Is Paytm, the future of commerce and eCommerce in India ?

Nandan Nilekani, Photo credit: YouTube

Prime Minister Narendra Modi demonetised ? 500 and ? 1000 notes in a bid to curb corruption and put an end to black money floating in the country. Delhi Chief Minister Arvind Kejriwal is one of the fiercest critic of the decision. He tweeted “Paytm biggest beneficiary of PM’s announcement. Next day PM appears in its ads. What’s the deal, Mr PM?”.

Is Paytm really the biggest beneficiary of the decision ?

For starters Paytm is digital/electronic form of physical wallet.

Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one system. Once you register on UPI with any bank, you’ll get a virtual ID, along with TPIN or MPIN which becomes your transaction identity.

In addition to being a digital wallet, Paytm, according to its site, “is India's largest mobile commerce platform. Paytm started by offering mobile recharge and utility bill payments and today it offers a full marketplace to consumers on its mobile apps.”

So why Paytm may NOT be the ultimate winner ?

Unlike UPI, Paytm acts as an agent along with Mastercard, Visa etc. between vendors such as Uber on one side and Banks on the other.  Once the VC funds dry out, each of these multiple players have to make money (Mastercard and Visa already do) which will increase costs for vendors and eventually consumers.   Whereas UPI (developed by National Payments Corporation of India which is promoted by Reserve Bank of India) is free for both seller and buyer and is unique in the world for being so.  In a value obsessed country like India, cost alone will be the biggest disadvantage of using Paytm.

Customers need to keep refilling and they may not refill enough money for large transactions. If you want to pay ? 98,000 to TRAVELSPICE.com for multiple rooms for multiple days in a 5 star hotel, chances that you will use Paytm now or in the future, are less.

Paytm is simple to use.  It is so simple that one could transfer money to a person who doesn’t have a Paytm account with NO warning.  On the other hand UPI is simple to use with two factor authentication.  Improvements in User Experience of UPI will come from individual apps from banks.  Paytm, according to its Chairman’s tweet, will itself put UPI on it's app.

Logon to paytm.com, you will see paytm selling movies, buses, flights, trains, hotels etc.  Even when Paytm wallet converts to Paytm Bank, it still carries the same name and same promoters.  For vendors selling any of competing services, using Paytm is like feeding their competition, which is not the case with use of UPI. Take for example their entry into movie tickets. Business Standard in their article titled “BookMyShow faces Paytm music?” quoted Devang Sampat, Head of Strategy, Cinepolis India as saying “Paytm has better chance of success. It is definitely better equipped to challenge BookMyShow's monopoly". If you are BookMyShow selling movietickets or TRAVELSPICE.com selling hotel rooms, the chances you will gravitate towards UPI are higher because of inherent conflicts of interest with Paytm.

Because of the decentralized nature of banking and banks, customers get support from their existing banks branches when it comes to UPI.  Whereas because of the enormity of task at hand, Paytm lacks wherewithal to support unsuccessful transactions.  There are increasing number complaints in social media, of lack of support from Paytm for unsuccessful transactions.

Livemint, in an article titled “UPI is almost like being on a highway without toll gates: Nandan Nilekani?“ quoted former chairman of the Unique Identification Authority of India (UIDAI), who currently serves as an honorary adviser to NPCI on innovation and public policy and was one of the key brains behind UPI, saying once some of “the teething issues” with the current version of UPI are sorted out, UPI will be ready to take off in a big way, especially in e-commerce. The ex-CEO of Infosys said the demonetisation drive will accelerate the roll out of digital financial services in India supported by Aadhaar, UPI, USSD and micro ATMs. “... what would have taken another 3-6 years to get rolled out, I now believe because of the urgency of the matter, will happen in 3-6 months,” Nilekani told NDTV.

Government of India introduced slew of benefits for using UPI including ? 1 Crore Lucky Draw?.  "Our objective is to make digital payments a mass movement... Beginning December 25, the NPCI will announce 15,000 winners of 1000 rupees for the next 100 days ... It will be a Christmas gift to the nation," NITI Aayog CEO Amitabh Kant said.

Is it all a smooth sailing for UPI then?

Not necessarily.  Team UPI has been slow in this competitive space.  Though it has been in the making for years, they do not have app for iOS or Windows phones.  Even startups such as TRAVELSPICE ? launch apps on all platforms.  UPI’s target market is NOT consumers, their customers are banks on one side and merchants like TRAVELSPICE ? on the other.  They should be co-marketing aggressively like “Intel Inside” with both merchants and banks.  UPI team is slow to understand their target market and how to market to them.

Not all is lost for NPCI and UPI teams though, if they pick up speed of execution and improve collaboration with banks and merchants, because of cost savings, conflict of interest of businesses with Paytm, support extended by bank branches and government to UPI apps, UPI not Paytm may well be the future of commerce and ecommerce in India.

Note:  Ramu Kallepalli is the Founder and CEO of TRAVELSPICE.com, India’s first and rapidly growing opaque hotel deal platform.  On TRAVELSPICE.com customer decides price she wants to pay for a particular area and star rating, pays that amount and gets confirmed in one of the listed hotels or her money refunded in less than 3 hours.  TRAVELSPICE.com is the FIRST eCommerce company in India to launch UPI as payment option on it’s app and on travelspice.com.