Aditya Puri, a veteran banker, questioned Paytm’s business strategy on Tuesday, claiming that the freshly listed financial services company had gained consumers through cashbacks rather than services. Puri, who led HDFC Bank from its beginnings to being the largest private sector bank by the time he departed in 2020, questioned Paytm’s business model, asking where the profits are if the company handles so many payments.
The comments come amid a sharp drop in Paytm’s stock, which is now selling at a 75 percent discount to the initial public offering price. Puri isn’t the first person to express his dissatisfaction with such organisations’ business methods.
Paytm has amassed millions of users by offering cashbacks, according to Puri, unlike a bank, which books revenues for providing services and reports profit.
Puri emphasised the need of hard work in areas such as cross-selling, saying that it took years of effort for HDFC Bank to improve its cross-selling capabilities in the auto loans segment, despite owning the clients through other services.
Puri, who faced questions over the procedures of HDFC Bank’s car loans vertical near the conclusion of his tenure, said corporate governance is a problem throughout the country, and that we have built a “halo” around it.
He stated that corporate governance is a cultural factor that must be established from the top of an organisation, and that the RBI is working hard to improve it at lenders. According to Puri, service providers like as Amazon and Google Pay can’t launch their own bank, and if they do, they’ll have to deal with the same array of laws that commercial banks must follow.
A bank has a brand, trust, and owns a client, but a payments company relies solely on the bank’s infrastructure, he added, emphasizing that the lender must be compensated for enabling such service delivery. Puri claims that semi-urban and rural markets contain all of the required elements for economic development, but that financial institutions are hesitant to meet their requirements.
Paytm (short for “pay through mobile”) is a multinational Indian financial technology business that specialises in digital payment systems, e-commerce, and financial services. Its headquarters are in Noida. The company offers its registered users an app that allows them to conduct financial transactions and payments with a variety of merchants and financial institutions.
More than 2 crore businesses throughout India utilise the company’s QR code payment system to take payments directly into their bank accounts, according to the company. In FY 2020–21, it had a gross merchandise value of over 400,000 crore (US$52 billion) across all platforms. Paytm’s brand value was expected to be US$6.3 billion in 2020, making it one of India’s top ten most valuable brands.