India: Paytm launches investment arm, to inject $10m in new entity

Paytm founder Vijay Shekhar Sharma. Photo: Pradeep Gaur/Mint

Paytm, run by One97 Communications Ltd, has set up a new entity called Paytm Money Ltd that will offer investment and wealth management products and will invest close to $10 million upfront in the new entity.

Paytm Money is the fourth product from One97’s stable after Paytm Mall, Paytm Payments Bank and Paytm wallet; it will be available as a separate mobile application to users, said Vijay Shekhar Sharma, founder of One97 Communications.

Paytm could also end up creating a money market fund in the long term just like Ant Financial in China, said Sharma. Alibaba’s four-year-old Yu’e Bao Fund is one of the biggest money market funds in the world.

Paytm, which also has a payment bank, could make money through the deposits customers keep in their wealth management accounts. Experts have raised concerns over the business model of payments banks and how it would be difficult for these banks to make money as they are not allowed to lend. Synergies between Paytm Money and bank could help solve that problem for Paytm.

Paytm Money is in the process of seeking approval from the Securities and Exchange Board of India (Sebi) to act as an investment advisor. To start with, it may offer mutual fund products to users.

“We ultimately want to be the Charles Schwab of India with a zero-fee brokerage,” said Sharma.

Paytm Money seems to be an attempt by the company to find more ways of keeping user money with Paytm and build customer loyalty for the long term.

Paytm Money will be headed by Pravin Jadhav as senior vice-president.

Jadhav previously worked with Servify, a personal device assistant, and Rediff, a news, information, entertainment and shopping portal.

“India’s wealth management services market have so far focused mainly on the urban segment leaving a huge chunk of the market untapped,” said Jadhav in an e-mailed statement.

Paytm Money currently has a 40-member team working out of Bengaluru and is looking to add another 150-plus people over the next 12-18 months.

It aims to launch in the first quarter of 2018 after receiving regulatory approvals.

“We started as a payments platform and expanded customer offerings to deposits with Paytm Payments Bank. Today, with Paytm Money, we have taken the next logical step in the direction of wealth management,” said Sharma. “We aim to increase the size of wealth management customer base and bring simple and easy-to-understand wealth products to our consumers.”

The company is already in discussions with leading asset management companies to offer mutual fund investment products. According to Jadhav, only 15 million people are invested in mutual funds today and he aims to take this number to 200-300 million users with Paytm Money.

“We want to double the market share in two years,” he added.

Paytm counts SoftBank Group Corp., SAIF Partners, Alibaba Holding Ltd and Ant Financial Services Group as its investors.

Paytm’s owner One97 was valued at over $7 billion in May 2017 when the company raised close to $1.5 billion from SoftBank.

Investor interest in Paytm, the top online payment services provider in India, increased after the government in November 2016 invalidated old high-value banknotes, spurring cashless payments.

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