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PAYTM’S BUSINESS MODEL: HOW A TEN BILLION DOLLAR MOBILE PAYMENT COMPANY EARNS?

Updated: Feb 7

Founded in August 2010 by Vijay Shekhar Sharma with an initial investment of a whopping $2 Million, Paytm became a game changer in the market of Indian E-Commerce. With the revenue of ₹814 crore (US$110 million), Paytm is now India's most trusted E-Wallet app

.

Accomplishments Till Now


Paytm is now available in 11 Indian languages and offers online payment services like mobile recharges, utility bill payments, travel, movies, and events bookings as well as in-store payments at grocery stores, fruits and vegetable shops, restaurants, parking, tolls, pharmacies and education institutions with the Paytm QR code. As per the company, over 7 million merchants across India use their QR code to accept payments directly into their bank account. Paytm is a $10 Billion Dollars company as of January 2018.


In the midst of all this growth, a question is evoked in the hindsight of Paytm users everytime,

"How the hell do they earn money for expanding this much?"



Major Sources of Paytm’s Cashflow


There are many ways that Paytm could earn money from.

Disclaimer: All the data provided here is mostly based on facts.


1. Interest or investment of customer's wallet balance:


If you are a frequent user of these sites then you don't want to trouble yourself by authorising your transaction on these apps. That's why most of the users keep some wallet balance in these apps.


Users can recharge their wallet anytime by any amount so that they can use that balance when doing transactions on this app. This really saves time when you are in a hurry. You can use QR code scanner to pay instantly at the stores using this app.


So if you are able to do so, then you must have keep some cash in your wallet already and here's where the catch begins. These companies don't pay you interest for keeping money in your wallet, instead they are charging you for keeping you money there, just like Swiss bank charges interest for keeping money reserved in the bank.


So you may get a brief idea about how much interest they may be gaining if only 10% of the customers are keeping at least 100 rupees in their wallets.


2. Coupon advertisement money:


We get such types of coupons when we transact on these apps. Either these coupons are chargeable or if these are free then probably company pays to these apps to promote their business by providing coupons and they probably be earning from other advertising methods too.


3. Customer database:


Customer database plays a vital role in a better growth of company. Company can use their database in many ways to promote their own business or to advertise other business. So, to attract new customers, they generally provide large cashbacks. They also get to know your payment method, shopping habit and patterns of spending money across various categories. They are very useful for advertising and recommendations.


4. Providing offers:


The favourite way of attracting customers is to give them cashbacks, not a discount because the customer will return to use cashback and then again will get some cashback and the cycle goes on. More they use the service, more they get habituated to the service and more will the platform be able to do business.


5. Gateway charges:


Paytm charges gateway service from both, the customers and the shopkeepers who are receiving the payment through paytm. But it charges more from shopkeepers than buyers because they sponsors the app to pay and in return, the app provides them easy customers, and for the customers, the app charges for keeping wallet balance and spending it.


Paytm is indeed a big brand now and is still playing it's monopoly in the e-commerce solutions. From the beginning till now, it is still one of the most favored and trusted e-wallet application. Hence, for a successful business, perfect competition isn't a right path, monopolistic competition is the best path.


- Gurjit Singh Bitta

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