Paytm business model – how does paytm make money feedough gas in back shoulder


Paytm has already rolled out its new marketing strategy where it has planned to focus more on the digital currency prospects. Hence, all of its core marketing and promotional strategies enforce the use of Paytm Wallet. This is a very clever move as Paytm will get the first mover advantage and through its extensive distribution strategy (which is far better than its competitors like Freecharge, Ola Money, etc.), will be able to increase its brand preference. This will eventually help it to carry out its future plans.

Paytm wallet is a semi-closed wallet (approved by RBI) used to store currency in digital form which can be used to buy goods and services (including financial services) at identified merchant locations or establishments (like petrol pumps, a supermarket, your barber’s shop, movie hall, etc.) which have a specific contract with the company to accept these payment instruments.

Paytm wallet can be used to pay for almost anything, everywhere. It has created a new market for digital currency users because of its ease of use. Money can be transferred between the Paytm wallets of two users with just a few taps on the phone.

As per the RBI guidelines, the money deposited by users in Paytm wallet is deposited by Paytm in an Escrow Account with a partner bank. This escrow account deposit fetches Paytm certain interest which is decided as per the contract between the bank and Paytm.

But operating a prepaid wallet comes with an expense. Banks and payment gateways charge a fee equivalent to 1-3% of the money deposited for using their services. This fee can’t be charged to the customers as it’ll make them choose alternatives like UPI, IMPS, etc. However, the interest generated through the escrow account deposits is usually more than the expenses incurred which results in profits to the company.

Paytm has partnered with gold refiner MMTC-PAMP to launch ‘Digital Gold’ that will allow its users to buy, sell, and store gold digitally without any additional cost. Users can also get the gold delivered to their house with just paying a minimal delivery charge.

Gold is considered as the safest investment in India and Paytm has full plans to capitalize on this. There are bigger plans involved in the introduction of digital gold trade on Paytm. The company wants its users to have something which they call a Gold Bank account, which will allow users not only to buy gold, and store it in digital form, but also to use the gold to buy other services on Paytm — from recharging to pay utility bills, or book movie tickets to buy shoes and clothes from Paytm Mall.

The bank lets you open zero deposit digital current and savings bank accounts and offers a 4% p.a. interest on saving bank accounts and overdraft facility on your current bank accounts. There are no restrictions related to any type of transaction but any balance deposited over ₹1 lakh is moved to a fixed deposit with a partner bank (which provides 7% interest p.a. to you).

Paytm has partnered with other financial institutions and banks to sell their products and services (like insurance, investments, loans etc.) along with its own. It earns money in the form of commissions or other forms as per the contract between the parties.