Paytm seeks to transform payments bank into small finance lender

Signage for digital-payments provider Paytm, operated by One97 Communications Ltd., is displayed at a shop selling printer cartridges in Mumbai, India, on Friday, Jan. 27, 2017. Photographer: Dhiraj Singh/Bloomberg

Indian financial technology (fintech) giant Paytm is planning to transform its payments bank into a small finance bank, which it believes is a more profitable growth model, according to a report by The Times of India.

Paytm founder and CEO Vijay Shekhar Sharma told TOI that that the payments bank – Paytm Payments Bank – will approach the government for an license to allow it to lend to consumers using technology-enabled low-cost operations. Sharma holds 51 per cent share in the bank.

Small finance banks can offer micro-loans and issue credit cards to their customers aside from accepting deposits of over Rs1 lakh ($2,000). Payments banks, a new model of banks conceptualised by the Reserve Bank of India, cannot issue loans and credit cards.

One of the priorities for small finance banks would be to serve basic banking to the under-served and unserved population, specially small businesses, and farmers, in India.

Sharma stressed that differentiated banks have been introduced to further promote financial inclusion. To achieve that goal, he said there is a need for payments banks to offer small value credit to its customers.

He sees small finance as a profitable growth business model and aims to drive higher distribution outreach through Paytm’s technology-enabled low-cost operations.

Paytm Payments Bank formally began operations in 2017. It posted its profit of Rs19 crore ($3.7 million) in fiscal 2019. The said bank and Airtel Payments Bank account for over 88 per cent of the deposits in payments in India as of 2018.

Paytm’s plan to convert its payments bank into a small finance lender follows the firm’s $1-billion financing round led by US-based global asset manager T Rowe Price and backed by existing investors Ant Financial, SoftBank Vision Fund, and Discovery Capital.

Sharma earlier disclosed that Paytm will make an aggressive push in the financial services business, with lending, insurance, and new-age banking as focus sectors.

He said the company will consider listing only after 2021, when it is expected to start generating cash.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.