Paytm's branding may be a common feature all over India, but digital payments are far from replacing cash as the primary mode of transaction. Instead, Paytm's founder Sharma reckons that the best it can aim for is to see less of cash rather than no cash. Image Credit: Reuters

Bengaluru (IANS): Even three years after demonetisation and all-out efforts to make most transactions through electronic, cash is still king in India,

“While cashless economy is not possible in India, less cash economy will be in the future,” said Vijay Sharma, Paytm’s founder. “Less cash is the only solution, not the elimination of cash.”

Asserting that it would take 5-10 years for India to make the transition to digital payments from cash, Sharma said the e-payment industry benefitted more from the November 8, 2016 note ban and withdrawal of old 1,000 rupee and 500 rupee denominations.

“I think it (demonetisation) helped the industry despite lack of specific help. But the world has changed since then. It is about the scale of distribution of merchants that is propelling digital payments,” said Sharma, whom Forbes ranked as India’s youngest billionaire in 2017, with a networth of $2.1 billion.

Vijay Sharma, founder of Paytm, is realistic about how far digital can make inroads in India. Image Credit: Bloomberg

Paytm has 16 million strong merchant user base, which Sharma aims to raise to 26 million base in the next one year.

Zero charge

Expounding Paytm’s zero service charge, Sharma said the strategy is sustainable as it leads to acquiring more customers and merchants, enabling newer business opportunities. Paytm also does not levy a service charge to small merchants for its payments services, unlike organised players like Uber.

“The merchants who are small shopkeepers, become our financial services customers as they open a bank account, which is profitable,” said Sharma.

Paytm secured a Payments Bank license from the Reserve Bank of India to offer a savings bank account, Rupay debit card and money transfer services. “We are banking on payment services acquiring customers and merchants who avail banking, lending, insurance, wealth and software services like billing software and business ledger software services eventually,” Sharma added.

The mobile first bank services include zero balance and zero digital transaction charge accounts.

“Basically, payments, cloud, commerce and financial services are a cohort we follow. So, payments is our customer as well as merchant acquisition. If it breaks even, we are happy because other line items make more money.”

Don’t go premium

Noting that in a market like India, one cannot price services at a premium unlike in the US, the businessman said a consumer in a developing country would not be able to afford such a hefty charge. While several countries operate on the model of higher service charges, Sharma said newer business models have to be discovered in India, as customer lifecycle value accounts for more stages than in other nations.

Asked about an upscale retailer like Zara not giving a wallet payment option during its recent end-of-season sale in Bengaluru, Sharma said Paytm was addressing such hiccups with its all-in-one payment solutions.

“It’s an opportunity, because if the retailer has our all-in-one point of sale machine, where in they enter the amount, it shows both the Quick Response code (QR) and card payment options,” he said.

Sharma compared older swiping payment machine to feature phones. “If you notice, they look like feature phones and the modern day card machine is more a smartphone like. You can add the smatphone components, which can add the features,” reiterated Sharma.