Paytm ventures into payments banking

The Dollar Business Bureau

All eyes have been on Paytm's fortunes since November 8, 2016, the day 80% of India's hard cash lost its value. Having cashed in on this well-timed opportunity, Paytm comes under spotlight yet again for its ambitious expansion plans.

After revolutionising the e-commerce industry by making bill payments a one-click job, mobile wallet provider Paytm has ventured into payment banks. The move to enter the uncluttered space of payments banking should work in favour of Paytm as the mobile wallet industry is already clogged with competition from MobiKwik, PayU and others.

Following RBI's approval, Vijay Shekhar Sharma, founder of Paytm, proudly announced that Paytm is all set to launch its payments bank. Operations are likely to commence as early as February 2017 with the launch of its first branch in Noida, UP.

Strictly restricted to deposits up to one lakh per account, RBI conceptualised the model of payment banks as a measure to boost financial inclusion. With mobile banking, online banking, ATMs and debit cards in its ambit, payments banking has a considerably wide scope even without the much-coveted lending operations that are out of its reach.

Among the eleven enterprises that were given an approval by RBI in 2015 to start payments banking, Paytm is the first one to step into the arena, bringing competition to Airtel, the only established name in the business so far.

Vijay Shekhar Sharma will continue to hold majority stake after major restructuring undertaken by One97 Communications, Paytm's parent company. Although China's Alibaba group has holdings as high as 40% in One97 Communications owing to its 680 million dollar investment in the company, it will not have a direct shareholding in the payments bank.

Huge marketing and advertising investments made by Paytm so far have definitely bestowed it with a generous user base which has exponentially grown in the past few months, but profitability still evades the start-up despite capturing massive investments from the likes of Ratan Tata and the Alibaba group.

As Paytm inches towards making an indelible mark on the payments technology scene, one step at a time, it comes across as an ebullient new player trying to make its own place among the big financial brands of the country. Let's hope this fervour favours the economy in terms of benefits such as financial inclusion and new, innovative, efficient financial services for all.