Paytm bets on local expertise to fend off rivals

India’s top digital payments firm, Paytm, is betting on its local expertise and a deep pool of backers to fuel business growth and fight off global rivals in a rapidly growing market, its chief executive said on September 11.

Paytm, which started in 2010, became a household name in the country after a ban on high-value currency notes in late 2016 led to a cash crunch and spurred the use of digital payments.

“The fight is no more about one company, it is about ecosystem players,” Vijay Shekhar Sharma, founder of Paytm’s parent One97 Communications, told Reuters in an interview on the sidelines of a private equity and venture capital conference organised by DealStreetAsia.

“If you have a standalone payments company, you definitely have an opportunity in the market. But there is a bigger game being played in the ecosystem level - there the revenue gets made or the value gets created,” Sharma said on September 11.

Paytm, which counts Alibaba Group and SoftBank Group among its investors, is transforming into a financial services start-up with forays in banking, mutual funds and later insurance. Sharma has also started an e-commerce venture, on which payments are driven by Paytm.

Paytm competes with Alphabet Google Pay and faces an expected launch by Facebook’s Whatsapp in India’s digital payments sector.

Credit Suisse estimated the value of transactions industry-wide to grow five-fold to $1 trillion by 2023.

With 95 million monthly active users, Paytm has been growing by 5 per cent to 6 per cent month-on-month. It aims to reach 500 million users by 2022, Sharma said.

Paytm has set a target to increase its offline merchants to 15 million by March 2019, from 9 million now.

“Paytm has gone into a network effect right now,” said Sharma, 40, whose net worth Forbes estimates at $2.2 billion.

As more customers start using Paytm, more merchants join, spurring further use, he added.

Many Paytm users have bank accounts, but it has simplified its app to reach India’s vast unbanked population, especially in smaller towns and cities. The app is also available in about 11 languages.

The Unified Payment Interface (UPI), a state-backed open platform, allows people to send money to each other and directly into bank accounts by linking mobile numbers.

The platform has reshaped the payments arena and Paytm and other mobile wallet firms are adding services to retain users.

Last month, Berkshire Hathaway joined as an investor in a deal that valued Paytm at more than $10 billion, media said.

Sharma said Paytm had no need to raise more funds.

“There is an advantage of being a private company,” he said. “And we always have capital requirements three years forward in our bank. So for three years, we are sorted.”