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    Paytm Business Model – How does Paytm Make Money?

    PAYTM business model

    How Paytm makes money even after providing 50% to 100% cashback? What exactly is Paytm Business Model? It’s a worthy question to ask. Another worthy question that should be asked is – Why does the cashback gets accumulated in the Paytm Wallet and not refunded back to the user?

    I guess you got a clue. Anyway, we’ll explain it later in the article. Let us first discuss Paytm Business Model in this Paytm Case Study.

    What is Paytm?

    Paytm is India’s largest mobile payments, e-wallet, and commerce platform. Though started as a recharge platform in 2010, Paytm has subsequently changed its business model to a marketplace and a virtual bank model. It is also one of the pioneers of the cashback business model.

    The company has transformed itself into one of the Indian giants dealing in mobile payments, banking services, marketplace, gold, recharge and bill payments, etc. who serve around 100 million registered users.

    Business Model of Paytm

    Paytm Business Model is a marketplace model which also deals in recharge & bill payments and provide users with an e-wallet and banking option.

    How Paytm Makes Money?

    As of May 2017, Paytm has a valuation of ~ $7 Billion which includes a stake of one of the global leaders of marketplace model, Alibaba.

    Paytm Revenue Model can be divided into following categories.

    1. Marketplace (Paytm Mall)
    2. Recharge Services
    3. Bill Payments
    4. Payment Solutions
    5. Paytm Wallet
    6. Digital Gold
    7. Paytm Bank


    Paytm Marketplace (Paytm Mall)

    Paytm was the first company who took the step of being a mobile-only marketplace in India. Today, with over 120 million buyers and 2 million daily transactions (and 90% prepaid offers), Paytm is the most beneficial marketplace for sellers. Revenue from this subcategory is generated as fees and commissions from the sellers, which differ for different category of products.

    paytm mall payments

    Recharge Services

    There was a time when Paytm Business Model consisted just mobile recharge and bill payment services. Times have changed and online recharge services for mobile subscriptions, TV channels subscriptions, data-card, and metro card, etc have been added to the revenue model of Paytm.

    The company, just like other recharge services providers, charge commissions from these operators.

    Bill Payment

    In addition to the recharge facilities, the customers can even pay their electricity, telephone, water, mobile, broadband, gas, etc. bills on Paytm. Apart from these, Paytm has also partnered with several education and financial organizations and act as a portal to accept education fees and insurance installments.

    Revenue, just like recharge services, is generated by charging commissions from these providers.

    Payment Solutions

    Paytm offers smart payment solutions for online businesses. The payment solutions allow them to accept online payments through Paytm.

    paytm payment solutions

    The payment option comes with no setup fee and maintenance charges. However, the company charges a commission of 1.99% on every transaction.

    Paytm Wallet

    Ever wondered how Paytm earns even after providing 50-100% cashback?

    Through the Paytm wallet, of course.

    Cashbacks are credited to the users in their Paytm wallets.

    Paytm has already rolled out its new marketing strategy where it has planned to focus more on the digital currency prospects. Hence, all of its core marketing and promotional strategies enforce the use of Paytm Wallet. This is a very clever move as Paytm will get the first mover advantage and through its extensive distribution strategy (which is far better than its competitors like Freecharge, Ola Money, etc.), will be able to increase its brand preference. This will eventually help it to carry out its future plans.

    What exactly is Paytm wallet?

    Paytm wallet is a semi-closed wallet (approved by RBI) used to store currency in digital form which can be used to buy goods and services( including financial services) at identified merchant locations or establishments (like petrol pumps, a supermarket, your barber’s shop, movie hall, etc.) which have a specific contract with the company to accept these payment instruments.

    Paytm wallet doesn’t permit cash withdrawal.

    How does Paytm earn through Paytm wallet?

    Paytm wallet, with the launch of the new marketing campaign, can be used to pay almost for anything, everywhere. It has created a new market for digital currency users because of its ease. Money can be transferred through the Paytm wallet through one tap.

    The money deposited by users in Paytm wallet is deposited by Paytm in an Escrow Account,  as per RBI Guidelines, with a partner bank. This escrow account deposit fetch Paytm certain interest which is decided as per the contract between the bank and Paytm.

    The interest from the escrow account is decided on the basis of the average of the deposited amount in a certain period of time (58 weeks).

    The more you use Paytm wallet, the more Paytm earns from it.

    Digital Gold

    Paytm has partnered with gold refiner MMTC-PAMP to launch ‘Digital Gold’ that will allow its users to buy, sell, and store gold digitally without any additional cost. Users can also get the gold delivered to their house with just paying a minimal delivery charge.

    Gold is considered as the safest investment in India and Paytm has full plans to capitalize on this. There are bigger plans involved in the introduction of digital gold trade on Paytm. The company wants its users to have something which they call a Gold Bank account, which will allow users not only to buy gold, and store it in digital form, but also to use the gold to buy other services on Paytm — from recharging to pay utility bills, or book movie tickets to buy shoes and clothes from Paytm Mall.

    Paytm also has plans to connect the customers with the jewelers at a later stage. This will let the customers get their stored gold converted to finished jewelry and will let Paytm make money by being an affiliate.

    Paytm Bank

    Paytm wallet is no more just a semi-closed wallet. The company has revamped itself as a payments bank. A payments bank is a digital bank which can accept deposits and give out interests on the deposits but can’t offer loans to its customers. This has led to more dependency Paytm business model on the smartphones.

    Just like the Paytm wallet, users will pay to the seller by scanning a QR code. For those who don’t have a smartphone, Paytm will issue debit cards with QR codes, which can be scanned at various points.

    Batue ko tum gul karo, masti ki tanki full karo. Paytm Karo 🙂

    Go On, Tell Us What You Think!

    Did we miss something?  Come on! Tell us what you think of Paytm Business Model (Paytm Case Study) in the comment section.

    About the author

    Aashish Pahwa

    A marketer, a dreamer, a traveler and a philomath. I prefer stargazing to spending nights in clubs.

    Sahil - January 9, 2017

    Hey Aashish ! Loved your content and the research you’ve put in is indeed worthy of praise. You work as a marketing/branding consultant or you are full time with this? Anyway about the PayTM business model, any idea how much is their commissions on bill payments of hotels etc?

      Aashish - January 9, 2017

      Hi Sahil!
      Paytm, just like Airbnb, provide listing service to the hotels. Unlike oyo rooms, Paytm do charge commissions for every customer who books a hotel room through their portal. However we don’t have the information about the exact percentage of commission charged. Commission charged by Paytm from the hosts must be ~10% as Airbnb charges 10%.

      I do freelance marketing and branding consultancy services. You can contact me at [email protected] for more details.

    Matt Hogan - January 9, 2017

    Hii.. Thank you for sharing useful information. As today world has become online everywhere and depending upon mobile wallets, it is very important for many people to learn how these mobile wallet works.

    Srinath Narasimha - February 13, 2017

    “The money deposited by users in Paytm wallet, as per RBI Guidelines, is deposited by Paytm in an Escrow Account with a certain bank. This escrow account deposit fetch Paytm certain interest which is decided as per the contract between the bank and Paytm.”

    This of course means that customers lose interest on the money they transfer to paytm wallet from their bank accounts. This is a case against using paytm, especially when there is the alternative of BHIM app, where you don’t have this problem.

      Aashish - February 26, 2017

      Hi Srinath

      Every aspect has its opportunity cost. BHIM app, though beneficial to the customers doesn’t have an extensive marketing and distribution reach like Paytm. It’ll gain popularity soon.

    Akhil Sharma - February 25, 2017

    Hello Aashish,

    the work you did on this page and the matter, analysis and everything is superbly well executed! the manner in which you have presented the whole case is also very well presented!! Keep up the good work!!

      Aashish - February 26, 2017

      Thank you Akhil.
      Do subscribe to get all the updates. 🙂

    Manu - March 11, 2017

    paytm does allow cash to be transferred to banks, withdrawal is possible.

      Aashish - March 13, 2017

      Hi Manu,
      Bank transfer and cash withdrawal are two different things. Unlike commercial banks, you can’t withdraw money out of your paytm wallets on any ATM or other outlets. However you’ll be able to do it soon as paytm launches its payments bank.

    Pratham VL - October 4, 2017

    The “Buy and Sell” method in the article seems redundant. Overall a great article. I was unable to find such a detailed information elsewhere. Thank you, an keep writing!

    Rohan Kumar - December 6, 2017

    Very nice article. well articulated !!

    Rohan Arya - January 16, 2018

    Hi Aashish , the article was a great read – very well explained the business of Paytm.(Y)
    In Payment Solution / Services business – how to increase the no. of transactions for a particular account .? Is cashback followed by campaign is the only key .??

    m.n.shah - March 16, 2018

    Chore Paytm wale first settle my account with all these transaction these are the i have also submitted bank statement from jan to feb 24 in mail attachment to pay tm still patm fools me as already settled. no evidence paytm had my complaint still unsolved complaint id . from pay tm i got this reply Dear Merchant,

    Greetings from Paytm!

    We would like to inform you for your case number 02665194, there is no payout pending with us.

    following transaction done through Paytm mobile wallet # 8125678910 defalt QR code
    amount 1620 1st jan 2018
    amount 1785 12 jan 2018 trx id 17401153585
    amount 270 08 feb 2018 trx id 17652616378
    amount 500 21 feb 2018 trx id 17914479239
    amount 800 02 March 2018 Trx id 18017851631
    amount 210 03 march 2018 Trx id 18026645161
    amount 980 03 march 2018 Trx id 18026630087

    Guddu gupta - March 21, 2018

    Hello Ashish,
    You have really done the very nice work.Reasearch about all these things about the paytm and Business Model , you have provided all information about paytm thanks…

    SHAMIM HALIM - April 2, 2018

    Hello Aashish,

    It is a very succinct and informative account of Paytm business model. Very interesting business model , more particularly how imaginatively Paytm has added both to the services they provide and to their revenue. I believe, it is 1, 2, 3… and still counting!

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