Paytm, supported by Alibaba, favored small financial banking.

Editor’s note: This article is from the WeChat public account “ 朱 道 ” (ID: zd_review ), Author Zhu Dao.

Paytm, India’s largest mobile payment and commerce platform, is currently considering shifting its focus to small financial banks that lend to consumers, a move aimed at finding a profitable business model for its payment banking business.

It is reported that Paytm, supported by Alibaba, is applying for a small financial banking license from the government and the Indian central bank, the Reserve Bank of India (RBI), to use technology-supported low-cost services to provide loans.

Paytm Payment Bank (PPB) founder and CEO Vijay Shekhar Sharma holds a 51% stake in the company and told the Times of India: “Once regulated The agency agrees that we will launch this new business function. “Vijay Sheka Sharma also added that after becoming a payment bank, he hopes to be allowed to provide microcredit to customers immediately, he believes Small financial banks are a profitable growth business model and plan to expand their distribution through technical means.

In September this year, the Indian banking regulator issued a draft guideline on small financial banking licenses for reference by stakeholders. Paytm submitted feedback after the guidelines were issued, and expressed a desire to apply for a small financial banking license.

Different from payment banks, small financial banks can provide small loans, issue credit cards to customers, and can also accept deposits in excess of Rs 100,000. Paytm sees this untapped business opportunity.

Paytm payment bank officially started operations in 2017 and achieved a profit of Rs 190 crore for the first time in fiscal 2019. According to data from the Bank of India, as of last year, Paytm Payment Bank and Airtel Payment Bank controlled a total of over 88% of the deposits of Indian payment banks.

As of March 2019, Paytm Payment Bank claims to be the top leader in mobile banking transactions with a market share of more than 19%. Most of its income comes from government bonds invested, in addition to commissions paid by its savings bank accounts and e-wallet holders.

Without a profitable business model and revenue, many payment banks have closed their doors in the past few months. As the existing bank payment rules do not allow direct loans and limit each customer’s deposit to Rs 100,000, they also do not have multiple profit models to choose from. These restrictions have prevented many small companies from continuing to engage in payment banking.

It’s worth mentioningYes, between 2017 and 2018, payment banks lost a total of Rs 5.165 crore. Of the 11 Indian payment banks initially launched, only five-namely: Paytm, Airtel, Fino, Jio and India Posts are currently operating banks. In July of this year, Aditya Birla Idea Payment Bank and Vodafone m-Pesa announced the closure of their businesses.

There have been previous reports that Paytm ’s Unified Payment Interface (UPI) transactions have plummeted, and market share has also “gone away” to rival Google Payment services Google Pay and PhonePe. Not only that, the company is laying off more than 500 intermediate and junior employees, involving its compliance supervision, O2O, retail and transportation logistics business teams. Two sources who requested anonymity said that many of the company’s executives, including junior managers and team leaders, were required to resign immediately, and all those fired would receive two months’ severance pay.

As far as the current situation is concerned, let’s wait and see if the most well-known e-commerce and fintech giant in India can rely on business transformation to reverse the trend.

(The cover image is from Pexels)