Two days back Paytm, India’s largest mobile payment platform, launched first of its kind all-in-one POS device for merchants. The device helps merchants to process all types of payments, including wallet, UPI, Cards and Cash as well. The move is being seen as Paytm effort to strengthen its market share and to widen the gap with its closest competitor.
While it’s a bit too early to discuss the success or failure of the device, the initial response by merchants to the device is quite encouraging for the company.
We recently got a chance to have a tete-a-tete with Vijay Shekhar Sharma, Founder & CEO – Paytm, to understand Paytm’s strategy for 2020, cashless economy, customers behaviour, industry challenges, and the much-awaited IPO.
Q: Why do solutions, like all-in-one Paytm POS, are much needed in today’s market scenario?
Vijay Shekhar Sharma (VSS): When we launched QR, there was a curiosity to it. Then it became mainstream. Soon enough market got flooded with many other QR Codes. So this is how the QR market today stands. Now, obviously, we need the aggregation. For example, a few decades back there was only one airline and then more companies jumped into the aviation industry launching more airlines. Now, you don’t want to hit individual airlines’ website to book a ticket. So you literally want to go to a single website that could provide information about all airlines.
So our all-in-one QR is sort of that single place. It’s like solving the big fragmentation issue mobile payment industry is currently going through. On the other hand, merchants don’t need multiple bank accounts and reconciliations we well. Single reconciliations for all type of payments is all they get with the latest offerings from Paytm.
Q: As Paytm, along with many others, is now offering almost every type of payment processing service with a single device, do you think that cashless economy could be a reality in the near future?
VSS: Not in the near future!. it’s a two-way system where consumers have to be comfortable and learn, and merchants need to learn and be able to process digital payment quickly. Now, I believe that the network effect kicks in when you see it at more places and a consumer struck up with it in more and more situation. So that day somebody will nudge you in.
We all have tried cashback, tried spending marketing dollars, and now we all have hundreds of million customers. That allows us to understand where is a new customer coming from and why is he coming? So to kick in the network effect, there is a solution requirement of expanding the acceptance.
Paytm started with utility payment on Paytm app and then third party merchant payments, then offline shops and then every nook and corner. So if you notice, this is like a flywheel that we are trying to create, and when a customer uses us more often and becomes a user, the more places he will see Paytm, the more committed he will be. And we’ve seen that happening in this; our average active customer has grown in the best cohort four times more transaction than the last year. So that means that customers who are using it, use it a lot more and they’ve become the Champion investor.
Q: With the help of these new offerings how many new merchants are expected to onboard Paytm?
VSS: The company is quite optimistic about the success of the new all-in-one POS device and expecting that it will bring in 10 million new merchants to the Paytm platform in 2020, making the total count of merchants on Paytm platform touching around 25 – 26 million.
Q: So can you tell me some insights about like average transaction size when it comes to customer to customer and customer-to-merchant?
VSS: The average payment transaction size in terms of customers to merchants is around Rs 500. People are paying Rs 2000, Rs 5000 or Rs 200, Rs 300 on the lower side.
When it comes to P2P on Paytm platform, we stand for really the money transfer. We don’t push P2P transaction which is done in a casual way where you get some gamified incentive. This makes our P2P transaction a larger ticket size. Hence, it goes in Rs 900 to Rs 1000 kind of range because that is when you are actually transacting.
Casual payments happen on the wallet which are very small tickets like less than a hundred. Less than a hundred, five hundreds and a thousand rupees, literally, are kind of three cohorts are existing out there.
When it comes to merchants, about 60% of active merchants are accepting payments for about 10 days in a month. That makes us very confident that if we solve the next level of their problem, more and more merchants will join us.
For example, one of the very problems that we could figure out was that if the QR app becomes their full ledgers, along with being capable of accepting digital payment, cash payments and pay later, then it becomes even more sticky. So we launched a ‘Business Khata’ at the beginning of the year. And today we launched all-in-one POS, which allow merchants to create invoices and then they can keep a cash payment also. I believe that if we look at it from merchants’ side the reconciliation of all the things that they sell and receiving payments for is a big challenge. If that gets sorted out, we believe merchants will love what they’re building.
Q: In today’s’ scenario what is the biggest challenge you foresee for a customer, in terms of making a payment, as well as for merchants?
VSS: The customer’s biggest challenge is that when it comes to mobile payment, they use either Wallet or UPI; and both have their own learning curves. Presently in wallets, you are adding money and then you’re paying. It’s an easy one-click while in UPI you have to have an onboarding using a debit card and creating a pin and then it has its own security PIN obligations every time.
Customers need seamless payments. Wallet and bank account have solved it to a particular level. Now, the next thing that customers are expecting is a credit; so the post-paid kind of solutions that we’ve seen worked tremendously well. So on a pilot when we were able to find out literally millions those customers. I believe the customer’s expectation is of credit at a mass level.
When you go to the merchant side. I would see these two solutions, all-in-one QR with the sound and all-in-one card have literally solved the problem of payment. But merchants have a larger requirement of technology in their shop. We’re talking payments right now. So single QR solves the problem of multiple standees. Second, Paytm SoundBox solves the problem of notification without you being there and the problem of having a POS machine if merchants want to accept cards as well. And, all of it through a single payment processing device. As all of these solutions are now sorted, I believe, the next solution for us to solve for merchants is about payout business payments.
Q: Considering there is an upfront cost involved for merchants to own Paytm all-in-one POS device, how exactly SMBs and shop keepers are responding to it?
VSS: I used to believe that if it goes for free, it about payment, why would merchants pay for this? Everyone likes free stuff. But I am overwhelmed and surprised that merchants are ready to pay. They are ready to pay because it solved two problems – The fraud payment confirmation screen is slowly becoming a big challenge for merchants to deal with and it’s bad for any business. The second one being sticky confirmation. If a merchant is earning, let’s say, twenty or thirty thousand a day on a shop, I don’t think he would hesitate to pay one or two rupees for this. For just two rupees a day this device becomes far cheaper especially when it has the capability to take care of all types of payments for a merchant.
Merchants will pay just like we pay online convenience fee for movie tickets or flight tickets. If there is a value in it, consumers and merchants both are ready to pay.
Q: Any new development in terms of the much-awaited IPO that the company is aiming in the next two to three years from now?.
VSS: Once we are making money and predictable, only then it makes sense to have a concrete roadmap for IPO. I think it is just too early to talk about it.