PAYTM business model
PAYTM business model

Paytm Business Model – How does Paytm Make Money?

Paytm Business Model – How does Paytm Make Money?
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How Paytm makes money even after providing 50% to 100% cashback? What exactly is Paytm’s 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’s bank account?

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

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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 instalments.

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.
paytm-qr-code-business-model#PaytmKaro.

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 can be used to pay for almost anything, everywhere. It has created a new market for digital currency users because of its ease of use. Money can be transferred between the Paytm wallets of two users with just a few taps on the phone.

As per the RBI guidelines, the money deposited by users in Paytm wallet is deposited by Paytm in an Escrow Account with a partner bank. This escrow account deposit fetches 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).

But operating a prepaid wallet comes with an expense. Banks and payment gateways charge a fee equivalent to 1-3% of the money deposited for using their services. This fee can’t be charged to the customers as it’ll make them choose alternatives like UPI, IMPS, etc. However, the interest generated through the escrow account deposits is usually more than the expenses incurred which results in profits to the company.

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 jewellers at a later stage. This will let the customers get their stored gold converted to finished jewellery 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.

Just like the Paytm wallet, users operate Paytm bank using their smartphones. Paytm also issues debit cards with QR codes which can be scanned at various points.

The bank lets you open zero deposit digital current and savings bank accounts and offers a 4% p.a. interest on saving bank accounts and overdraft facility on your current bank accounts. There are no restrictions related to any type of transaction but any balance deposited over ₹1 lakh is moved to a fixed deposit with a partner bank (which provides 7% interest p.a. to you).

How does Paytm Bank make money when it can’t carry out lending activities?

Cross-Selling

Paytm has partnered with other financial institutions and banks to sell their products and services (like insurance, investments, loans etc.) along with its own. It earns money in the form of commissions or other forms as per the contract between the parties.


Interest Arbitrage

Paytm bank makes money by depositing the money with some other bank and/or government deposits which provides interest rates greater than that is provided by Paytm bank.

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.



Written by

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

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  • Sahil says:

    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 says:

      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 says:

    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 says:

    “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 says:

      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 says:

    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!!

  • Manu says:

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

    • Aashish says:

      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 says:

    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 says:

    Very nice article. well articulated !!

  • Rohan Arya says:

    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 says:

    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 says:

    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 says:

    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!

  • Amrit says:

    Hello Aashish,
    Good Research bro, love to read your articles.

  • Harish says:

    Bro I have a question please answer it I can’t find a proper answer for it
    When I pay using my debit card I use visa gateway and payment is completed by paytm payment gateway from whom does visa take commission and from whom paytm takes commission

    • Hi Harish,
      I guess you missed this section of the article:

        Banks and payment gateways charge a fee equivalent to 1-3% of the money deposited for using their services. This fee can’t be charged to the customers as it’ll make them choose alternatives like UPI, IMPS, etc. However, the interest generated through the escrow account deposits is usually more than the expenses incurred which results in profits to the company.
  • Harish says:

    Thanks for the reply but can you elaborate more , now consider this scenario I recharge my number using visa card how does Visa earn in this transaction
    Paytm gateway also comes into play but how does visa and paytm gateway work together in a single transaction..

  • Harish says:

    Thanks for the reply but can you elaborate more , now consider this scenario I recharge my number using visa card how does Visa earn in this transaction
    Paytm gateway also comes into play but how does visa and paytm gateway work together in a single transaction…

  • Virus says:

    Bhai phir Bhi samajh nhi aaya ki paytm
    First order free aur per month 299 ki shopping pr 200 cash back deta hai….
    Iska Kya mtlb hai??

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