Rise and Fall of Paytm - GD Topic

Rise and Fall of Paytm – Trending MBA GD Topics

Paytm is a dream startup that is making thousands of crores in revenue. This company is aspirational for many and facing huge challenges now. After the announcement of the ban from the RBI, things are getting worse for them. Founder and Non-Executive member Vijay Shekhar Sharma resigned from the post. Started from nowhere to reach the position of the most inspiring startup in India and then its downfall. The story of Paytm has lots of things to learn. In this blog, we’ll see the good and bad of Paytm.

About Paytm

In August 2010, Mr. Vijay Shekahr Sharma launched the Paytm. At that time Paytm offered services such as recharge and ticket booking. Later on, many features were added to the app such as a wallet, stocks, banking, UPI, and others. It was the demonization time when Paytm got the use success and adaptability. From there this app never looked back. On 28, Nov. 2017 they launched the paytm payments bank. In 2017 year only Soft Bank invested 1.4 billion USD in paytm. During the paytm IPO time, this company had an 18.5% stake in the company and since then they are offloading their share, and it’s 5% now.

Problems and paytm are not new, Alibaba a Chinese company become the biggest shareholder with a 34.70% stake. This causes serious concern as Chinese companies have the highest stake in the company. RBI has warned the company to regulate the process of KYC and not opening new accounts but they did not take it seriously. After many warnings finally RBI banned the paytm offering wallet and banking services.

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Stats of Paytm – Paytm GD Topic

  1. More than 10000 people are working the Paytm and its parent company.  
  2. Paytm has 100+ million active users on the app. 
  3. Out of 100 million, only 20 million are active wallet users of Paytm payments bank and the number is even more lower for the bank services. 
  4. Paytm has the third largest share in UPI transactions in India 13% after the Phonepe 46% and Google Pay 36%
  5. Paytm has launched the second largest IPO in India worth rupees 18,300 crore.
  6. In 2023 company witnessed a 44% growth and reached 4928 crore. Also, the new margin increased by 3x and reached 1970 crore. (Source – Paytm (https://paytm.com/document/ir/financial-results/Paytm_Earnings_Release_Q4_FY2023_INR.pdf))
  7. Due to this ban, Paytm will witness loss of 300-400 crore in this financial year.
  8. Many users have uninstalled the Paytm app after the ban announcement from RBI.

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Goods of Paytm

  1. Paytm employs more than 10000 employees in India and contributes a major part to India’s development.
  2. Paytm makes the process of online transactions simpler and more secure for the users and the merchant.  
  3. It is the one-stop solution for financial things from bookings to recharge, from investment to spending, from saving to shopping almost everything is available on the app.
  4. The second largest IPO of India worth Rs 18300 crore and the largest of a Startup.  

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What went wrong for Paytm?

Not one many things went wrong with the paytm and their work that led them to this situation. A few of them are mentioned below

  1. Chinese company Alibaba has almost a 35% stake in the company. Officials are concerned about the large digital payment platform influenced by Chinese owners. After the criticism from users and before the IPO Alibaba reduced it to 25% but still stake in the Chinese company letting paytm lose the trust of customers.
  2. Paytm launched its IPO worth rupees 18300 crore rupees at a 2100 share price. At that time many financial institutions and advisors stated that this price was too high. The share price should be 1100 or 1200 and this prediction is somewhere true as shares of paytm are listed at 1955 rupees. From three Paytm shares always see a downfall.
  3. Paytm wallet and Bank accounts KYC is easy to do and there are millions of inactive accounts. RBI raises concerns about the possibility of Money laundering and dealing with money without tracking.
  4. In 2018 also RBI asked paytm to stop their banking services after finding some problems with their workings. RBI stops them from onboarding new customers to banking and wallet services. Although in December 2018 RBI lifted their ban on Paytm.  
  5. Before the current ban also RBI asked paytm to stop onboarding new customers from banking. Under the hood, they kept on doing these things which led RBI to impose a ban on their services. 
  6. Major shareholders of Paytm – Alibaba, Softbank, Ant slowly offloading their share in Paytm which breaks the trust of small investors. Warren Buffet a renowned investor also sell his shares of Paytm at a 31% of loss
  7. Too many areas – Paytm loses its focus to earn revenue which costs them this situation. From financial apps to baking to e-commerce to other areas Paytm kept on growing on the other hand their competitor Phonepe did one thing become a household name with a 46% market share.

Ways for Paytm from Here

Paytm will survive this situation it just will lower revenue and needs to work on its methods. Paytm has requested RBI to make them an application provider for 4-5 major banks in India. RBI asked NCPI to look into the matters and analyze the capabilities of paytm technologies. In one month NCPI will present its report to the RBI. Most likely Axis Bank will be the first customer of paytm and yes bank, HDFC is in talks. Also, the app of paytm will remain working as earlier it is just their banking and wallet service that is terminated.

Conclusion – Paytm GD Topic

It takes more than a decade to build a business for Paytm but some irregularities and neglect lead them to a tough situation. If they made some decisions after the working things could have been better for them. Paytm will continue to work but they lost the trust of customers and it’s not easy to gain trust again. They need to make a lot of effort and after the founder resigns things are not seem to be right. Well with rumours of a partnership with Axis Bank things in the future may go right.

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