PAYTM'S BUSINESS MODAL-A CASE STUDY |HOW DOES PAYTM MAKE MONEY|
we recently made an article about India's top 10 loss-making startups and Paytm was number one on that list they're currently the second most valuable startup in the country but they lost more than 200 million dollars in the financial year of 2021. of course, these losses are covered by Paytm investors and if they're unable to turn a profit before they go public at the end of 2020 then these losses will be covered by their shareholders but one thing that we didn't have time to cover in that top article were Paytm's revenues this is something that a lot of people seem confused about how does Paytm actually make money to mitigate their losses where does their revenue come from well that's the question that we're going to be answering right after this so Paytm's parent company 197 saw revenue totaling 3 1886 crore ops in the financial year of 2021 and if you had shared this number with Vijay sheik Sharma back at the beginning of 2014 he probably wouldn't have believed you see back then the company's revenue was just 210 crore rupees and this was before Paytm launched their cash wallet which would completely transform both Paytm's revenue model and India's entire digital payments ecosystem
see before this cash wallet Paytm was just a place for you to buy things online like any other e-commerce platform like Flipkart the only difference with Paytm was that you were paying for intangible things like bill payments or mobile recharges whereas with Flipkart and you were buying physical products all of that changed though with the launch of the cash wallet in February of 2014. since then 197 has seen their revenue increase by 15 x but to understand how that actually happened we first need to understand how Paytm's wallet works now you might be surprised to know that when you add money to your Paytm wallet Paytm doesn't actually hold that money they can they are a rbi approved payments bank but they choose not to and the reason that they do that is that your money can actually make Paytm even more money if it's in somebody else's hands so when you deposit money into your Paytm wallet that money is actually ending up in an escrow account with Paytm's partner bank and while it's there it's accumulating interest for Paytm that interest is revenue and it's one of the biggest reasons why Paytm tries so hard to get people to use their wallet every single rupee that people deposit into their wallet is making Paytm money
and a lot of Paytm's customers don't even realize this they assume that the marketing campaigns and the cashback offers are for customer acquisition or to change the behavior of Indian society and these are some of Paytm's goals but there's actually a much simpler more short-term source of motivation here Paytm just wants to make money plain and simple but what if you decide to withdraw money from your Paytm wallet this is obviously a bad thing for Paytm right they're not going to be making interest on that money which is why they charge a five percent withdrawal fee they're killing two birds with one stone here on the one handdisincentivizing people from withdrawing money from their Paytm wallets in the first place but even if you decide to withdraw that money they're still gonna get some money
out of you before you go so these are two methods by which Paytm generates revenue method number one is that they make money from your money through interest and method number two is withdrawal fees but what about method number three how does Paytm generate revenue when you spend the money that's in your Paytm wallet well one of the biggest ways is through commissions like I mentioned earlier before Paytm launched their cash wallet
they were an e-commerce company no they didn't sell clothes or electronics or appliances they sold intangible things that you can't hold or touch like bill payments and mobile recharges but as time has gone on the number of things that you can pay for using Paytm has expanded significantly you've got travel tickets for buses trains and flights you can book a hotel room or a movie ticket or even tickets to an amusement park or an event like a concert or a workshop or a comedy show and for all of these things
Paytm is taking a cut of the transaction from the seller now it's not much usually between two and three percent but when you think about how many people use Paytm daily to book these kinds of tickets that two to three percent adds up to a sizable number and again that's all revenue for Paytm and the funny thing is that Paytm isn't really doing all that much when you think about it these are tickets that you probably would have booked anyway even if you couldn't find them on Paytm's platform but you would have had to go somewhere else to book those tickets and that might have been a more complicated and more stressful experience but because Paytm puts everything all on one platform they're able to demand that two to three percent from sellers and it doesn't stop there either because I haven't even mentioned Paytm mall which was founded by 197 in 2017.
so paytm all is kind of like a low-cost version of flipkart or amazon just like these e-commerce platforms they rely on sellers to supply products to their customers they take these products they list them on their platform and then every single time one of these products sells they take a cut or a commission just the same way that they do with ticket bookings but this is where we need to draw a line between paytm mall and other e-commerce companies like amazon or flipkart because these companies have warehouses and they handle a lot of stuff on their own like stocking and packaging but with paytm mall all of that stuff is handled by the seller and the first time that the seller actually comes in contact with a staff member from paytm mall is when the delivery guy shows up to take the product and deliver it to the customer and the seller pays for that delivery 197 makes money from paytm mall through its sellers these sellers pay a product commission depending on the category and the value of the product they pay a logistics fee depending on the size and the weight of the product and they can also pay huge penalties if they cancel an order or if they try to sell a counterfeit product or a product that's poorly made and then on top of all of this
paytml sellers also have to pay a 2.7 transaction fee because they're using paytm's payment gateway and i wanted to take a second to talk about this payment gateway as well as transaction fees across paytm's various services so a payment gateway is basically just a middleman between two parties who want to send money over the internet and for everyday people using this gateway at least paytm's gateway is completely free there are no transaction fees when you want to send money to a friend or a family member but if you're a merchant if you're a small business or an enterprise then there are transaction fees and for small businesses specifically these fees are a 1.99 cut of any transactions that happen using credit card or net banking or paytms wallet and considering the fact that there are 20 million merchants using paytm this 1.99 really adds up associated it winds ups up} tributary considerably to paytm's overall revenue okay thus currently we have a tendency to've lined the main ancient thusurces of pay tms revenue you've interest on pocketbook cash you've commissions on sales associated you've got dealing fees however currently need|i would like|i need} to speak regarding a number of 197's subsidiaries in recent years 197 has actively heterogenous associated currently in
2021 these new ventures have began to generate revenue of their own first of all let's mention paytm payments bank that the payments bank class was created by the tally back in 2014 however it wasn't till 2017 that paytm determined to found their own payments bank currently payment banks are not ready to issue loans like ancient business banks however paytm payments bank has been ready to circle this rule by partnering with different banks and nbfcs to issue loans to their customers through paytm payments bank thus for instance as an example that indus inbank is providing loans at a ten rate currently on returns paytm payments bank and that they partner with indus and bank begin|and begin} providing that very same loan at a fifteen rate currently as a result of square measure} partnering with indus in bank which bank really|is extremely|is truly} the one who's supplying the loan paytm payments bank is not technically breaking the rbi's rules and on prime of that they get to stay that 5 % as {a thusrt|a kind|a form} of commission for conveyance
new customers to the industry in bank albeit that} those customers do not extremely grasp {that square measure}|that they are} coping with Indus in the bank unless they browse the fine print see for the common person obtaining a loan from a bank may be a touch bit daunting they do not wish to travel there nose to nose to satisfy someone or seek advice from someone on the phone and that they need to fill out a bunch of work and someone should return to your house or come to your workplace to substantiate simply} truly live there and do a bunch of KYC these items is all a touch bit shivery however with Paytm {it's thus|it is thus} easy it all happens on the Paytm platform and it's comparatively stress-free a minimum of till you've got to begin return that loan with the other five rate that Paytm placed on prime of it however that is the worth simply} {pay for|buy|purchase|acquire|pay cash
convenience besides this paytm payments bank conjointly offers savings accounts wherever they use constant technique like paytm pocketbook by creating your cash build more cash by golf stroke it in another bank or by investment it into government bonds {and then|then|so|and thus} you furthermore mght have the power to shop for stocks or mutual funds or gold or insurance and paytm takes a cut of every of those transactions okay so we're nearly done here there is just 2 a lot of sources of revenue that i need to quickly skim over they are each pretty simple advertising and recreation so for advertising paytm is commercialism exposure corporations that want to urge your eyes on their merchandise pay paytm to market their merchandise to their quite a hundred and fifty million users then we have recreation wherever paytm is following the same model to dream eleven wherever players pay an entry fee to play games like rummy or fantasy cricket or fantasy soccer and a little of that fee goes into the prize pool whereas the remaining portion of that fee goes into paytm's pocket as revenue so there are plenty of the way for paytm to create money it's a money-making machine unfolded across multiple platforms and subsidiary corporations and services however you would possibly be speculative why in spite of all of this money-making paytm continues to be losing scores of bucks well the easy answer is that they are actually doing this strategically they're defrayment more cash than they need in a trial to grow a lot of quickly
per Vijay Shekhar Sharma within the fintech journey, we are just gathering the ingredients currently and have not even started preparation so Paytm is presently gathering ingredients and they are doing this so that once they start preparation {which will|which can|which is ready to} be presumptively right before they are going public or shortly when the food goes to be delicious but I ought to note that the time for gathering ingredients looks to be coming back to an end between the fiscal year of 2020 and also the fiscal year of 2021 Paytm saw their losses decrease by forty-two % and Vijay Shekar Sharma himself has aforesaid that Paytm is also able to hit in 2021 and become profitable shortly when so I am curious to grasp what you guys consider Paytm's prospects particularly in lightweight of the fact that they are attending to go public at the tip of 2021. does one assume that this first public providing are self-made does one assume that Paytm are ready to come through profitableness let Pine Tree State grasp what your thoughts are in an exceedingly comment down below okay that's all I actually have time for these days many thanks guys most for looking at this episode of backstage with millionaires if you haven't already signed currently would be an excellent time to try to this we have a tendency to post new videos every single week and as continuously it extremely helps North American country out once you hit form button thus if you created it this so much I am forward that you just enjoyed the video thus please try this
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