Paytm, one of the 11 recipients of a payments bank license from RBI, has targeted the launch of its business, with an initial capital of Rs.300 crore, before November this year. Vijay Shekhar Sharma, One97 Communications founder revealed the information on Monday.
Paytm has targeted the launch with 20 million account holders, and has been hiring new executives and making partnerships to strengthen the e-commerce platform.
Three out of 11 receivers of the license have withdrawn their applications, raising concerns over the business model and profitability of payment banks. These companies include Tech Mahindra; Sun Pharma promoter Dilip Shanghvi and his partners IDFC Bank Ltd and Telenor Financial Services; and Cholamandalam Investment and Finance Co.
The entity, Paytm Payment Bank, is expected to become the second largest contributor of revenues after its core payments business in two years.
“It is not an easy business and is a long-term game. It should take any payment bank three to five years to make money. If you have enough volumes, you could reach there faster,” said Vijay Shekhar Sharma in an interview on Monday.
“The company (One97) and I will continue to keep funding the bank till it is profitable,” he added. Paytm Payment Bank will be 49 per cent owned by One97 whereas Sharma owns the remaining 51 per cent.
In the first year, the bank will look to grow its business in 12 cities in north-east and central India. It is first of its kind initiative in India aimed towards increasing financial inclusion of rural areas, poor population, and other non-banking population in the country.Smaller markets such as parts of Bihar, Madhya Pradesh and Uttar Pradesh will be high on the agenda, Sharma said.
The strategies has been laid to enable basic bank transactions in remote areas through extensive coverage of mobile phones in the country.
With an option to store a maximum sum of Rs 1 lakh in a payment bank, the customers can avail interest on balance amount just like a normal saving account. As payments banks can’t lend, it will issue debit cards and ATM cards which can be used on any bank ATM all over the country. It also has tie-ups with other banks and financial institutions to sell cross-banking products such as insurance and wealth management products to drive most of its revenues..
PayTm claims to provide an interest more than any saving bank account of other banks.
“A common person’s savings is the money kept in his savings bank account. He does not have the luxury of wealth management… we will bring some incredible wealth management tools and we will create a money market fund here, which will not have any lock-in period or any penalty for breaking the bond,” said Sharma, while explaining the innovative products his company would launch.
“The products will be priced at affordable rates, some investments can be even as low as 10 to encourage more and more people towards using payments bank,” he further added.
PayTm is aiming to have 200 million accounts including mobile wallets, current accounts, and savings accounts, within 12 months of the launch of payments bank. By 2020, it expects to reach half a billion accounts. It already has close to 130 million mobile wallets, so another 70 million accounts is needed to reach its initial target.
The Paytm marketplace currently claims to have an annualized GMV of around Rs.20,000 crore based on its current run rate. Its daily GMV is about Rs 55 crore on a no-promotion basis and it expects to touch a GMV of Rs.40,000 crore by March 2017.
The entity, Paytm Payment Bank Ltd, is expected to become the second biggest revenue source for the parent firm after the core payments business.
