After establishing its presence in Canada and Japan, Paytm is looking to expand to more developed markets, the digital payments company announced during this year’s edition of the World Economic Forum in Davos. This is a pattern many other Indian startups have followed, including InMobi, Oyo, Ola and Zomato.
Paytm, founded in 2010, is backed by China's Alibaba Group, Japan’s SoftBank and Berkshire Hathaway. It faces intense competition in India from Google Pay, WhatsApp Pay and state-backed Unified Payment Interface (UPI), which is expected to see digital payments touch USD 1 trillion by 2023. Paytm’s global play may help diversify the risks it faces as it grows bigger in India amidst regulatory hurdles and growing competition in the payments market.
Paytm rolled out its bill payment services in Canada in March 2017. Last October, it entered Japan in partnership with SoftBank and Yahoo! Japan with the launch of digital wallet PayPay. Going to Canada and Japan seemed the logical step the former has a huge chunk of Indian population, while the latter is SoftBank’s turf. The firm’s long-term goal, however, is to reach the US shores. “(Expansion to) southeast Asia could happen but that’s not my personal ambition. My personal ambition will be to make America great again," Paytm founder Vijay Shekhar Sharma told the media in November 2018.
Harish HV, partner of the India leadership team at Grant Thornton, said the move reduces risks when there are regulatory changes in India that impact the business. “The predictability of regulations is much better outside as India sometimes comes up with regulations on an immediate basis.”
After the Supreme Court banned private companies from using Aadhaar to complete the Know your customer (KYC) process, mobile wallet companies including Paytm are struggling to meet the Reserve Bank of India’s February-end deadline to complete verification of all customers. A recent report in Economic Times estimates that 80% of transacting users of mobile wallet companies are yet to comply with KYC. Rather than submitting various identification proofs, users prefer to use UPI-enabled payments.
Over the last few years, the Paytm group has expanded to payments bank, wealth management and e-commerce, among other things. “The fight is no more about one company, it is about ecosystem players,” Sharma told Reuters in a September 2018 interview.
Ujjwal Chaudhry, associate director, consumer internet, RedSeer, said, “Paytm is possibly targeting a larger unbanked or under-penetrated population within countries like Canada and Japan. They have had an R&D centre in Canada for three to four years, so it makes it easier for them to enter, whereas Japan is a highly cash-driven economy, so there is a large opportunity to disrupt. Secondly, existing players in these countries might not look at these (under-banked) as a significant opportunity, because the larger population is more mature in terms of financial services. It makes a very good case for an Indian company to take up those markets.”
The other big Indian names which have made international debut include ride-hailing company Ola and hotel chain Oyo. Ola started operations in Australia in January 2018, while Oyo has expanded to Nepal, Malaysia, Sri Lanka, China and the United Kingdom, among other countries. Chaudhry also noted that the learnings here can be leveraged across other emerging nations as well. That is why we see companies solving India-specific problems in sectors like fintech and edtech go global.
The eight-year-old One97 Communications Ltd, Paytm’s parent company, isn’t profitable yet. In FY 18, it posted a loss of Rs 1,490.7 crore (USD 208.6 million), while Paytm Mall, which operates under the separate entity Paytm E-commerce Pvt. Ltd, reported a net loss of Rs 1,787 crore (USD 250 million).
Earlier this week, Sharma rubbished rumours about his company’s plans to shut down Paytm Mall due to mounting losses and falling market share, adding that he expects its recently launched wholesale B2B arm to generate approximately 15% of Paytm Mall’s business in the coming years.