Paytm Revenue Model | How does Paytm make money? #Paytm

                        We recently made a Article about india 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 of2021. of course these losses are covered by paytms investors and if they're unable to turn a profit before they go public at the end of 2021 then these losses will be covered by their shareholders but one thing that we didn't have time to cover in that top 10 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 sheikh 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 ecommerce platform like snapdeal or flipkart the only difference with paytm was that you were paying for intangible things like bill payments or mobile recharges whereas with flipkart and snapdeal 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 an rbi approved payments bank but they choose not to and the reason that they do that is because 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 cash back 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 hand they're disincentivizing 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 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 on a daily basis 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 anyways 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 and it ends up contributing significantly to paytm's overall revenue .

                      So now we've covered the major traditional sources of pay tms revenue you've got interest on wallet money you've got commissions on sales and you have transaction fees but now i want to talk about some of 197's subsidiaries in recent years 197 has actively diversified and now in 2021 these new ventures have started to generate revenue of their own firstly let's talk about paytm payments bank so the payments bank category was created by the rbi back in 2014 but it wasn't until 2017 that paytm decided to found their own payments bank now payment banks aren't able to issue loans like traditional commercial banks.
                          But paytm payments bank has been able to circumnavigate this rule by partnering with other banks and nbfcs to issue loans to their customers through paytm payments bank so let's say as an example that indus inbank is offering loans at a 10 interest rate now along comes paytm payments bank and they partner with indus and bank and start offering that same loan at a 15 interest rate now because they're partnering with indus in bank and that bank is actually the one who's issuing the loan paytm payments bank isn't technically breaking the rbi's rules and on top of that they get to keep that five percent as a sort of commission for bringing new customers to indust in bank even though those customers don't really know that they're dealing with indus in bank unless they read the fine print.
                         See for the average person getting a loan from a bank can be a little bit intimidating they don't want to go there in person to meet somebody or talk to somebody on the phone and they have to fill out a bunch of paperwork and somebody has to come to your house or come to your office to confirm that you actually live there and do a bunch of kyc this stuff is all a little bit scary but with paytm it's so simple it all happens on the paytm platform and it's relatively stress free at least until you have to start paying back that loan with the added 5 interest rate that paytm put on top of .
                     Itbut that's the price that you pay for convenience besides this paytm payments bank also offers savings accounts where they use the same technique as with paytm wallet by making your money make more money by putting it in another bank or by investing it into government bonds and then you also have the ability to buy stocks or mutual funds or gold or insurance and paytm takes a cut of each of these transactions okay so we're almost done here there's just two more sources of revenue that i want to quickly skim over they're both pretty straightforward advertising and gaming .
                   So for advertising paytm is selling exposure companies that want to get your eyes on their products pay paytm to promote their products to their more than 150 million users then we've got gaming where paytm is following a similar model to dream 11 where players pay an entry fee to play games like rummy or fantasy cricket or fantasy football and a portion of that fee goes into the prize pool while the remaining portion of that fee goes into paytm's pocket as revenue so there are a lot of ways for paytm to make money.

                          It is a money-making machine spread out across multiple platforms and subsidiary companies and services but you might be wondering why in spite of all of this money-making paytm is still losing millions of dollars well the simple answer is that they're actually doing this strategically they're spending more money than they have in an effort to grow more quickly according to vijay shekhar sharma in the fintech journey we are just gathering the ingredients now and not even started cooking.
                                So paytm is currently gathering ingredients and they're doing this so that when they start cooking which will be presumably right before they go public or soon after the food is going to be delicious however i should note that the time for gathering ingredients seems to be coming to an end between the financial year of 2020 and the financial year of 2021 paytm saw their losses decrease by 42 percent and vijay shekar sharma himself has said that paytm may be able to break even in 2021 and become profitable soon after.
                              So i'm curious to know what you guys think of paytm's prospects especially in light of the fact that they're planning to go public at the end of 2021. do you think that this initial public offering will be successful do you think that paytm will be able to achieve profitability let me know what your thoughts are in a comment down below okay that is all i have time for today thank you guys so much for watching this episode of backstage with millionaires if you haven't already subscribed now would be a great time to do ,I hope you Like it  and I will see you in the next one

Post a Comment