Paytm loses appeal despite ambitious growth plans and past successes

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Investor confidence in Paytm will decline as Alibaba and Ant Financial offload their stakes in Paytm Mall, citing the economic slowdown and growing competition in the market.

Paytm’s diversification strategies are also under threat from regulators and peers. It must overcome these obstacles by focusing on its key themes to strengthen its anchoring in the market.

Paytm increasingly faces competitive pressure

Paytm has seen success over the past decade, mainly due to the growing trend of digitalization in India. It also benefited from the Indian government’s demonetization initiative in 2016, followed by the pandemic in 2020. However, it faced opposition from competitors in its main themes – from Google Pay and PhonePe in mobile payments and from Amazon, Flipkart and Reliance. in e-commerce.

Ambitious projects

Paytm intends to become a super-app like Alipay by offering a variety of mini-apps (including payments, shopping and games) on one platform. However, it faces intense competition from conglomerates such as Reliance and Tata, as well as tech giants such as Amazon, which have deep pockets and strong delivery and service standards.

To revive its e-commerce business, Paytm is joining the Open Network for Digital Commerce (ONDC), an open platform launched by the Indian government to curb the dominance of Flipkart, owned by Amazon and Walmart, and focus on e-commerce exports. However, it must match its peers in terms of quality of service, delivery and inventory to stay afloat in the market.

Regulatory and macroeconomic obstacles

Paytm tried to diversify its mobile payment service into banking and insurance, but ran into trouble with Indian regulators. In March 2022, the Reserve Bank of India blocked Paytm Payments Bank from acquiring new users after violating India’s data storage rules. The company also explored a transition into insurance, but failed to carve out a foothold in that space. While it wants to establish itself as a super app, bigger players such as Tata Group, Reliance Jio and Amazon will hold back its progress.

In mobile payment, the company is losing ground to Alphabet’s Google Pay and Walmart-backed PhonePe. Together, PhonePe and Google Pay held an 80% share of Unified Payment Interface (UPI) transaction volume in April 2022, while Paytm held a 15% share. By value, PhonePe and Google Pay jointly held 83% of UPI transactions and Paytm around 10%.

Following its IPO in November 2021, Paytm attempted to regain its lost market share and revive its business. However, its stock market debut was unfavorable due to the high issue price of INR 2,150. Shares of Paytm have since fallen by 73% to INR 585.80 as of May 18, 2022. As a result, its ability to achieve its lofty ambitions appears to be shrinking.

Paytm must invest in AI, Generation Hashtag and social media

Paytm ranks tenth out of 49 companies in GlobalData’s Topic Scorecard for India Tech. However, it lags behind peers like Amazon (first tier), Alphabet (second), and Reliance (sixth). Alibaba ranks eighth on the scoreboard, and its exit will have a noticeable impact on Paytm’s growth in the years to come.

Paytm should focus on attracting the Hashtag generation (anyone born between 1991 and 2005) by providing personalized, convenient, and omnichannel experiences. Delivering a seamless experience requires investments in logistics, cloud computing, and most importantly, artificial intelligence (AI). Paytm needs to invest in AI and machine learning to analyze customer data and derive insights into customer trends, habits and preferences. Using social media for marketing, shopping, and increased customer engagement will also help Paytm fill the void.

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