“The last five years were an opportunity for those who were capturing Indian consumers, because people got internet connections with smartphones,” Paytm’s founder and CEO Vijay Shekhar Sharma tells me, his easy chuckles complementing the sunny poolside of a Delhi hotel. “The next five years are an opportunity for companies capturing Indian small and medium businesses (SMEs) as they begin to understand how important smartphones are to their businesses.”
Like all entrepreneurs, the Paytm founder is in the habit of predicting the next big thing. What sets him apart though is a nimbleness to welcome the unexpected with equal alacrity.
The latest instance is the cash crunch in India, following the sudden withdrawal of high denomination currency notes and scarcity of replacements. This was a windfall for Paytm, which started seeing half a million new users on its digital wallet every day.
As a startup, sometimes you take calls without looking at all aspects of a decision.
The knee-jerk reaction would’ve been to chase more consumers to grab the moment. What Paytm did instead is to focus on enabling merchants to use the wallet, which would in turn pull more consumers. It launched a new feature to let merchants who don’t have card-swiping machines to accept card payments on their wallet. This had to be put on hold the very next day when card companies raised a red flag over security, but it showed Paytm’s nimbleness to align a new opportunity with its longer-term goal to capture SMEs.
Some may criticize Vijay for being hasty with the new feature, but he’s never one to die wondering. “Not every day do you get a chance like this,” he points out. “No company in a digital payments business model would’ve figured that one day currency would be asked to go.”
It also sums up Vijay’s attitude to being an entrepreneur. “You’re a startup, you’re taking chances anyway,” he says with his characteristic grin. “Why not take a bigger chance when luck comes your way? As a startup, sometimes you take calls without looking at all aspects of a decision. Let’s find out [if it works].”
Rewards of perseverance
Fortune favors the brave, goes an old adage. And Vijay has made many a bold prediction ever since he founded One97 Communications at the turn of the millennium to offer astrology services to a telecom operator in Delhi. Other services followed, from gaming and content subscriptions to SMS apps. Paytm came up in 2010 for topping up phone credits. This was long before the smartphone boom kicked in.
“We built a mobile business when smartphones [for the masses] were not there. Mobile payment was not supposed to be an opportunity because this is a cash country,” Vijay observes on how this has turned in the opposite direction.
Paytm has earned a series of labels over the years: from SMS services to phone top-ups to a mobile commerce and fintech company. Vijay now simply calls it a mobile internet business as possibilities have exploded over the past couple of years, especially after a US$680 million funding infusion from Alibaba in return for a 40 percent stake.
Mobile payment was not supposed to be an opportunity because this is a cash country.
It’s mind-boggling to think the same man had given up 40 percent of One97 for INR 800,000 (US$11,740) a decade earlier to keep his company afloat. But Vijay remains grounded. “I started in 2011, Alibaba started in 1998. How small we are in comparison! Don’t you see the pain in that?”
It has been a long struggle. Born in an era when Indian companies were looking to go global, he focused on the domestic market and waited patiently for the India story to unfold. And now it’s unfolding so fast that he needs all his agility to stay in the game.
Vijay interrupts the conversation to dart across the poolside and fetch a cup of tea for himself, chatting with three people on the way. I notice how nimble he is on his feet, despite his slightly rotund figure. It strikes me that he personifies Paytm.
Seizing the moment
Both Vijay and Paytm have had to be nimble and flexible to ride out “critical junctures” one after another, from launching a wallet to raising big money to grabbing their moment with demonetization.
Vijay was in Hong Kong on the evening of November 8 when the Indian prime minister’s announcement withdrawing high-denomination notes came on TV and immediately went viral on the net. His team back home started putting together a full-page ad for the next day’s newspapers to tell people how Paytm would help them switch to digital payments. “No,” Vijay told them. “This moment is bigger than that.”
What followed was an ad congratulating Prime Minister Narendra Modi for his bold push for a digital India. It caught the ire of rival politician Arvind Kejriwal, who made veiled allegations against the PM and the “biggest beneficiary” of demonetization. Vijay’s response on Twitter was a knockout: “Dear Sir, The biggest beneficiary is our country. We are just a tech startup, trying to solve financial inclusion & make India proud.”
Customers just want an easier and flawless way to make payments and transfer money.
Twitter battles and newspaper ads apart, there was frantic work going on behind-the-scenes. Earlier, Vijay had rebuffed card companies that wanted to be on the Paytm platform to reach its users. Now, overnight, he wanted card payment options on Paytm.
He was no longer thinking linearly about growing the 160 million users on Paytm. He was thinking of the hundreds of millions of others who didn’t have Paytm in their phones, but did have bank accounts and debit or credit cards. They would all face the problem of making payments to merchants who had no card-swiping machines. If Paytm could solve their problem, it had a potential for exponential growth.
Although Paytm’s card payment feature has got blocked for the time being, the push to onboard merchants to Paytm continues on a war footing. Here too, the approach is the opposite of the position Vijay had taken earlier.
Only the nimble can survive
“I was against offline payments, because I thought it’s better to solve a problem when the consumer and seller are both online,” explains Vijay. “There’s a lot to do in the online world, after all.”
The offline play remained peripheral until Vijay stepped into Alibaba’s world. In China, he saw the ubiquity of QR codes for mobile payments, and the penny dropped. Last year, Paytm introduced QR codes for merchants which customers could scan for payments. It claims to have enabled a million offline merchants to accept digital payments via QR code.
I started in 2011, Alibaba started in 1998. How small we are in comparison!
Now, the Indian government has asked Visa, Mastercard, and RuPay to come up with a common QR code for merchants to accept cashless payments. Customers can then scan the QR code with their preferred card payment gateway app.
In such a fluid space, only the nimble can survive. Vijay believes startups will build out new systems faster than banks which “lag in work flow.”
“Customers just want an easier and flawless way to make payments and transfer money,” he points out.
We’re interrupted by Paytm people who want to drag him away, but he wants to carry on with the interview. “Take a seat,” he tells them. “You will learn something.”
New, new possibilities
Paytm is on the threshold of much bigger things, which will test Vijay’s agility to the hilt. The huge expansion of its consumer and merchant user base following demonetization opens up all kinds of possibilities because of the “network effect.”
Vijay sees Paytm evolving rapidly from handling payments to providing financial services. “I can help a shopkeeper with loans with his payment records. I can upsell a product like insurance or provide wealth management. It opens an immense market.”
It’s not just the consumer-merchant user base Paytm is targeting either. APIs (application programming interfaces) create all sorts of possibilities. SaaS (software-as-a-service) companies, for example, have always found it hard to target the domestic small and medium businesses because of the difficulty of collecting recurring subscription payments. This could suddenly become much easier.
I don’t know what solution we’ll come up with tomorrow… We’re like ether.
Paytm also has a licence from the Reserve Bank of India to launch a “payments bank” – a new entity in India where the bank is restricted to payments. This is more convenient to use than a standalone digital wallet which has a low storage cap and requires frequent replenishment from a bank account. Once the wallet is integrated with its own bank, Paytm becomes much more user-friendly.
It’s this rapidly widening horizon which prompts Vijay to describe Paytm simply as a mobile internet company these days. “I don’t know what solution we’ll come up with tomorrow. O2O, top-ups, payments, services, content… we’re like ether.”
If Paytm pulls it off, it could also have a ripple effect on the Indian startup ecosystem as a whole. The consumer internet space has attracted huge funding rounds, but its poster boys Flipkart, Snapdeal, and Ola have been cutting a sorry figure of late in the face of global rivals Amazon and Uber. A Paytm slam-dunk would reaffirm the faith of believers in Indian consumer internet startups.
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