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Is Paytm's Business Model Falling Apart?

Paytm changed the way Indians spend but its business model could just face its biggest challenge yet

Published 3 years ago on Dec 04, 2019 24 minutes Read

When Steve Jobs introduced the iPhone to the world in 2007, Vijay Shekhar Sharma instantly knew that consumers would shift to smartphones. His company One97 Communications, a mobile VAS company which offered cricket scores, horoscopes, jokes and movie songs was going to be toast. It was a feature-phone-led business and feature phones were on their way out. He needed to quickly figure out a game plan to survive. One thing was certain — mobile commerce had to happen and there was no payment system in place. So he decided his company would enable people to pay through mobile. That’s how Paytm got its name. In 2014, Paytm launched its mobile wallet after getting the nod from RBI. Now you could load money in the wallet and spend them at merchants who accepted digital payments. In about a year, it was the first Indian app to hit 100 million downloads. But one event that really changed its fortunes was when the government decided to demonetise 86% of the cash in circulation in November 2016. Overnight, everyone from your paanwala to the friend to whom you owed money was using Paytm to send and receive money, and as a result the user base increased from 122 million to 177 million by the end of 2016 and by February 2017, the user base grew to 200 million. But an open platform, high regulatory control and increasing competition has turned its core payment business into a commodity. So, Paytm decided to be everything to everyone. Now it offers payments, commerce, gaming, content, financial services, business services and banking. “We don’t consider ourselves a wallet player but we like to call ourselves a payments player. We hope to process half a trillion worth of payments on our platform over the next two years and that will enable a commerce and financial services ecosystem that will drive our revenue and profit,” says Sharma, founder, Paytm. A plan that is easier said than done. There are perils of being everything to everyone – you are juggling too many things at the same time and spreading yourself a little too thin. While the mantra for Paytm has always been ‘Go big or go home’, can it beat the odds, this time around?