Billion Dollar Unicorns: How Will Paytm Navigate Rising Competition?

India’s digital payments market is expected to grow five times to reach $1 trillion by 2023. Following the acquisition of Flipkart, digital payment company Paytm has become the most valuable startup among Indian Billion Dollar Unicorns despite struggling with profitability. 

Paytm’s Journey

Paytm’s parent company One97 Communication was founded in 2000 by Delhi College of Engineering graduate Vijay Shekhar Sharma. Initially, the company offered live astrology services for a GSM operator in Delhi. Soon after, it launched SMS-based applications, gaming applications, and subscription-based content services.

By 2010, Vijay had figured out the importance of mobile phones in the country and launched Paytm as an online recharge portal that allowed subscribers to purchase pre-paid recharge cards for their mobile phones. Inspired by the initial success, Paytm started offering recharges for Datacards and even tickets for the Delhi Metro. Within a year of its launch, the company was handling over 500 million subscribers per day.

To leverage its user base, Paytm launched an e-commerce platform Paytm Mall and Paytm Wallet for online payments. It was the first company to popularise payment using QR code and when digitization was forced on an unprepared Indian market, Paytm took off in a big way.

Today, Paytm has over 320 million users and 7 million offline merchants. It allows consumers to make payments for their mobile phone, electricity, gas and water bills, book bus tickets, train, and movie tickets, pay fees for associated schools and colleges, book amusement park tickets, and even make purchases from its online marketplace. It processes over 1 billion transactions per quarter and adds 10 million new users every month. About 50% of its transactions are from small towns and villages. Looks like the demonetization opened up this market for Paytm in a big way.

Paytm’s Expansion

Last year, the Paytm Payments Bank Ltd was launched. Following this, One 97 Communication transferred the Paytm wallet business and all the wallet accounts to the bank. Paytm Payments Bank was India’s first bank with no charges for online transactions and minimum balance requirements. From June this year, the RBI has prohibited Paytm Payments Bank from opening any new accounts and wallets on account of violation of certain licensing conditions and operating guidelines. However, no restriction has been placed on the bank for servicing its existing customers.

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