INSUBCONTINENT EXCLUSIVE:
Vijay Shekhar Sharma founded One97 Communications and its brand Paytm almost two decades agoVijay Shekhar Sharma, 41, founded closely held
One97 Communications and its brand Paytm (rhymes with ATM) almost two decades ago
It offered a variety of digital services before moving into payments in 2014, just as millions of urban Indians began shopping online
Two years later, India's banks created the Unified Payments Interface, a tech umbrella to help banks and fintech startups create services
quickly, and the government eliminated high-value currency notes, turbocharging demand for Paytm's services
Mr Sharma, a self-described hippie who loves to sprinkle U2 and Pink Floyd lyrics into his conversation, now has backers including Alibaba's
Jack Ma, SoftBank's Masayoshi Son, and Berkshire Hathaway's Warren Buffett.Paytm is the market leader in India, where KPMG sees
digital payments growing at the fastest rate of any country, with transaction value rising at an estimated annual rate of 20.2 per cent from
But competition is heating up as Google, Walmart, and Facebook jump into India, wielding cashback offers to lure customers
Meanwhile, the government has proposed scrapping fees on digital payments, Paytm's core product
In an interview in Delhi, Sharma described his career and how Paytm is adapting to India's changing market, cutting annual expenses 45 per
and e-commerce?VIJAY SHEKHAR SHARMA: I grew up in a small town called Aligarh where I studied in a very basic Hindi medium school [where
Hindi is the medium of instruction]
I didn't have fancy schooling
I was lucky to get into engineering college in Delhi at the age of 15
I taught myself English by memorizing rock songs and simultaneously reading translated textbooks in English and Hindi
When I graduated, I was the youngest teenage engineer out of the University of Delhi
As the Pink Floyd song [Breathe] goes,Run, rabbit run.Dig that hole, forget the sun,And when at last the work is doneDon't sit down it's
time to dig another one.For long you live and high you flyBut only if you ride the tideAnd balanced on the biggest waveYou race towards an
early grave.My early heroes were internet entrepreneurs Jerry Yang and Mark Andreessen
I started One97 Communications in 2000 and began by selling content to users through telecom operators
By 2010 the smartphone became the distribution channel
Payment became our thing, and destiny was in our hands
In 2014 we launched our licensed wallet product
By 2015, Ant Financial had invested in us, then Alibaba and then SoftBank.A whole generation of internet entrepreneurs in India have
small-town roots and hunger to build something significant and successful
My father was a schoolteacher
I had four siblings; there was no money to go around
I had to find ways to make money through weekend consulting jobs to set up computer networks for small businesses
At engineering college, I naively asked around [to find out] what the best-paying job is
I didn't even realize the person was being sarcastic
I knew the only way to get to be CEO was to build my own company
Looking back, I've never had a business card which said CEO
When I set up One97 Communications, my business card stated my title as EO
My engineering school buddy and one of my first employees, Harinder Takhar, also had the same title
We were both EOs.I couldn't get to Stanford or Silicon Valley
Somewhere there was the urge that I should do something worthwhile, but I would have to do it in the Silicon Alley called Delhi
I wanted to build a great company; I wanted to attract the best talent
The internet age was calling
Paytm began offering people searches and went from there into business services, payments, commerce, gaming, content, financial services,
and banking.SARITHA RAI: Are you satisfied with what you've built so far?VIJAY SHEKHAR SHARMA: Many entrepreneurs are called "overnight
success." I say, "Yeah, my overnight was 19 years long." We started in the dial-up internet era, where we ran up huge phone bills
We now carry the internet in our pockets
How far we have come! The last 20 years have been the most significant for India
It is an unprecedented kind of change the world hasn't seen, not even in the United States or China
Nowhere else have such a large number of users come online in such a short period of time.SARITHA RAI: How will India's digital payment
transformation be different from China's ?VIJAY SHEKHAR SHARMA: China has two players
We will not have that kind of dominance
India will have four or five players, with a leader, which will have significant market share
Payment is way too huge a problem for one or two players to control.India is far more competitive
We have neither the best talent nor the best infrastructure, nor the required levels of capital
We have to be far more resourceful
To raise money we have to take a flight out of India and explain our market to investors
Neither the Chinese nor the Americans have had to describe their market to their investors.SARITHA RAI: Is India changing?VIJAY SHEKHAR
SHARMA: With low mobile data tariffs, the internet is reaching the corners of India
That's spawning a huge number of startups in payments, cloud, and even startups that help people file taxes
There is a large local market
Risk capital is available to win the market
We are now grade-A entrepreneurs, not Third World businesses
It is possible to build a business to serve this country and then take it to the rest of the world
These are phenomenal days
Ten years ago, there was no local market, no risk capital, no internet infrastructure, no customers
When we started, it was the very beginning of the internet era of the country
I feel tickled that I am now bracketed with today's young entrepreneurs of India, like Ritesh Agarwal of OYO [Oravel Stays Pvt.] and
Bhavish Aggarwal of Ola [Electric Mobility Pvt
and ANI Technologies Pvt.]
Nobody remembers that I started with old-generation internet businesses.SARITHA RAI: Competition is building up in digital payments-Walmart,
Google, and others whose launch is imminent.VIJAY SHEKHAR SHARMA: Rivals are spending huge amounts of money, but none of them have dented
India's digital payments market share is expanding
In the next five years, India will be a much more digitized country
As for rivals spending money, the big giants with the deep pockets never win the war
Microsoft didn't win the search war
Search didn't win the social war
Social didn't win the messaging war.I can bet that none of the above is going to win the digital payments war
There will be many players
This country could produce the payment player which will go on to dominate the world
It will be an Indian player, not a Chinese one
The payments leader of India will build a low-cost, highly scalable model in an extremely competitive environment
The winner here can go and win anywhere.SARITHA RAI: Why is cash still king in India?VIJAY SHEKHAR SHARMA: We've had the first phase of
India's digital payments journey with many world players as our rivals
We were the clear leader in the digital wallet phase.The second phase began with the United Payments Interface, which is the tech backbone
linking banks and digital payments players so they can create services quickly and cheaply
Our rivals are using that backbone for person-to-person money transfers rather than merchant payments
Our business model is in merchant payments, in the everyday experience of users paying businesses
That's our journey now.Less than 10 per cent of payments made by users to businesses is through digital means
We believe merchants should provide their customers the whole range of options, and that's what we offer through the Paytm wallet, which
accepts cash, debit cards, credit cards, UPI-linked bank accounts, and other wallets
A digital wallet is far more inclusive
Even if a user doesn't have a bank account, he can do digital payments.SARITHA RAI: When UPI was introduced, it seemed that digital wallets
were going to die.VIJAY SHEKHAR SHARMA: In the early days, I had assumed that people would give up on the wallet after you could link a bank
account and begin using UPI
But users are still uncomfortable with linking bank accounts
There is low penetration of digital money and low consumer trust
The pecking order in the country is: cash, followed by card, then wallet, and UPI.We do more than 600 million merchant payments a month
All UPI payments together are not even as big as our wallet transaction numbers
On UPI, all apps put together have a $150 million monthly payments volume
We have a total of $390 to $400 million volume via Paytm through UPI, other wallets, cards, and cash
After spending billions of dollars, Google Pay and Walmart's PhonePe haven't been able to touch us.SARITHA RAI: How do you enlist
merchants?VIJAY SHEKHAR SHARMA: It takes time
Shopkeepers need a lot of hand-holding for digital payments, cloud services, and everything else
They are underserved by tech companies
We are currently at 13 million merchants and will reach 25 million by March 2020
It's all about how many cities, how many shops, how many markets give consumers the chance to use digital payments
We are very visible in India's main cities
We are now headed to Tier 3 and Tier 4 markets.SARITHA RAI: To transition merchants to digital payments and other digital services can't be
easy.VIJAY SHEKHAR SHARMA: We are offering software where they can create their own store and start selling online
They can build their business's credit score and access our instant business loans
We have leapfrogged from being a payment company to a complete ecosystem for small and medium enterprises for their software and
Our "Business With Paytm" app is in 10 languages
In this era of zero-margin digital payments, as mandated by the government, we have to make money on additional services such as financial
services and cloud services.SARITHA RAI: Isn't every digital payments service using cashbacks as a lure?VIJAY SHEKHAR SHARMA: Cashbacks are
They incentivize users and merchants to try out digital payments
Our cashbacks, by the way, are not in cash
They are in the form of movie vouchers, flight vouchers, and so on
Cashback is a strategy for us
We have pushed the Paytm cashback logo a lot more in the last few months.SARITHA RAI: How have you innovated for users in the smaller towns
and semi-urban India?VIJAY SHEKHAR SHARMA: We use a lot of data
Rich users don't value the 20 rupee [28 cents] cashback
Our engine understands who values the small sum of money
Our AI is built at Paytm Labs in Toronto
We have the ecosystem advantage because we can be the one stop for many things
We introduced cancellation insurance for movie tickets
The cancellation value is extremely low, and our AI engine ensures that it's an extra revenue earner.Here's another example: India saves
We allow users to buy infinitesimal amounts of the metal
For example, a user can buy gold for 11 rupees and aggregate
Buying gold is a wealth service we offer everyone
Our gold product has more customers than all wealth management companies in India put together
We have 17 million users.SARITHA RAI: What will it take to win India?VIJAY SHEKHAR SHARMA: Some people still want to pay by card-card
transactions are the highest by value
Others want to pay by wallet because they do not want to link their bank account to third-party apps for fear of digital theft
As the market matures, all use-cases as a combined offering makes sense rather than just one
In the countryside, there's huge fear they'll get defrauded of their money
Soon as one system grows, fraudsters walk into that system
That is why we have a large investment in setting up a lab in Canada building fraud detection systems
We have been lucky so far
We have been working hard
For a payment company like ours, competition does not come from another payment company
It comes from hackers.SARITHA RAI: What's the life of an Indian entrepreneur like? We had a tragic suicide recently of the founder of
India's largest cafe chain [V.G
Siddhartha], who described himself as a failed entrepreneur.VIJAY SHEKHAR SHARMA: In India it is particularly tough
Entrepreneurship is looked down upon, unlike in the US
We are just above Africa markets in terms of per capita income
We have to build a business model for that
Then there are many rules and regulations, sentiments, behavior.Siddhartha's suicide is heartbreaking for entrepreneurs like me.You have
to be far more Zen to survive in this country
As I said, if you build in India, you can go build anywhere in the world
What do you think is the first thing an Indian kid learns? That the bus stop is not where the bus will stop.SARITHA RAI: Is there an IPO
round the corner? Some of the most high-profile companies backed by Masayoshi Son, such as Uber, have gone the IPO route.VIJAY SHEKHAR
SHARMA: Masa has never mentioned the word IPO to me
We will remain private for the next two or three years for sure
I look up to Warren Buffett, Masayoshi Son, and Jack Ma
Their ambition is to build huge impact on their markets, cities, countries, business domains
They are all market share-centric
What I take from them is: First, learn to do one thing really well
Then build the next level of business on top of it
We're not even on the preparation journey for the IPO, which itself takes a couple of years.SARITHA RAI: Then are you looking to raise
funds?VIJAY SHEKHAR SHARMA: There is a huge amount of incoming investor interest
People with large-dollar checks are knocking at our doors
Once we figure out the business requirement and get the necessary board OK, we will raise money
We are very well-capitalized for our business model.SARITHA RAI: Where is Paytm headed in the next few years?VIJAY SHEKHAR SHARMA: Paytm is
[dominating] and will dominate India's mobile payments ecosystem
Paytm Payments Bank has overtaken India's No
1 mobile bank, state-owned lender State Bank of India
Just like Ant Financial dominates payments in China, Paytm wants to dominate in India
We are getting into insurance and lending
We've created world-class tech that can be replicated both in emerging and developed markets
We built payments from the bottom up in Japan with Made in India technology
PayPay [a joint venture among Paytm, SoftBank, and Yahoo Japan] today has 10 million customers
We will go to the Americas and Europe.Saritha Rai is a reporter covering technology for Bloomberg News in Bengaluru.(Except for the
headline, this story has not been edited by TheIndianSubcontinent staff and is published from a syndicated feed.)Get Breaking news, live
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