Paytm - Backed by China’s Alibaba Group, its affiliate Ant Financial and most recently, the Japanese telecoms and tech investment group SoftBank. As India’s largest digital payments and m-commerce platform, Paytm continues to prove an increasing threat to Indian Banks and FinTech players alike.

1. Dario de Wet
© Dario de Wet
Case Study Overview

2. • Founded in 2010 by Vijay Shekhar Sharma.
 Payments and Commerce.
 US$135mn within wallet ecosystem.
 ~630% growth to 220mn wallet users over two years (700 000 new users added on one single day).
 Initially offered mobile and digital television (DTH) recharging only (Control ~30% of Indian recharge market).
 Consumer brand of One97 Communications.
• Diverse service offerings:
 Book tickets: Bus, trains, flights, movies, hotels.
 Buy: Online shopping (Offline payments accepted).
 Pay: Uber.
 Postpaid payments: Mobile, broadband, insurance premiums, loan EMI payments, gas bills, water & electricity.
 Recharge: Mobile phones, metro cards, DTH cable, data cards.
• SoftBank Group invested US$1.4bn in Q2 2017.
 US$1bn (14.2%) in new shares and US$400mn in existing shares.
 Alibaba Group previously invested US$680mn (40% stake) Q4 2016.
 Ant Financial (20%) & Alibaba (20%) – Alibaba Group (40%) as at Q4 2016.
‘Pay Through Mobile’
US$7bn Valuation (Q2 2017)
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3. • Web-commerce & App-commerce:
 Website, mobile website, mobile app (Android/iOS) and affiliate networks (blogs, coupon websites and review websites).
 Marketplace model – X% seller’s commission on total sale value (pre-tax).
 Commission ranges between 0% and 20% (product dependent).
• Payments & Wallet Integration and Transaction Discounting Rate (TDR):
 Commission-driven.
 1. Payment gateway commissions average between 1.8% and 2%.
 Debit card ‘Merchant Discount Rate’ (MDR) charges capped at 1% (RBI enforced).
 2. Mobile recharge commissions vary according to MNO structure:
 National MNO: 2.5% - 3% (large transaction volumes).
 SME & New Business: Up to 5%.
 Aggregators (Oxigen, Euronet and Cyberplat): Less than 5%.
• Seller Services:
 Listing fee & onboarding fee (doorstep service to explain online selling process).
• Payments Bank:
 See slide 8.
• Merchant & Micro Lending:
 See slides 9 & 10.
Revenue Model
“The aim is to build a new business model in the banking industry, focused on bringing financial services to
hundreds of millions of unserved or underserved Indians.” - Vijay Sharma, CEO and Founder.
© Dario de Wet

4. • Higher daily transaction activity than all of Indian E-commerce/M-commerce combined.
 Cleartrip, Flipkart, Jabong, MMT and Yatra (Flipkart has acquired eBay’s India operations).
• Cashback-driven user stickiness.
 40% to 60% cashback incentives on all products ( industry norm ~5% to 10%).
 ‘Cash’ returned into mobile wallet - Enhances organic Paytm ecosystem growth.
• Maximize revenue-generating opportunities (interest-yielding prospects).
 Time lag between money-received from customer and money-paid to vendor (T&Cs).
 Paytm earns interest on the outstanding amounts.
 Paytm marketplace: The money owed to the merchant is only paid once the return-period has passed.
Revenue Model
“The marketplace model generates merchant and consumer transaction history, which gives worth to our
financial services, business and bank.” - Vijay Sharma, CEO and Founder.
© Dario de Wet

5. Competitor Matrix
Wallet E-Commerce Bookings Deliveries Taxi Offline Shops P2P Recharge
Paytm Paytm, eBay, Croma
Paytm, Booking.com,
IRCTC, BookMyShow,
MakeMyTrip, Cleartrip,
PVR Cinemas
Swiggy, Zomato Order,
Grofers, BigBasket
Uber, Meru ✔ ✔ ✔
Airtel Money eBay, Myntra BookMyShow - - ✔ ✔ ✔
Vodafone mPesa eBay, Walmart India BookMyShow - - ✔ ✔ ✔
Jio Money eBay BookMyShow - - ✔ ✔ ✔
FreeCharge SnapDeal, Jabong IRCTC, BookMySHow Swiggy, Zomato Order Meru ✔ ✔ ✔
MobiKwik * eBay, Jabong, Myntra
MobiKwik, IRCTC,
BookMyShow,MakeMyTri
p, Cleartrip, PVR Cinemas
Swiggy, Zomato Order,
Grofers, BigBasket
Meru ✔ ✔ ✔
Ola Money
eBay, Jabong, Myntra,
Croma
MakeMyTrip,
BookMyShow, Cleartrip
Zomato Order, Grofers,
BigBasket
Ola ✔ ✔ ✔
PayUMoney **
eBay, Jabong, Myntra,
Croma
MakeMyTrip,
BookMyShow, ClearTrip
Zomato Order, Grofers,
BigBasket
- ✔ ✔ ✔
ItzCash Yebhi
BookMyShow,IRCTC,Yatr
a,Cleartrip,Redbus
- - ✔ ✔ ✔
Oxigen eBay, Croma
BookMyShow, IRCTC,
PVR Cinemas
- - ✔ ✔ ✔
PayPal TBD TBD TBD TBD TBD TBD TBD
Amazon TBD TBD TBD TBD TBD TBD TBD
WhatsApp TBD TBD TBD TBD TBD TBD TBD
* Offers physical cash pickup and wallet-loading service (limited to Delhi, Gurgaon, Mumbai and Jaipur regions only).
** Strong focus and presence amongst SME and other small service providers. Also serves as a payments gateway, and is launching a rental-free POS terminal to improve offline penetration. © Dario de Wet

6. The Art of Timing
• Financial inclusion has become Paytm’s primary focus.
 Aim to financially empower ~0.5bn Indians through Paytm platform.
 200mn+ users (~15% of total Indian population).
 Accepted by 3mn+ merchants (primary focused on the 50mn SMEs within the Indian economy).
• Narendra Modi (Indian Prime Minister) announces demonetization of ₹500 and ₹1000 notes – November 10th, 2016.
 Combat black market, increase transparency and digitize the economy.
 86% of India’s cash went out of circulation overnight.
• The benefits of demonization.
 20mn+ new Paytm users since announcement.
 1 000% growth in funds added to Paytm wallets.
 300% growth in Paytm app downloads.
 500% increase in weekly transactions per user [18 transactions per user per week (previously at 3 weekly transactions per user].
“For us, the journey to enable fellow countrymen with digital payments and become a part of financial
inclusion has only started right now.” - Vijay Sharma, CEO and Founder.
© Dario de Wet

7. Paytm Payments Bank
• Bringing financial services to all unserved and underserved Indians.
 First virtual wallet to be ‘green lit’ by the Reserve Bank of India (RBI).
 Accounts, loans, insurance and other financial products.
• Traditional bank – CASA (current account/savings account) ; Payment bank – WACASA (wallet/current account/savings account).
 Can accept deposits from individuals and SME’s up to ₹ 100 000 per individual customer.
 Cannot issue traditional loans or credit cards – Debit cards only.
• RBI’s main focus is on deepening financial inclusion.
 21 entities were ‘green lit’ in-principal last year (11 payment banks and 10 small finance banks).
 Telenor Financial Services, IDFC Bank, Tech Mahindra, Cholamandalam Investment and Finance Company – detracted payments bank license (business decision).
 Only Airtel (November 2016) and Aditya Birla Idea Payments Bank (1H 2017) remain.
• WhatsApp.
 Biggest threat.
 ~160mn MAU (monthly active users) in India.
 UPI-based payment/transfer interface.
“I just need consumer data and this data allows us to build superior financial services, micro loans, advances
for merchants, cash advances, insurance and even wealth management .”
- Vijay Sharma, CEO and Founder. © Dario de Wet

8. “Merchants can now get a digital footprint at zero cost, courtesy which they will get access to low-interest
loans.” - Kiran Vasireddy, Senior VP.
Merchant Lending
• Collateral-free working capital loans for merchants (via FSP partnerships – Capital Float, Aditya Birla Finance & Capital First).
 ₹ 50 000 – ₹ 20 000 000 (dependent on eligibility and working capital requirements).
 12% - 24% annual interest, payable over 2 to 24 month period.
 SME Focus - Retail stores (kitanas), taxi drivers and milk cooperatives.
• Credit scores using transactional data as stimulus.
 Marketplace data to create credit profiles (e.g. value and volume of transactions).
 Driven by Alibaba investment and subsequent success of Alibaba’s Sesame Credit in China.
• Partners have full loan sanctioning rights.
 Partnership with Capital Float (confirmed), Aditya Birla Finance (interest shown) and Capital First (interest shown).
• Current KYC process – Laborious.
 KYC is required for all transactions above ₹ 20 000 (RBI regulatory requirement).
 Visit Paytm KYC center / Request visit to your home.
 Must have RBI-approved documents (Aadhar card, passport, driving license, voted ID card or NREGA job card).
 PAN card number only mandatory for single transactions worth more than ₹ 50 000.
 Unlimited transfers once KYC approved.
© Dario de Wet

9. Micro Lending
• Collateral-free micro loans (via FSP partnerships - ICICI Bank).
 ₹ 5 000 – ₹ 20 000 (dependent on eligibility and working capital requirements).
 No KYC required (only for transactions above ₹ 20 000).
 TBD interest rate.
 ~30 minute transaction time.
• Credit scores using transactional data as stimulus.
 Marketplace data to create credit profiles (e.g. value and volume of transactions).
 Large emphasis on electricity and mobile bill payment history.
• Rival products.
 MobiKwik has entered into a partnership with consumer-lending marketplace (CashCare), to pilot its micro-loan service.
 ₹ 500 – ₹ 25 000 to 25 000 users.
 Pilot ran through April-May 2016.
© Dario de Wet

10. • Mobile Insurance
 Free protection (to the lesser of ₹ 20 000 or the last recorded balance) against unlawful debits and theft from Paytm wallet accounts.
• Digital Gold
 Partnered with gold refiner MMTC-PAMP, allowing customers to electronically trade gold.
 “Gold is the preferred form of investment for Indians” – World’s largest consumer of gold (24 000 tones worth US$900bn stocked across homes and bank lockers).
 KYC is required for all transactions above ₹ 20 000 (as per traditional Paytm KYC requirements).
• Paytm Food Wallet
 Instant tax-free food allowances for businesses.
 RBI (Reserve Bank of India) has asked all meal coupon operators to be digitized by the end of 2017.
 Allows employers to pass-on food allowances to employees under the government-approved tax-redemption bracket.
 Additional employee benefits include: cashbacks, discounts and exclusive deals.
 ‘Nearby’ function added to allow users to locate closest food outlets.
Innovation: The Path Forward
“We are on course to introduce a money market fund, credit scoring system and other functions similar to the
architecture of Alipay by 2020” - Vijay Sharma, CEO and Founder.
© Dario de Wet

11. Contact Details
Should you want a PDF version of this report, to connect and/or for speaking enquiries; please reach out using the details
below:
E Dario.dewet@gmail.com
L Linkedin.com/in/dariodewet
P +2760 694 0573
© Dario de Wet