machines to 1 million merchants by 2020 end
Bringing cards, mobile payments and UPI under one umbrella and enabling payments through competing products in the spaces it operates in allows the company to be flexible and adapt to the market demand
This step, if successful, will help company to open more accounts for its Payments Bank
Experts see the road to revenue conversion a tough ask because of the continuing dominance by cash, possible reluctance of merchants to invest in new machines and difficulty in maintaining them
Sharma rejects such apprehension. He says that in his initial experience, when as many as 150,000 all-in-one machines were provided to merchants, the merchants readily accepted them for the convenience they offered. “So we found that for those who did not have a PoS machine, we became the default choice. Those who had another, started using our machine because it could be used for all kinds of transactions. So the second machine is expected to die a natural death.”
When Business Standard asked the well-travelled Sharma whether he or his research team came across any such device elsewhere on the globe, he said the product was developed keeping the unique Indian needs and the current market dynamics in mind. These machines have been codeveloped by Paytm with some international players, says Sharma while withholding the partners’ names due to “competitive reasons”. “Additionally, since we realise that there is still a lot of cash being used, we have provided the option of a ledger entry which will help them with better accounting. Though that does not bring any money, we expect to bring in a behavioural change once they see the convenience in digital,” he says.
But Phani does not see cash being replaced anytime soon. “Imagine a small shop full of customers during the hot and humid Indian summer. Can you see a machine taking the load of so many repeated transactions? Maintenance would be a huge challenge going ahead. Plus cash is very entrenched in our system. A demonetisation-like factor can spark only a temporary change. I don’t see that windfall happening for Paytm again. Revenue goals are not realistic,” he sums up.