There was a lot of hype around payments banks but it seems to have ebbed. How is Paytm Payments Bank doing?
We have built the only profitable payments bank business in the country. Today we have more than 50 million accounts in less than two years as six months we were not allowed to acquire customers. We have more than Rs 2 trillion of money in and out and we have more than Rs 2,500 crore of residual deposits from customers.
We also have more than 40 per cent active accounts. Payments Bank as a business model is viable but it makes a lot of sense for it to become a small finance bank, which the Reserve Bank of India (RBI) has introduced for consultation. We are very happy that the regulator thought about it. It is a step in the right direction. It will bring more support to the revenue model of payments banks.
There were reports that Paytm is planning to acquire YES Bank. Are there any discussions?
As an entrepreneur in a build-versus-buy universe, I have always been a ‘build’ person. I did not meet any promoter or banker in the said transaction ever. We have our bank and are happy to grow with that. I would prefer to build our bank as a world-class organisation. We do not need to buy equity in others.
Has Paytm lost the first-movers advantage or it still is leading the payments space?
Paytm’s core business is payments gateway, while the bank’s business is bank accounts, UPI, and wallet. Our payment gateway is the market leader in online, offline and combined. We own the majority market share. What people also talk about is person-to-person
(P2P) money transfer, which we believe is a money transfer business and our bank does that. We are the number one money transfer company in the country.
Your competition such as Google and PhonePe claim they are doing the most UPI transfers. Have you lost the race to them?
When we were looking at the banks business, we found out our bank accounts are linked on other apps. What we noticed that a large number of transactions of a fixed amount among a set number of people was happening in a day. This pattern we have been seeing month on month.
We along with everyone else were incentivising customers for P2P money transfer. In P2P transfer, if you add incentives, people gamify the system and keep rotating the money. Initially, it is a good way to acquire customers, if some businesses think they need to keep on incentivising customers for P2P transfers, it is good. But we as a company do not need that. So we announced that we would not give any cashbacks to the same customers who are doing P2P transfers. We have still witnessed healthy growth in that business. We even make money and we ignore the numbers anyone else has because these are not commercially valuable transaction numbers. We are only focusing on merchant payments and own 68 per cent of the marketshare there.
Predatory pricing has snowballed into a major issue in e-commerce. Do you think deep discounting should be stopped?
Paytm Mall’s role is very clear: to help shopkeepers with tech and connect them to a larger customer base. Shopkeepers and merchants have understood this and are paying for our services. We are doing around $1.5 billion in gross merchandise value (GMV) annually and spending as little as $3 million of Ebitda, which is phenomenal.
The government is working hard on stopping predatory pricing. We have seen massive four-page advertisements in newspapers, which blatantly show deep discounting is at play. Maybe, it is a brand giving the discount. But these things hurt the small shopkeepers. A retailer cannot be a technology company. We are happy being money makers where technology is powering small shops versus being a large giant retailer with a large loss violating laws at the same time. If more money does not come into this proxy retail in the online world, we can even take the second spot. We are a comfortable third right now, but are happy to make money, offer technology to a small shopkeeper, and not be a proxy retailer.
At group level what are the targets like? By when will you be profitable and head for an IPO?
This year, we are planning to do $100 billion of GTV and $35 billion GMV, which includes commerce. Our GMV would grow to $70 billion-plus next year and the GTV in two years will touch half a trillion dollar. Last year, we had around Rs 4,000 crore ($563 million) of net loss. This year, we are targeting Rs 3,000 crore ($422.2 million) and we are looking at Rs 1,500 crore ($211.1 million) next year. After that we should break-even. So in the next two years, we should be profitable at group level. Once we are profitable, we will think about an IPO.
How is your digital gold initiative working out?
That has brought to us a large number of wealth customers, which Paytm Money manages it. One of the things we have learnt is India’s comfort with buying gold is much more than buying any equity product. We have more than 50 million customers of that product.
What are targets for Paytm Money?
The best thing about Paytm Money is that it did not get its distribution on its own. It has a customer base of 3 million registered users, of which a few hundred thousands are regularly investing every month. We are eagerly waiting for that equity trading offering. The Securities and Exchange Board of India has given us the nod. We are looking at launch after Diwali.