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BREAKINGVIEWS- Lucky unicorn cashes in on India's money madness
December 21, 2016 / 3:50 AM / a year ago

BREAKINGVIEWS- Lucky unicorn cashes in on India's money madness

(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.

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- 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 India.

- 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.

- For previous columns by the author, Reuters customers can click on


Editing by Quentin Webb and Nicolle Liu

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