(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
By Una Galani
HONG KONG Dec 21 (Reuters Breakingviews) - Paytm is the
star of India's push towards digital payments. Usage of the
country's biggest mobile wallet has soared following November's
decision to void almost 90 percent of the country's banknotes by
value. The policy move is the best marketing any payments
unicorn could wish for.
Individual users can store as much as $1,500 into a digital
wallet and then do everything from settling utility bills to
paying for groceries and taxis. That proved especially useful
when cash suddenly disappeared, leaving citizens queuing for
days outside banks.
Paytm was quick to capitalize: it took out full-page
newspaper adverts, made itself available in 10 regional
languages, pushed agents to enlist new merchants, and waived
various fees until the end of the year.
As a result, Paytm has added 20 million users in recent
weeks to count 170 million in total. The number of registered
merchants has doubled to 1 million in just over two months. The
company has claimed to log more transactions per day than
combined average daily usage of credit and debit cards.
Paytm is already one of India's most valuable unicorns,
alongside the ride-hailing firm Ola, and the e-commerce group
Flipkart. A 1 percent stake sale by founder Vijay Shekhar Sharma
in early December, as reported by the Times of India, values
Paytm's parent One97 at just shy of $5 billion, though it's
unclear if the valuation was agreed prior to the cash move. If
anything, the value will have increased further.
The challenge for the loss-making company will be to keep up
the momentum. Electronic payments make it hard to dodge taxes,
so it is unclear how many new users will stick to digital once
India's cash crunch eases.
Paytm will also face competition from the "Unified Payments
Interface", a newly launched government-backed initiative that
enables money transfers across multiple accounts through a
single mobile application.
Its Chinese backers are also attracting unwanted attention
of local rightwing politicians. The group's ownership structure
is in flux but One97 counts e-commerce giant Alibaba
and its payments affiliate Ant Financial amongst its largest
investors. For now, Chinese ownership is still an enabler more
than a source of friction and India's lucky unicorn has a
healthy head start.
On Twitter twitter.com/ugalani
- India's One97 Communications will merge its wallet
service, Paytm, with its soon-to-be-launched payments bank.
- Payment banks can accept deposits up to 100,000 rupees
($1,471) per customer, pay interest, and issue debit cards but
cannot make loans. These are new deposit-taking institutions in
- The bank is 51 percent controlled by Vijay Shekhar Sharma,
who is also the founder and chief executive of One97.
- Chinese e-commerce giant Alibaba and mobile-money
affiliate Ant Financial are large investors in One97. The duo
invested more than $500 million in several rounds last year to
own about 40 percent of the company, valuing it at roughly $4
billion, Reuters reported in September 2015.
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(Editing by Quentin Webb and Nicolle Liu)