Digital Lenders Use Tech To Improve SME Loan Repayments Amid

Lockdown

These fintech firms are using past payment behaviour and current transactions to validate
customers facing genuine difficulties. Given the likelihood of repayment delays by small and
medium enterprises following the 21-day lockdown implemented to contain the spread of
coronavirus, digital lending start-ups in the country have begun upgrading their technological
capabilities to enable borrowers to service their loans on time without any physical interface.

"Due to the disruption caused by the current lockdown, we do see some of our clients facing
temporary difficulties in repaying their loans," said Alok Mittal, managing director and CEO
of Indifi. The start-up may validate such cases based on data points such as past payment
behaviour, current transaction trends and other information, he added.

The number of digital lenders providing working capital loans to SMEs in the country has
risen in recent years. Though the total amount disbursed by such lenders is not more than Rs
10,000 crore as of now, their existence has given many small entrepreneurs access to loans
that were otherwise not available to them from traditional financial institutions.

However, the 21-day lockdown announced by the government has put these small businesses
in a spot, as they face severe cash-flow issues with their operations coming to a standstill.
"The cash flow and businesses have literally halted," said Manish Lunia, co-founder to
FlexiLoans.com.

MSMEs, which are seen as the backbone of the Indian economy, account for 29.80 per cent
of GDP, according to the latest annual report of Ministry of Micro, Small and Medium
Enterprises.

"The travel and hospitality business will go through its own stress cycle, but there is likely to
be a boom in pharmaceutical and diagnostic labs," said Harshvardhan Lunia, co-founder and
CEO, Lendingkart. He also said, it has been a ‘struggle’ to reach out to customers in tier-I
and large towns ever since the 21-day lockdown kicked in last Tuesday.

However, these new-age lenders are ramping up their technological prowess to reach out to
clients and improve the collection process. "This involves targeting relatively low-hanging
fruit like using a dialer to handle the increase in expected collection volumes, to using
sophisticated data analytics to determine the most appropriate day of the week to collect the
loan installment," Mittal of Indifi said. Indifi has over 25,000 borrowers across the country.

FlexiLoans.com has been working on a customer communication programme that involves

informing borrowers about the the options available to them, such as the three-month
moratorium or other arrangements. "We are sprucing our digital collection ecosystem for
smart and digital recoveries in these times," Lunia of FlexiLoans.com said.

1
Veena Kumar
Lunia of Lendingkart, whose company has disbursed over Rs 5,000 crore loans till date, said
around 90 per cent his firm's customers are in the 23- to 45-year age bracket. They are
generally tech-savvy and communicate through phones regularly. "So, by design, digital
lenders are in a better position during these times (of the pandemic) than a lender who
operates through a legacy branch model," he says.

The Reserve Bank of India last week announced a moratorium of three months on payment of
instalments with respect to all term loans, outstanding as of March 1, 2020.

BS: Tue, March 31 2020.

The Nuts And Bolts Of Paytm's Latest Bet To Boost Merchant Retention
Here are the nuts and bolts of Paytm's latest bet to boost merchant retention and revenues
For every transaction worth Rs 100 via the PoS facility Paytm pockets 30 paise

 Paytm E-commerce reports net loss of Rs 1,171 crore, revenues jump by 25%
 Paytm blends analytics, offline communication to woo small town merchants
 Paytm raises a billion dollars at a valuation of $16 bn, plans expansion
 Paytm parent One 97 Communications' loss doubles to Rs 4,217 crore
 eBay makes festive prep and bulks up global offers on Paytm Mall

It’s been around a month that digital payments and financial services
platform Paytm formally launched its all-in-one payment device for merchants, a subscriber
group it has for a while identified as the main driver to its journey towards profitability.

Founder Vijay Shekhar Sharma sees this as a strategy wherein his firm offers convenience
and flexibility in payment management in exchange of merchant retention and hopes to bring
this captive subset under the ambit of Paytm Payments Bank. The representatives engaged in
the distribution of the devices are trying to get the adopters to open current accounts
in Paytm Payments Bank to help it scale up.

If and when that happens, the revenue would be consolidated. However, the other aspect of
the strategy — widening the payment ambit and pocketing more revenues — is replete with
challenges even if one takes Paytm’s claims on market share on face value (Sharma says it
holds a 54 per cent share in peer-to-peer payments and an even skewed 66 per cent in the
merchants category.) Sharma sees potential in a huge base and repeated transactions.

The company aims to distribute these devices so Paytm enables the merchants to use those
for any kind of payment — from wallets and UPI using its own platform or those of rivals
such as Amazon Pay and PhonePe, and also credit and debit cards — to a million merchants
(from a total base of 16 million) by the end of this calendar year. “Right now, the digital
payment market is evenly distributed among wallets, UPI and credit or debit cards being used
through point of sale or PoS machines.

2
Veena Kumar
Our machine allows them to do all that on a single device and we look to earn commission
wherever possible,” says Sharma. Raj N Phani, founder of Zaggle, a fintech company, says
UPI has almost killed the wallet. “So, no one is inclined to make a wallet payment and pay a
commission. You (a fintech player) don’t make money on UPI transactions. Only cards are
left then and hence the possibility of cornering significant revenues is really small. “Sharma
explains the card transaction math.

For transaction worth every Rs 100 via card payment facility added in these devices, Paytm
pockets 30 paise (barring RuPay card transactions which are free). “Also, it prevents the entry
of our fintech competitors into those outlets for they are not providing an integrated payment
solution that we are.” Again, the sheer number is where Paytm sees the opportunity but Phani
fears it will not affect the coffers significantly as there are chances that the total number of
those using PoS machines at present is a fraction of the one million that Paytm has in
mind.Then there is the mammoth challenge of convincing the one million small and medium
enterprise (SME) owners to get these machines installed at their outlets replacing the earlier
QR codes and in many cases, PoS machines made by other manufacturers.

It may be added here that the merchant has to pay a certain amount (Rs 12,000-15,000)
upfront to acquire one such machine. This covers the hardware and cloud software installed
and additionally, brings in a subscription fee of Rs 500 per month to Paytm. A business
owner is given the choice to pay the subscription fee either per month or make bulk payments
in advance.

Phani sees this as an additional deterrent and believes that the shopkeepers may be unwilling
to pay and recommends that Paytm distributes these machines for free to start with.

Fresh Swipe

 Paytm feels that while peer-to-peer transactions widen the base, they don't
bring much revenue. It also finds it tough to keep up with discounts offered by
new players

 It is offering the all-in-one machine to its merchant base. It aims to distribute

machines to 1 million merchants by 2020 end

 Bringing cards, mobile payments and UPI under one umbrella and enabling
payments through competing products in the spaces it operates in allows the
company to be flexible and adapt to the market demand

 This step, if successful, will help company to open more accounts for its
Payments Bank

 Experts see the road to revenue conversion a tough ask because of the
continuing dominance by cash, possible reluctance of merchants to invest in
new machines and difficulty in maintaining them

3
Veena Kumar
Sharma rejects such apprehension. He says that in his initial experience, when as many as
150,000 all-in-one machines were provided to merchants, the merchants readily accepted
them for the convenience they offered. “So we found that for those who did not have a PoS
machine, we became the default choice. Those who had another, started using our machine
because it could be used for all kinds of transactions.

So the second machine is expected to die a natural death. “When Business Standard asked the
well-travelled Sharma whether he or his research team came across any such device
elsewhere on the globe, he said the product was developed keeping the unique Indian needs
and the current market dynamics in mind. These machines have been codeveloped by Paytm
with some international players, says Sharma while withholding the partners’ names due to
“competitive reasons”. “Additionally, since we realise that there is still a lot of cash being
used, we have provided the option of a ledger entry which will help them with better
accounting.

Though that does not bring any money, we expect to bring in a behavioural change once they
see the convenience in digital,” he says. But Phani does not see cash being replaced anytime
soon. “Imagine a small shop full of customers during the hot and humid Indian summer.

Can you see a machine taking the load of so many repeated transactions? Maintenance would
be a huge challenge going ahead. Plus, cash is very entrenched in our system. A
demonetisation-like factor can spark only a temporary change. I don’t see that windfall
happening for Paytm again. Revenue goals are not realistic,” he sums up.

Business Standard: Sun, March 01 2020.

Google Pay Leads Upis In Digital Payments, Amazon Pay Most Favoured
Wallet
All the findings in this report are based on transactions held on the Razorpay platform from
January 2018 to December 2019
 Walmart-owned digital payments firm PhonePe hits $95 bn annual TPV run-
rate
 Pay by app: The risks and rewards as Indians chuck cash, go digital
 Digital payments: Google wants US Fed to replicate India's UPI model
 Paying your income tax may soon become as easy as swiping a card at a shop
 PhonePe launches digital ATM, users can withdraw cash from merchant shops

Among UPI (unified payments interface) apps, Google Pay contributed 59 per cent and
Walmart-owned PhonePe facilitated 26 per cent, followed by Paytm (7 per cent)
and BHIM (6 per cent) in digital transactions in 2019, according to fintech firm Razor pay’s
report ‘The Era of Rising Fintech.’

4
Veena Kumar
The report provides an in-depth study of a rapidly evolving fintech ecosystem in India and
analyses the patterns of digital transactions and the impact of industry innovations, such as
UPI, which are harnessing a digitally inclusive economy. In 2018, Google Pay contributed 48
per cent and BHIM facilitated 27 per cent in digital transaction, followed by PhonePe (15 per
cent) and Paytm (4 per cent).

Also, Amazon Pay was the most preferred wallet among consumers (33 per cent), followed
by Ola Money (17 per cent) in 2019. While the usage of cards (46 per cent) and Net
banking (11 per cent) saw a decline in 2019, down from 56 per cent and 23 per cent
respectively in 2018, UPI (38 per cent) went up from 17 per cent in 2018.

“A growth of 338 per cent in digital payments in a year (2018-19) is massive. It’s the highest
we’ve seen so far in the country. Among other factors that led to this exponential growth, it
was UPI which rose in prominence, dominating other modes of transactions,” said Harshil
Mathur, CEO and co-founder of Razorpay. “For the first time in the history of digital
payments, we saw UPI overtaking cards. UPI has become the preferred choice not only for
P2P(peer-to-peer) payments but also for P2M (peer-to-merchants) payments.”

All the findings in this report are based on transactions held on the Razorpay platform from
January 2018 to December 2019. According to the report, Bengaluru was among the most
digitised city (23.31 per cent), whereas Delhi, climbed up the ladder to the second spot (10.44
per cent) followed by Hyderabad (7.61 per cent). In 2018, Bengaluru scored 29.26 per cent
followed by Hyderabad (9.02 per cent) and Delhi (8.36 per cent).

In terms of the top States, in 2019, Karnataka saw the highest adoption of digital
payments (26.64 per cent) followed by Maharashtra (15.92 per cent) and Delhi NCR (13.01
per cent). The top 3 sectors in digital payment adoption for 2019 were food and beverage (26
per cent), financial services (12.5 per cent) and transportation (8 per cent).

“In 2020, the trust will be bigger than convenience in digital payments,” said Mathur. “From
banks to fintech’s and government bodies to payment networks, all these forces will need to
collaborate to build unique solutions aligned to amplifying customer trust,” said Mathur.

Business Standard: Mon, January 27 2020.

Cashe May Become A Digital Bank In Five Years, Says CEO Ketan Patel
Patel on how the fintech company plans to build its business, get a small finance bank licence
 Fintech start-ups chug along the loan growth path as banks, NBFCs falter
 Statspeak: Four reasons why FinTech adoption remains on the rise
 Fintech committee recommends new legal framework for consumer protection
 Fintech firm Mobikwik becomes operationally profitable, eyes IPO
 How fintech firms are disrupting the corporate banking ecosystem

5
Veena Kumar
Digital lender CASHe has based its business model on lending to millennials. It gives loans
of only one-year duration, and profiles customers using a combination of their current
financials and social media behaviour. The company is funded entirely by V Raman Kumar,
its founder and private equity investor. CASHe’s chief executive officer Ketan Patel spoke
to Raghu Mohan on how the fintech company plans to build its business, get a small finance
bank licence; and hopefully, be a pure play digital bank down the road. Edited excerpts:

Give us a sense of your digital lending business model?

We have tried to cover the ecosystem to the best of our ability for salaried millennials of ages
between 24 and 35 years. The maximum tenure of my loans is a year; be it for consumer
durables, two-wheelers or a travel loan. The equated monthly instalment for any kind of loan
is not more than 35 per cent of borrowers’ salary. I have to make it as comfortable as possible
so that they don’t have problems returning my money back.

This space is occupied by a few legacy banks, but not many others are in it. At this point, our
competitors are ‘Moneytap’ and 'Earlysalary’, but the difference is that while they are
focusing on a channel (product line), I am covering the ecosystem. I don’t want to own the
channel, but can I own the segment of 24 to 35-year old salaried millennials? The problem
for banks in this space is the credit history. How will you give out loans when the person
doesn’t have one?

And how have you gone about profiling customers?

You have alternative ways of judging such customers. We look at their mobile bills, at the
social data along with education and work experience. Or what we call the social loan
quotient (SLQ). The footprint says a lot about how we live and behave in the larger social
world, and we use big data and artificial intelligence. Look, what is the credit history
basically about? It’s about visibility. But the problem with credit history is that it is telling
you that the guy was good; and so, the future will also be good! What the credit bureau does
is diagnosis; what I am doing is prognosis. I am interested in your trend line; not your credit
score. You may have taken loans five years ago; and for some reason, would have defaulted
on a credit card also. And in the past five years, nobody would have given you a loan. But if I
were to check, there would not have been a single bounced cheque, and you are also paying
your bills on time.

We started around two years ago, and have given out 4, 00,000 unique loans. The monthly
strike-rate is 18,000 loans. My book size is churning fast — the outstanding loans are around
Rs 230 crore and the total disbursement till date is approximately Rs 1,200 crore.

Non-banking financial companies (NBFCs) are finding it difficult to fund their game.

How have you gone about it?

Banks are not lending to NBFCs because of asset-liability mismatch issues. But I am their
blue-eyed boy. I have 21 lenders to my platform and they are pleased with the book. I am

6
Veena Kumar
both lending and borrowing at the short-term. I will be able to churn these short-term loans
by the end of a financial year. And banks will know within six months as to how good or bad
my portfolio is.

What happens to this model if banks were to adopt the same approach as yours?

It will never happen! My average ticket-size is Rs 40,000. For the amount of work and the
expenses banks will have to incur to originate and service such loans, they will never make
any money. But I will make money on the first loan itself. If I remove all the charges other
than the cost incurred towards customer acquisition, I will make Rs 800 on every loan I give
out. On the sixth loan, I will break even. A bank will not (and can never wait) for six loans to
be given out to the same person to get it right. Again, 75 per cent of my customers come back
to me, and have in the past two years (since our inception) borrowed at least four times. Of
course, unless my loan is repaid, I never allow another loan to be given out. I cannot run two
parallel loans at the same time.

And just how do banks look at millennials?

You see, I am lending to millennials with salary accounts. The point is banks are not giving
money to their own salaried account holders! They always look at the CIBIL score. Now the
know-your-customer norms are the same, but their (banks) idea is like if he has a score of
750, then he is a good guy. Anything below, and that’s a bad guy. There are five crore
salaried people who file returns, and you have only around 110 million credit cards. There are
a good number of people whom banks just don’t want to cater to, or are not worth their while.
At a million customers with a ticket-size of Rs 40,000, we will be a billion-dollar company;
at valuations typically two times the book-size of Rs 4,000 crore.

Can you give a glimpse into the credit behaviour of millennials?

This generation doesn’t believe in saving at all! They don’t keep a single penny as savings. It
is all about the here and now. Take insurance. If you tell a 24-year old he is going to fall ill or
die, he will laugh at your face. But if you tell the same guy that he could lose his job
someday, he will get scared. If you sell job-loss insurance, he will buy. A millennial takes
loans for a holiday once year to travel within the country and abroad. And changes mobiles
every nine months.

Are you open to the idea of selling banks’ products to your customers?

Now, let me play the devil’s advocate. What stops me from being a digital bank five years
from now? You see, I am also looking at the CIBIL score on a regular basis from the time a
customer came to me even as I am creating my own score. We are talking to two banks. I am
going to eventually lose these customers after they have reached 35 years.

7
Veena Kumar
So, can we partner? I have told them to give me a small amount across the products they sell
on our platform. We will help them sell 10 products to a customer, but of the income, they
are making, give me a share of it since you don’t have to bear the acquisition cost.

BS: Wed, November 20 2019.

Will Sachin Bansal's Long-Term Bet In Financial Services Pay Off?
This September, the ace entrepreneur found the answer to that when he picked 94 per cent
stake in microfinance company Chaitanya Rural Intermediation Development Services

 Sachin Bansal to be CEO again, buys majority stake in microfinance company

 Flipkart co-founder Sachin Bansal in talks to buy Essel's mutual fund arm
 Tatas to infuse more funds into financial services firms TCFSL and TMFL
 NCLT rejects IL&FS Financial Services auditors' plea challenging 5-year ban
 Bain, TPG in talks to buy minority stake in Tata Capital Financial Services

After Sachin Bansal exited Flipkart in May last year, all eyes were on his next move. He did a
couple of small investments, but people who know Bansal closely are pretty sure that those
are not the things he would want to do for long. After leaving the e-commerce firm that he
co-founded in 2007, Bansal predominantly confined himself, over the next few months, in
trying to find out what are the next big sectors that could give him enough scope to scale and
solve the challenges, by leveraging the power of technology.

And this September, the ace entrepreneur found the answer to that when he picked 94 per
cent stake in microfinance company Chaitanya Rural Intermediation Development Services
(CRIDS) for around Rs 740 crore. “Post Flipkart, I took a break and then explored various
opportunities where I could apply my skills. I looked at health care and education and the
gaps that existed in these spaces,” said Bansal, while speaking at an event in Bengaluru this
week.

“Around late last year, I finally decided on financial services,” he added. Since then, Bansal
has taken over CRIDS as CEO and is driving everything from the front. His immediate plan,
according to sources close to him, is to scale up the company’s operations as quickly as
possible without making much investment in physical infrastructure and by leveraging
technology. The plan includes to scale CRIDS’ presence from the present five states to 10 as
quickly as possible.

“What Sachin is basically trying to do is to see how you can use technology to drastically
reduce costs and improve service delivery so that the cost of lending also comes down and
the returns get better,” said a source privy to his plans. Bansal has also made it amply clear
that besides microfinance, he is also going to broaden his playing field in the larger financial
services space sooner or later.

“What attracted me to this is the size of the opportunity. I think the level of under-penetration
that exists in any part of financial services is so high that India will need a lot more dollars, a

8
Veena Kumar
lot more start-ups than what we have today, to solve this problem in the next 1-15 years,”
Bansal said at the event.

As the country’s economy grows, he says, this will give rise to a number of people who will
fall in the “middle class” category. Many of them would also migrate to cities or launch
businesses which will open huge opportunities not just for credit but other financial
services as well. “Today, the problem is, they (the middle class) don’t have access to it
(financial products),” he says.

In the last five years, India has undergone a financial revolution of sorts. There are now a
dozen payment apps, UPI volumes have surpassed credit and debit cards, and top fin-tech
firms like PhonePe and Paytm are worth billions of dollars. A recent Boston Consulting
Group (BCG) report said over 1,000 fin-techs have come up in India over the last seven
years.

Unlike the bigger fintech companies, Bansal-run CRIDS is focusing on first-time, non-urban
users for its financial products. “I see a different kind of trend over here. In fact, firms in this
segment are profitable. It makes sense to solve for these customers.”

Chaitanya, which started in 2009, offers loans for vehicles, education and small businesses to
low-income consumers in five states. In FY19, it disbursed loans of around Rs 800 crore and
had total assets under management of Rs 567 crore, according to the company’s annual
report. “While business has been growing, he (Sachin) is now trying to bring in his learning
from running other businesses, and use technology as much as possible,” said the source.

Bansal is providing advice on adopting technology systems in all facets of business, for lower
cost and higher efficiency. CRIDS will also have something akin to an app to accelerate sign-
ups through the web. He is also reportedly working on proprietary credit scoring and
underwriting systems.

“This is the business which he feels is the future and has thus pumped in huge money and
resources as a strategic bet,” said the source. Given what he has achieved at Flipkart, it will
only be expected that he would make a resounding impact in the financial services space.
“What I have realised so far is that nothing is going to happen in the short term. You have to
take a long-term view,” Bansal added.

BS: Sat, November 16 2019.

The Nuts And Bolts Of Paytm's Latest Bet To Boost Merchant Retention
Here are the nuts and bolts of Paytm's latest bet to boost merchant retention and revenues.
For every transaction worth Rs 100 via the PoS facility Paytm pockets 30 paise.

 Paytm E-commerce reports net loss of Rs 1,171 crore, revenues jump by 25%
 Paytm blends analytics, offline communication to woo small town merchants

9
Veena Kumar
  Paytm raises a billion dollars at a valuation of $16 bn, plans expansion
 Paytm parent One 97 Communications' loss doubles to Rs 4,217 crore
 eBay makes festive prep and bulks up global offers on Paytm Mall

It’s been around a month that digital payments and financial services
platform Paytm formally launched its all-in-one payment device for merchants, a subscriber
group it has for a while identified as the main driver to its journey towards profitability.
Founder Vijay Shekhar Sharma sees this as a strategy wherein his firm offers convenience
and flexibility in payment management in exchange of merchant retention and hopes to bring
this captive subset under the ambit of Paytm Payments Bank.

The representatives engaged in the distribution of the devices are trying to get the adopters to
open current accounts in Paytm Payments Bank to help it scale up.If and when that happens,
the revenue would be consolidated. However, the other aspect of the strategy — widening the
payment ambit and pocketing more revenues — is replete with challenges even if one takes
Paytm’s claims on market share on face value (Sharma says it holds a 54 per cent share in
peer-to-peer payments and an even skewed 66 per cent in the merchants category.) Sharma
sees potential in a huge base and repeated transactions.

The company aims to distribute these devices so Paytm enables the merchants to use those
for any kind of payment — from wallets and UPI using its own platform or those of rivals
such as Amazon Pay and PhonePe, and also credit and debit cards — to a million merchants
(from a total base of 16 million) by the end of this calendar year.“Right now, the digital
payment market is evenly distributed among wallets, UPI and credit or debit cards being used
through point of sale or PoS machines.

Our machine allows them to do all that on a single device and we look to earn commission
wherever possible,” says Sharma.Raj N Phani, founder of Zaggle, a fintech company, says
UPI has almost killed the wallet. “So, no one is inclined to make a wallet payment and pay a
commission. You (a fintech player) don’t make money on UPI transactions. Only cards are
left then and hence the possibility of cornering significant revenues is really small.”Sharma
explains the card transaction math. For transaction worth every Rs 100 via card payment
facility added in these devices, Paytm pockets 30 paise (barring RuPay card transactions
which are free). “Also, it prevents the entry of our fintech competitors into those outlets for
they are not providing an integrated payment solution that we are.”

Again, the sheer number is where Paytm sees the opportunity but Phani fears it will not
affect the coffers significantly as there are chances that the total number of those using PoS
machines at present is a fraction of the one million that Paytm has in mind.Then there is the
mammoth challenge of convincing the one million small and medium enterprise (SME)
owners to get these machines installed at their outlets replacing the earlier QR codes and in
many cases, PoS machines made by other manufacturers.

10
Veena Kumar
It may be added here that the merchant has to pay a certain amount (Rs 12,000-15,000)
upfront to acquire one such machine. This covers the hardware and cloud software installed
and additionally, brings in a subscription fee of Rs 500 per month to Paytm. A business
owner is given the choice to pay the subscription fee either per month or make bulk payments
in advance. Phani sees this as an additional deterrent and believes that the shopkeepers may
be unwilling to pay and recommends that Paytm distributes these machines for free to start
with.

Fresh Swipe

 Paytm feels that while peer-to-peer transactions widen the base, they don't
bring much revenue. It also finds it tough to keep up with discounts offered by
new players

 It is offering the all-in-one machine to its merchant base. It aims to distribute

machines to 1 million merchants by 2020 end

 Bringing cards, mobile payments and UPI under one umbrella and enabling
payments through competing products in the spaces it operates in allows the
company to be flexible and adapt to the market demand

 This step, if successful, will help company to open more accounts for its
Payments Bank

 Experts see the road to revenue conversion a tough ask because of the
continuing dominance by cash, possible reluctance of merchants to invest in
new machines and difficulty in maintaining them

Sharma rejects such apprehension. He says that in his initial experience, when as many as
150,000 all-in-one machines were provided to merchants, the merchants readily accepted
them for the convenience they offered. “So, we found that for those who did not have a PoS
machine, we became the default choice. Those who had another, started using our machine
because it could be used for all kinds of transactions. So, the second machine is expected to
die a natural death.” When Business Standard asked the well-travelled Sharma whether he or
his research team came across any such device elsewhere on the globe, he said the product
was developed keeping the unique Indian needs and the current market dynamics in mind.
These machines have been codeveloped by Paytm with some international players, says
Sharma while withholding the partners’ names due to “competitive reasons”.

“Additionally, since we realise that there is still a lot of cash being used, we have provided
the option of a ledger entry which will help them with better accounting. Though that does
not bring any money, we expect to bring in a behavioural change once they see the
convenience in digital,” he says. But Phani does not see cash being replaced anytime soon.
“Imagine a small shop full of customers during the hot and humid Indian summer. Can you

11
Veena Kumar
see a machine taking the load of so many repeated transactions? Maintenance would be a
huge challenge going ahead. Plus, cash is very entrenched in our system. A demonetisation-
like factor can spark only a temporary change. I don’t see that windfall happening for Paytm
again. Revenue goals are not realistic,” he sums up.

BS: Sun, March 01 2020.

Indian Firms In Fintech 100 List: Paytm, Olamoney Make It To Top 10

Check which Indian firms made it to Fintech 100 list

 Statspeak: Four reasons why FinTech adoption remains on the rise

 Fintech firm Mobikwik becomes operationally profitable, eyes IPO
 Fintech committee
recommends new legal
framework for
consumer protection
 Kerala Startup
Mission, UK fintech
firm tie up to help local
enterprises
 How fintech firms are
disrupting the
corporate banking
ecosystem

Eight Indian fintech firms were

featured in the KPMG and H2
Ventures' ‘Fintech100’ list,
with Paytm and OlaMoney
making it to top 10. “In 2019, we have seen the emergence of India as a fintech force,” the
report said. The Fintech100 list comprises 27 payments and transaction firms, 19 wealth
companies, 17 insurance companies, 15 lending companies, 9 neo banks and
13 companies that operate across multiple fintech sectors.

Business Standard: Wed, November 06 2019.

As Whatsapp Launches Payments Service, Paytm And Phone Pe Get Ready

For War
For most of the payments’ apps, it is time for pay back, given the investments incurred in on-
boarding customers and building their networks

 Delhi HC questions Google Pay authorisation, seeks RBI reply by April 29

12
Veena Kumar
  WhatsApp's new fingerprint feature may stop users from taking screenshots
 UPI volume dips 2% to 782 mn in April, value of transactions up 6%: NPCI
 WhatsApp Pay being tested in India, but have no timeframe: Mark Zuckerberg
 MDR waiver to boost UPI payments, may hit earnings of banks, PoS providers

When WhatsApp launches payments, it is difficult to imagine any mobile payments players

will survive, said Bhavin Turakhia, billionaire, serial entrepreneur and a poster boy for the
start-up industry in the country. Currently heading fin-tech start-up Zeta, Turakhia was
speaking at a Matrix Partners-organised meet-up in Bengaluru (June 27), along with Kunal
Shah, founder, Cred, who sold Freecharge to Axis Bank back in 2017. “Just look at the
experience,” Turakhia said to the crowd, some of whom were using the beta version that
allowed people to send money from within the chat-app, “would anyone use any other app?”
Shah was in complete agreement.

Barely weeks since the Facebook-owned messaging platform said it would loop a payments’
feature into its hugely popular app in the country, the market is aflutter with talks of an
impending overhaul, even though the feature is still to launched in the country. Mobile
payments players, already out on a limb, with wafer-thin margins, intense competition,
government subsidies on digital payments and other challenges are preparing for the potential
threat. But the question is whether business as usual—discounts and offers combined with
aggressive advertising, will really work to foil the WhatsApp effect in the payments
business?

For one the messaging app has huge social capital; with 200 million monthly active users
(MAUs) from India alone it will have a big lead when it starts out. This sets it up as the
biggest threat for market leader Paytm, which launched in 2010. Paytm, in which China’s
Alibaba has a significant minority stake, is already under pressure from rival Phone Pe
(Flipkart owned) and the rapidly growing platforms on the Unified Payments Interface (UPI),
an indigenous digital payments network.

Since August 2018, when the government rolled-out UPI, all major mobile
payment companies have had to come onto to the network. Ever since, companies have
worked hard to differentiate themselves even as the core offering or use-case has remained
the same. Paytm went on to launch an in-app e-commerce site Paytm Mall, while PhonePe
mirrored WeChat’s super app approach by introducing a merchants’ store-front within its
app. But almost everyone, offered wide ranging discounts as a hook.

13
Veena Kumar
Discounts still continue to be the biggest differentiator in the business. Having said that, both
Paytm and PhonePe have made considerable in-roads with offline merchants, from
neighbourhood kirana stores to street vendors. Acceptability, by a wide-merchant base is a
massive advantage.
WhatsApp has still to establish its
credentials in the merchant space. It may
take over users in in the peer-to-peer
(P2P) segment, but in the peer-to-
merchant segment (P2M) its mettle will
be tested, said Mahesh Makhija, partner
and leader, digital and emerging tech, at
consultancy EY. P2M is also where the
money is.

Like debit card transactions, where

merchants typically have to pay a 2 per
cent surcharge on the value of their
transactions, as a facilitation fee for the
service, mobile wallets have long waited
to pass on a similar charge when the
market is ready.

For most of the payments’ apps, it is time for pay back, given the investments incurred in on-
boarding customers and building their networks. The big fillip (Paytm was among the big
beneficiaries) came with demonetisation that had people scrambling to find a solution to the
cash ban and since then the numbers have swelled. Several small players too set up mobile
payment apps even though most of them have since perished or bought over. For instance,
Citrus Pay by PayU in 2016 and later in the year, PhonePe was acquired by Flipkart.

Given the period of intense competition that the mobile payment apps dealt with, discounts
and special offers were the only way to keep customers coming back for more. Balance
sheets were red and only those supported by big investors stayed in the game.

In 2017, Google jumped in with Google Tez and rebranded it as Google Pay a year later. The
search giant continues to build on and lure users using troves of consumer data it gathered
over decades. Amazon Pay, the offering by tech behemoth and world’s largest e-tailer,
Amazon, was launched in 2019. Now with WhatsApp getting into the mix, the battle is
expected to get more brutal and the brands, old and new, will have to look at new ways to
expand the customer base and keep the flock loyal.

BS: Thu, August 15 2019.

When Walmart Got A $10 Billion Phone Pe Surprise After Buying Flipkart
PhonePe has grown into one of India's leading digital payments companies

14
Veena Kumar
  Offline and online merchants drive PhonePe deals past the two-billion mark
 WhatsApp Pay being tested in India, but have no timeframe: Mark Zuckerberg
 Walmart tops up PhonePe wallet with Rs 743 cr to counter Amazon and Google
 Going beyond digital: Google Pay goes offline to take on Amazon Pay, Paytm
 Google Pay to enter wealth management services with 'Gold Account'

When Walmart Inc paid $16 billion for control of India’s e-commerce

pioneer Flipkart Online Services Pvt last year, the American retail giant got a little-noticed
digital payments subsidiary as part of the deal. Now the business is emerging as one of the
country’s top start-ups, a surprise benefit for Walmart from its largest-ever acquisition.

Flipkart’s board recently authorized the PhonePe Pvt Ltd. unit to become a new entity and
explore raising $1 billion from outside investors at a valuation of as much as $10 billion,
according to people familiar with the matter, asking not to be named because the discussions
are private. The funding may close in the next couple of months, although the talks are not
finalised and terms could still change, they said.

The unit would then become independent with a distinct investor base, although Walmart-
owned Flipkart would remain a shareholder. Walmart and Flipkart didn’t respond to emails
seeking comment.

PhonePe -- which means “on the phone” in Hindi and is pronounced “phone pay” -- has
grown into one of India’s leading digital payments companies. Its volume and value of
transactions have roughly quadrupled over the past year as the country’s consumers adopt the
technology to transfer money digitally to businesses and each other. PhonePe is gaining
ground on Paytm, which leads the field and is backed by Warren Buffett.

PhonePe is an “underappreciated asset,” Edward Yruma, an analyst from KeyBanc Capital

Markets, wrote in a recent research note. He estimated the business may be worth $14 billion
to $15 billion, separate from Flipkart’s e-commerce operation.

The start-up was founded in December 2015 by three friends who left Flipkart to get it off the
ground. Within a year, Flipkart founders Binny Bansal and Sachin Bansal decided to acquire
PhonePe, realizing that solving payments friction would make it easier for consumers to buy
online. Less than a year later, the Indian government made the unprecedented move to ban
large banknotes to curb corruption and boost digital transactions. With this “demonetization,”
Paytm, PhonePe and other fledgling services flourished.

Cheap smartphones and cut-rate wireless data plans have brought millions of Indians online
in the years since, boosting the whole industry. In June, the PhonePe app reached 290 million
transactions with an aggregate value of $85 billion, compared with 71 million transactions at
$22 billion a year earlier, according to the company.

15
Veena Kumar
The service gained momentum by offering an array of services, including mutual funds,
movie tickets and airline bookings. Earlier this year, it began using Bollywood star Aamir
Khan in its advertising. “Globally, hardly any privately held fintech company has reached
PhonePe’s scale on both sides of the network so rapidly,” Sameer Nigam, PhonePe’s co-
founder and chief executive officer, said in a statement, pointing to its 150 million plus
customers and more than 5 million merchants. “That’s why the strong investor interest.”

Walmart debated for months whether to keep funding the payments business internally or
whether to separate the operation so it could raise outside funds. After plowing nearly $300
million into PhonePe, the U.S. retailer opted for the latter course. Alibaba Group Holding
Ltd. made a similar decision when it split off its Alipay business, helping growth by allowing
it to work with a broader range of merchants.

Walmart is still grappling with whether to bring in strategic or financial investors, according
to one of the people familiar. While a strategic investor would likely be better for growth,
senior Walmart executives are concerned that such backers typically want more voting rights,
the person said. Walmart wants to use the lessons from PhonePe in other operations around
the globe.

Also unresolved are the future roles for Flipkart’s outside investors. Tiger
Global Management and Tencent Holdings Ltd. each hold board seats and equity stakes of
about 5%, while Walmart holds about 80%. The board will have to navigate the companies’
varied interests before any deal can be finalized.

The new funding is aimed at helping PhonePe’s growth. The company plans to delve deep
into the country’s heartland, where rivals have yet to expand, with the goal of reaching
profitability, one person said.

The market has vast potential. Digital payments in India are projected to reach $1 trillion by
2023 from about $200 billion now, said Credit Suisse Group AG. Beyond PhonePe and
Paytm, Google Pay, Amazon Pay and the soon-to-launch WhatsApp payments service will
compete for customers. They’re taking advantage of India’s Unified Payment Interface, a
technology backbone that includes 140 of the country’s banks and digital
payments companies.

“The market is getting bigger and fintech start-ups are becoming innovative,” said Kunal
Pande, partner, advisory services at KPMG. “The accelerated growth in many fintech areas is
attracting investor interest.”

BS: Wed, July 10 2019.

16
Veena Kumar