Analysis Of Paytm

AN INTERNAL AND EXTERNAL ENVIRONMENTAL ANALYSIS OF PAYTM, INDIA

TABLE OF CONTENTS Slide 3

Introduction

Slide 4

Industrial Analysis

Slide 5 Slide 6 Slide 7

External Environmental Analysis of Paytm • Porter’s Five Forces • PEST Analysis • Opportunities and Threats

Slide 8 Slide 9 Slide 10 Slide 11 Slide 12

Internal Environmental Analysis of PayTM • Value Chain • Strengths and Weaknesses • STP & Core Competencies • VRIN Framework • Strategy Canvas

Slide 13

Overall Impacts

Slide 14

Suggestions

Slide 15-16

Bibliography

Slide 17

Task Allocation

INTRODUCTION  Paytm is an Indian electronic payment and e-commerce brand based out of Delhi NCR, India. Launched in August 2010, it is a consumer brand of parent company One97 Communications. (Source: PayTM, 2017) Parent Organization: One97 Communications

(YourStory, 2015) Investors: SoftBank, SAIF Partners, Alibaba Group, Ant Financial (Alipay) and Mediatek

Services Used: PayTM

Employees: 13000+

(PayTM, 2017)

Registered Users: 250mn 3 million offline merchants

(Economic Times, 2016)

INDUSTRY ANALYSIS MobiK Others 10% wik Airtel 5% Money 5%

Market Share (%) (Financial Express, 2017) (KalaGato Pte., 2017)

Freecha rge 11% PayTM 68% (DSIM, 2015) Impact of Demonetisation:

(Economic Times, 2016)

(PayTM, 2016)

(LiveMint, 2016)

PORTER’S FIVE FORCE ANALYSIS

Bargaining Power of Suppliers [LOW] Bargaining Power of Buyers [HIGH] Alliances with banks (to provide better interest rates) Buyers are extremely price sensitive, therefore any differences in price/offers Several banks are capable of providing the same interest rates, making it will change the customer’s preference, at a very low switching cost, and easy for PayTM to switch to any other bank. make them move to a competitor. Competitive Rivalry [HIGH] Government Involvement: UPI and BHIM app to rival cashless transactions. Capabilities of competitors to provide similar/better services Threat of New Entrants [LOW] Threat of Substitutes [HIGH] As Paytm is well established and is market leader in this segment, it has There are several options available for the consumers to make transactions. diversified too much due to which it becomes difficult to compete as it has Example: Net banking, Credit or Debit Cards, Cash, Gift Vouchers, alliance with various FMCG companies, allowing them to provide cashback Sodexho Coupons, Gold. of more than 50% the cost of the product.

PEST ANALYSIS Factor

Implication

Social – Positive Impact (Times of India, 2016) (Nasscom, 2017)

The number of smartphone and internet users is projected to increase by up to 240% by the end of 2020. As projected by Nasscom, 2016, the number of new users from rural areas will increase by 75% and more than 70% of the E-commerce transactions will be via mobile.

Technological – Positive Impact (Fieldwork)

The price-war between the telecommunication companies has benefited its consumers. There are more number of smartphone users enabled with high-speed internet, giving Paytm a wide audience to cater to, therefore a potential increase in the customer base.

Economic – Positive Impact (Forbes, 2016) (Livemint, 2016)

After demonetization, the company claims to have registered a 700% increase in overall traffic on the platform and 1000% growth in the value of money added to PayTM accounts. In addition, the average transaction value has increased by 200% and the number of mobile app downloads by 300%.

Political – Positive Impact (Hindustan Times, 2016)

Digitisation: The Digital India Program ensured governmental support and promoted digital transaction policies to maintain and increase the number of cashless transactions. The number of users multiplied within the span of 4 months since the government’s declaration.

OPPORTUNITIES AND THREATS OPPORTUNITIES

THREATS

1. In India, 72 of every 100 inhabitants have a mobile phone while only 35% have a bank account with a total of 233 million in the unbanked population. (Yourstory.com, 2015) The sheer size of the market can allow PayTM to offer their services to various segments of the society. (Frankbanker.com, 2016)

1) The average literacy rate in India is 74.4% with rates as low as 60% in rural areas. (Censusindia.gov.in, 2017) The low literacy rate, lack of infrastructure in rural areas and the lack of technological knowledge will restrict the adaptation of people to the e-transaction route. 2) Usage of cash as a primary mode of transaction.

2. India has a low internet penetration of about 34.8% from which 26.3% are smart phone users considering this statistics this is a loop where PayTM can attract and increase customer base. (Internet Live Stats, 2016). 3. There are over 50 million registered small businesses in India, with about 2 million of them paying service taxes. Wallets have only partnered with 30,000 such merchants for online to offline payments, therefore, PayTM can acquire new merchants by targeting these businesses. (Your Story, 2016).

VALUE CHAIN ANALYSIS Firm Infrastructure: Headquartered in Noida with Regional Offices in Bangalore, Chennai, Mumbai, Kolkata and Toronto. Setting up acquisitions with several offline merchants to establish the Online-To-Offline (O2O) business model. (PayTM, 2017). Human Resources: 13,000+ employees with over 3 million offline merchants (PayTM, 2017). Wallet handled by non-bank entities (Livemint.com, 2016). Technology Development: PayTM Payments Bank, is India’s first bank with zero fee on online transactions, has no minimum balance, issues a free virtual debit card, keeps every online transaction free, and makes services like cheque book, demand draft and debit card available at a nominal fee. (Economic Times, 2017). Procurement: The suppliers are associated with the “PayTM Marketplace” where merchants can easily even Chat to Bargain with its consumers. (PayTM, 2017). Inbound Logistics • Transactions with banks • Setting up systems for immediate cash transfer on wallet. • Interacting with sellers and short-listing products to list down on wallet, according to which, cashback and other offers are provided

Operations Creating credit limits in banks • for transactions with accordance to laws set by RBI. (Reserve Bank of India, 2015) Maintaining user records and • taking care of transactional errors manually. (PayTM Blogs, 2016) Depositing money in Escrow • accounts for interests upto 6%. (Livemint.com, 2016)

Outbound Logistics E-fulfilment centres and return processing centres. (YourStory.com, 2015)

Marketing and sales • In the year 2016-2017, the company aimed to spend over Rs. 600 crores on branding and marketing (Livemint, 2017) •

PayTM launched a TVC highlighting Paytm wallet's multiple use to further strengthen its core messaging 'Paytm Karo'. The focus of the campaign is to showcase Paytm wallet as an alternate currency leading the way to a cashless nation. (ETBrandEquity.com, 2017)

Service Cashback to clients on their purchases for products on Paytm Mall and other Retail Outlets accepting PayTM.

STRENGTHS AND WEAKNESSES STRENGTHS •

Customer base of over 250 million registered users with 68% market share in the electronic payments industry. (Financial Express, 2017), (Paytm, 2017).

•

Paytm wallet is accepted at over 15 lakhs merchant locations online and offline. (PayTM Blogs, 2016)

•

Most preferred payment option for over 16 million users. (Paytm Blogs,

WEAKNESSES •

of the 14015 complaints successfully resolved. (Consumercomplaints.in, 2017) •

Paytm users do not require a bank account to receive money in their Paytm wallet.

•

Paytm aggressively diversifies into new markets to ensure a high rate of customer acquisition to maintain a strong competitive advantage. (Financial Express, 2017)

In 2016, RBI approved Paytm to operate as Bharat Bill Payments Operating Unit, which allows its customers to pay electricity, telephone and other bills. (Goodreturns.in, 2016).

The usage of Paytm wallet is restricted only to the national boundaries of India, therefore, overseas payments are unavailable

2016) •

PayTM is rated at 5% customer satisfaction rate with only 579 out

through Paytm. •

Due to a limited reach in the market, PayTM is not available at every store in India, therefore, customers need to keep alternate payment solutions to make payments in these stores.

STP AND CORE COMPETENCIES Segmentation • Geographic Segmentation: Urban areas with availability and knowledge of internet

Target Group • Young and middle aged people • Tier-1 and major Tier-2 Cities

• Psychographic Segmentation: People with smartphones looking for cashless payment transactions

Positioning • Positioned as an alternate for cash, with added benefits in every transaction. • Sponsorship in sporting events, cultural events. • Acquisitions with several brands for cashback options.

Core Competencies

Support from One97 Communications and Investors

PayTM Payments Bank

Alliances/ Partnerships: Uber, Bookmyshow, etc.

Acceptance in several online and offline locations

VRIN FRAMEWORK Factor

Customer Base

Valuable

Yes

Rare

Yes

Inimitable

Yes

Nonsubstitutable

Competitive Advantage

Yes

Sustained Competitive Advantage PayTM is the leading wallet company in India with over 250mn registered users. (Paytm, 2017)

Paytm Payment’s Bank

Yes

Yes

No

Yes

Temporary Competitive Advantage The Reserve Bank of India (RBI) issued licences to 11 companies in 2014 to operate as payment banks and of those Airtel and Paytm have started operations. (The Hindu, 2017)

Affiliations and Partnerships

Yes

Yes

No

Yes

Temporary Competitive Advantage Partnerships with companies like Uber, Swiggy, BookmyShow, etc.

Rural Markets

No

Yes

Yes

Yes

Competitive Disadvantage Lack of presence in rural areas compared to its competitors.

Yes

Competitive Rivalry Every competitor is capable of providing similar or better offers to its customers.

Offers and Other Services

Yes

No

Yes

STRATEGY CANVAS Source: Fieldwork (Questionnaire) 6

Blue Ocean Strategy

Red Ocean Strategy

5

4

3

2

1

0 Transaction Security

User Interface

Customer Base MobiKwik

Freecharge

Alliance/Partnerships PayTM

Jio Money

Offers & Other Services

Customer Care

IMPACTS Porters Five Forces

PEST Analysis

Opportunities & Threats

Strengths & Weaknesses

With the high level of governmental involvement and the capabilities of other ewallet companies providing the same services, Paytm faces aggressive competition that would destabilise the strategic plans of the company. The availability of other payment methods

As per the statistical analysis the external factors works in favour of PayTM as there is an increasing growth in the number of customers, and an opportunity of market development. The economical factors allowed the company to extensively grow in numbers, with an increase in overall traffic and downloads.

The overall size of market can enable PayTM to offer their operations to different portions of the general public, as there is a possible increase in the number of users in the rural areas (regardless the low literacy rate). The major threat for the company is the customer’s preference of choosing cash over cashless transactions.

Even though Paytm remains the market leader in India, there remains a threat of possibly losing several customers due its poor customer service. The company majorly focuses on acquiring new customers rather than trying to retain the existing ones.

Positive

Positive

Negative

Impact Negative

RECOMMENDATIONS 1) Market Development: With a projected increase in the number of smartphone users in rural areas and improved infrastructure in these areas, we suggest Paytm to expand in these areas and capitalise on the low competition there. 2) Customer Service: Paytm’s customer service is deemed as poor due to its high rate of dissatisfied customers. The company must emphasise on retaining customers, rather than acquiring them. We suggest the company to retrain its employees in the customer service department, improvise the refund and exchange policies, introduce a new loyalty program, and limit the number of sellers in the PayTM Mall to only reputed and brand authorised merchants. 3) Further Partnerships: With every competitor capable of providing high discounts to its customers, we suggest the company to increase the number of acquisitions with other companies. These partnerships will allow them to provide better offers and services, which will thereby help them retain and attract new customers.

BIBLIOGRAPHY 1.

One97.com. (2017). All About One97 Communications Limited that you Wish to Know. [online] Available at: http://www.one97.com/about-one97.php [Accessed 8 Nov. 2017].Paytm.com. (2017).

2.

About Paytm. [online] Available at: https://paytm.com/about-us/ [Accessed 8 Nov. 2017].

3.

Writer, O. (2017). What Is Paytm Wallet? How To Use Paytm App?. [online] goodreturns.in. Available at: https://www.goodreturns.in/classroom/2015/09/what-is-paytm-wallet-how-use-it-390037.html [Accessed 8 Nov. 2017].

4.

nz, i. (2017). Demonetisation effect: Paytm clocks Rs 5,000 crore worth of transactions in January. [online] http://www.hindustantimes.com/. Available at: http://www.hindustantimes.com/business-news/demonetisation-effect-paytm-clocks-rs-5-000-crore-worth-of-transactions-in-january/story-UhaQYwS1 u5fz2O98OQOKUP.html [Accessed 8 Nov. 2017].

5.

Forbes.com. (2017). Forbes Welcome. [online] Available at: https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/panosmourdoukoutas/2017/06/22/modis-india-the-worlds-4th-fastest-g rowing-economy/&refURL=https://www.google.co.in/&referrer=https://www.google.co.in/ [Accessed 8 Nov. 2017].

6.

Freepressjournal.in. (2017). Indo-German ties: Towards new highs | Free Press Journal. [online] Available at: http://www.freepressjournal.in/business/german-week-in-mumbai-indo-german-ties-move-towards-new-highs/1148396 [Accessed 8 Nov. 2017].

7.

FrankBanker. (2017). Payments Banks in India. [online] Available at: http://frankbanker.com/building-a-payments-bank-challenges-and-opportunities/ [Accessed 8 Nov. 2017].

8.

Care, P. (2017). PayTM Mobile Solutions Customer Care, Complaints and Reviews. [online] Consumercomplaints.in. Available at: https://www.consumercomplaints.in/paytm-mobile-solutions-b100340 [Accessed 8 Nov. 2017].

BIBLIOGRAPHY 9. Shukla, T. (2017). Technology will drive compulsive consumption: Paytm founder. [online] http://www.livemint.com/. Available at: http://www.livemint.com/Industry/6QfxG0CKAIzMXRlG1QwOzI/Technology-will-drive-compulsive-consumption-Paytm-founder.html [Accessed 8 Nov. 2017]. 10. Solution, P. (2017). Paytm Partners With Wipro For Development of Their Core Banking Solution. [online] Trak.in - Indian Business of Tech, Mobile & Startups. Available at: http://trak.in/tags/business/2016/05/02/paytm-wipro-payment-bank-development/ [Accessed 8 Nov. 2017]. 11. Paytm Blog. (2017). Know more about your Paytm Wallet: Security Features, Various Fees, Refunds. [online] Available at: https://blog.paytm.com/know-more-about-your-paytm-wallet-security-features-various-fees-refunds-306df50313fd [Accessed 8 Nov. 2017]. 12. Writer, O. (2017). What Is Paytm Wallet? How To Use Paytm App?. [online] goodreturns.in. Available at: https://www.goodreturns.in/classroom/2015/09/what-is-paytm-wallet-how-use-it-390037.html [Accessed 8 Nov. 2017]. 13. Google.com. (2017). Redirect Notice. [online] Available at: https://www.google.com/url?hl=en&q=https://blog.leadsquared.com/6-real-time-marketing-ideas-that-worked/&source=gmail&ust=1507785214123000&us g=AFQjCNGtjPFzmP6NpH1EHh3R4qOWe7kKTQ [Accessed 8 Nov. 2017]. 14. Ananya Bhattacharya, q., Nupur Anand, q., Ananya Bhattacharya, q. and Nupur Anand, q. (2017). There are too many e-wallets in India and most are nearempty. [online] Scroll.in. Available at: https://scroll.in/article/841511/there-are-too-many-e-wallets-in-india-and-most-are-near-empty [Accessed 8 Nov. 2017]. 15. Chopra, A. (2017). Paytm claims record number of transactions after govt’s demonetization move. [online] http://www.livemint.com/. Available at: http://www.livemint.com/Companies/gWu18E6zIzsI0tfsANYsFL/Paytm-claims-record-number-of-transactions-after-govts-demo.html [Accessed 8 Nov. 2017]. 16. Paytm Shop. (2017). Paytm.com – Digital & Utility Payment, Entertainment, Travel, Payment Gateway & more Online !. [online] Available at: https://paytm.com/ [Accessed 8 Nov. 2017].

BIBLIOGRAPHY 17. The Hindu. (2017). RBI grants in-principle nod for 11 payments banks. [online] Available at: http://www.thehindu.com/business/Industry/rbi-grants-inprinciple-nod-for-11-payments-banks/article7557908.ece [Accessed 8 Nov. 2017]. 18. Paytm Blog. (2017). Paytm Blog. [online] Available at: https://blog.paytm.com/ [Accessed 8 Nov. 2017]. 19. Singh, R. (2017). Payments banks have an opportunity in the millions of unbanked, but are these viable?. [online] The Economic Times. Available at: https://economictimes.indiatimes.com/industry/banking/finance/banking/payments-banks-have-an-opportunity-in-the-millions-of-unbanked-but-are-these-viable /articleshow/58874447.cms [Accessed 8 Nov. 2017]. 20. Sahay, P. (2017). Paytm to spend Rs600 crore on branding, marketing in 2016-17. [online] http://www.livemint.com/. Available at: http://www.livemint.com/Companies/GyVdzCnR1y54O1VAI80SxL/Paytm-to-spend-Rs600-crore-on-branding-marketing-in-201617.html [Accessed 8 Nov. 2017]. 21. ETBrandEquity.com. (2017). Paytm launches new ad campaign to push brand message - ET BrandEquity. [online] Available at: https://brandequity.economictimes.indiatimes.com/news/advertising/paytm-launches-new-ad-campaign-to-push-brand-message/52640000 [Accessed 8 Nov. 2017]. 22. Malik, Y. (2017). Paytm arm unveils online shopping portal Paytm Mall. [online] http://www.livemint.com/. Available at: http://www.livemint.com/Industry/vl7Vd6h4ssXQtvS08wXnQK/Paytm-arm-unveils-online-shopping-portal-Paytm-Mall.html [Accessed 8 Nov. 2017]. 23. Digital Marketing Blog - DSIM. (2017). DSIM- Digital Marketing Blog. [online] Available at: http://dsim.in/blog/2017/04/14/case-study-digital-payments-landscape-in-india-2017-trends-future/ [Accessed 8 Nov. 2017]. 24. Singh, R. (2017). Demonetisation: Why the challenge to take digital payment to rural India is as huge as the opportunity. [online] The Economic Times. Available at: https://economictimes.indiatimes.com/news/economy/policy/sunday-et-making-rural-india-pay-digitally-and-challenges-post-demonetisation/articleshow/55640 316.cms [Accessed 8 Nov. 2017].

TASK ALLOCATION  1727276: PEST Analysis, Porter’s Five Forces  1726504: STP, Core Competencies, Opportunities and Threats, Strengths, Impacts  1724061: Strengths & Weaknesses, Porter’s Five Forces, Impacts  1723794: VRIN, Value Chain, Strategy Canvas, PEST Analysis, Presentation, Industry Analysis

 1724089: Opportunities and Threats  1723819: Strengths and Weaknesses