How Paytm makes money even after providing 50% to 100% cashbacks? 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.
Business Model of Paytm
Paytm Business Model is a marketplace model which also deals in recharge & bill payments and provide users with the e-wallet and banking option. Paytm, though started as a recharge service provider in 2000, has changed its business model to ‘a marketplace and a virtual bank’ model. It is also one of the pioneers of cashback business model.
How Paytm Makes Money?
As of January 2016, Paytm has a valuation of ~ $4 Billion which includes a stake of one of the global leaders of marketplace, Alibaba. One97, the parent company of PayTM, has placed its ace while planning its revenue model.
Paytm Revenue Model can be divided into following categories.
- Recharge Services
- Bill Payments
- Buy and Sell
- Paytm Wallet
- Digital Gold
- Paytm Bank
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 love of sellers. Revenue from this subcategory is generated as commissions from the sellers, which differ for different category of products.
Paytm love sellers. Being a marketplace, more sellers will result in more product categories and more competition, which eventually will result in less prices on Paytm. Hence, more customers.
Paytm also generates money by holding promotions for sellers. It offers various properties (locations and spots on app and website) which may be utilized by sellers for promoting their brand and product.
This promotion cost corporates a lot.
Paytm might become the biggest marketplace in the coming days.
There was a time when Paytm Business Model consist of just mobile recharge and bill payment services. Online recharge service for mobile subscriptions, TV channels subscriptions, data-card, and metro card, etc are provided on Paytm.
The company, just like other recharge services providers, charge commissions from these operators.
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 organisations 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.
Buy and Sell
Paytm is everywhere and has everything. From bikes and cars to concert tickets, bus, trains, flights, hotel rooms, amusement park tickets, everything is sold over Paytm.
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 earns 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, 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.
The interest in escrow accounts are decided on the basis of average deposited amount in certain period of time (58 weeks).
The more you use Paytm wallet, the more Paytm earns from it.
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 behind 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 on 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 wallet will no more be a semi closed wallet. Paytm will soon come out with its unique Paytm Bank. It’ll will be a fully fledged payments bank (just like SBI, ICICI, etc.) but with a twist.
Paytm Bank Business Model will entirely be dependent on the mobile app. It’ll be a digital bank.
Just like the Paytm wallet, users will pay to the seller by scanning a QR code. For those who don’t have a smart phone, 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 🙂
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