How Paytm is brazenly piggybacking on banks and telcos

If they come together and join hands, they would be able to stop the invasion into their territories.

 |  3-minute read |   18-12-2016
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It should be galling for telecom service providers like Airtel and Vodafone to find Paytm (used as a metaphor for mobile wallet service providers) using the mobile numbers of their customers to provide mobile wallet services to them. 

Alas! If only they had been a little more agile and not allowed grass to grow under their feet so as to enable Paytm to flourish by using the property belonging to them.

What they should have done is laughably simple. Allowing subscribers to use the telcos' mobile wallet service free or as a value added service makes eminent practical and business sense. 

That the payer and payee need not always be using the same telco’s services need not be a major impediment. In telecom business, the service provider from whom a call emanated pays connectivity charges to the one in whose telephone the call terminates. 

A similar understanding could be reached for mobile wallet services provided to the payer by one telco and payee by another telco. 

One wonders if Paytm pays any royalty to telcos for poaching, as it were, into the telcos' customer base? However, I must hasten to add that launching a full-fledged wallet service should be infinitely more profitable for a telco than meekly and passively settling for royalty.

Like telcos, banks too have surrendered their suzerainty to Paytm. If Paytm latches on to mobile numbers, it also dips into bank customers’ accounts to fill their mobile wallets. 

Unified Payment Interface (UPI) is a belated response of banks to take on the challenge posed by the upstart or the first mover Paytm. One again wonders if Paytm pays royalty to banks for being allowed access to accounts for transferring money from bank accounts to mobile wallets. 

money-embed_121816045112.jpg One wonders if Paytm pays any royalty to telcos for poaching. (Photo: India Today)

Come to think of it, Paytm does business by using the properties of both telcos and banks. Banks have bestirred. Would telcos too wake up?

One also wonders if the banks joining the UPI platform pay royalty to telcos. In all fairness, both UPI and Paytm should compensate the telcos because at the end of the day, both are riding piggyback on the hard work and customer base of telcos.

A dedicated wallet like Ola money or OYO wallet is a slightly different kettle of fish - payments can be made from these wallets only for the main service availed from them.

To wit, Ola money is a wallet that can be used only to pay for the taxi ride booked through the Ola app, unlike Paytm which lends itself to freewheeling use.

Nevertheless there is compelling case for payment of royalty by such dedicated wallets as well to telcos because their apps too are at the end of the day linked to mobile numbers of their customers.

Mobile wallet service is a natural fit for telcos and banks. For telcos it is an offshoot of their mobile business and for banks it is an offshoot of their banking business.

If they come together and join hands, they would be able to stop the invasion into their territories by pure-play wallet companies like Paytm.

Regulators and policymakers too must sit up and take notice. Paytm’s business reportedly has registered a quantum jump, somewhere in the region of 300 per cent between November 8, 2016, the day high currency notes were demonetised, and December 15, 2016.

The remarkable upswing in its fortunes might have been triggered by demonetisation but it has to acknowledge the contribution, passive though it might be, made by telcos. There should be no free lunch especially to middlemen.

Also read: Why Paytm, not middle India, is happy about cash crisis

Writer

S Murlidharan S Murlidharan @smurlidharan

The writer is a Delhi-based chartered accountant with an abiding interest in writing and teaching.

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