Paytm Money boasts of having acquired more than seven million users within 2.5 years, with over 20 million transactions annually. In a freewheeling interview, CEO Varun Sridhar talks about PayTm Money’s journey and the wealth patterns which are emerging in India’s financial sector. Varun also shares his view on Robinhood and Bitcoin.
How is Paytm Money positioning itself in the market? What makes you stand out among your competitors?
Paytm Money hopes to provide everyone easy access to all investment options. Over a period of time, we aim to evolve to become India’s top digital wealth management platform and a one-stop app for savings, investment, and trading requirements of up to ₹1 crore for all retail investors.
Today, our platform provides options investment in equities, initial public offerings, ETF, F&O, mutual funds, digital gold, and NPS. Our ability to make a scalable, resilient and simple platform has helped us acquire seven million users within 2.5 years, with over 20 million transactions annually.
Our client acquisition is simple and low cost, given Paytm’s large, deeply interactive client base, and this has also allowed us to get scale quickly. We recently started experimenting with Hindi & Gujarati IPO content, which has been a big hit among our users and allowed us to get financial inclusion like never before.
If most products on the platform are free or minimally charged, how is Paytm Money generating its share of revenue?
We expect Paytm Money to break even in the next 2 to 3 years. Our business model first and foremost involves running a scalable, tech-based platform with low cost and passing the benefits to users. We don’t spend much on marketing and thus our cost of customer acquisition is far lower than the competition. We think that at scale, revenue per customer from products such as equity, gold, and others that we continue to add every month, will allow us to easily break even. We strongly believe a profitable and sustainable business model is essential.
What are the broad patterns Paytm Money has seen emerge?
We have been in the financial services space for around three years now, and it has been an exciting journey.
The most crucial of all aspects is that India is changing, and doing so rapidly. More and more Indians want to manage their wealth and income and come equipped with knowledge. As the India makes its way to $5 trillion economy from $2.5 trillion as of now, 2020-30 is poised to become a significant decade for wealth management.
Indians are rapidly changing in what they invest in and how they do it. We have seen a significant shift of MF assets to equity, inflows in gold and MFs and a sharp increase in equity and debt ETFs, international equity funds, and digital gold. Most importantly, the time spent by customers on managing their money is up by almost 30-40%. Across asset classes, we have seen a 25-50% growth in the last 12 months.
Within equity trading, and F&O, customers have started trading extensively on our platform given the Rs101 pricing intraday, and easy availability of advanced charts/tools. We launched six months ago and are have topped 2 lakh trades a day.
Global peers of Paytm Money, i.e. Robinhood, have been accused of ‘Gamification’ of investing. How is Paytm Money different?
Robinhood has created a very intuitive and engaging trading platform which has been able to draw in millions of young users, who might have otherwise avoided the financial markets. The primary concern here is that the ease of investing combined with the modern-day tools often encourage unsophisticated investors to take unwarranted risks.
Paytm Money puts investor’s interest at the heart of everything it does. We are targeting to on-board over 100 million first-time investors over the next three years, and it is crucial for us to ensure that our users are well protected. We intend to do this by constantly educating users, and building sophisticated tech which will act as a check against unwarranted risks. Some key initiatives that we are already working on are:
Our product also highlights key numbers/risk parameters that a user should worry about before investing. In MFs, we have multiple rating agencies giving feedback on every scheme, while in trading, the stop loss/margin calculator, profit calculator are easily available.
We are also working on integrating investor education into all our products.
Bitcoin as an asset class? Your comments on the Indian government’s stance on cryptocurrencies.
We will wait for the government, Reserve Bank of India, and Securities and Exchange Board of India to come out with regulations for any new asset class, including Bitcoin. We are sure that protection of retail investors will be managed well. We will be eager to launch the product within regulatory norms and policies.
What do you think young investors should focus on to win big in the stock markets?
We have 3 recommendations for young investors
• Learn before you start: The generation today is impatient/ wants instant gratification/ and has great aspirations. However, spending some time learning the basics is critical. Time invested in learning has a direct correlation with a user’s portfolio returns over the long run.
• Focus on ETFs: ETFs are a great and low cost way to manage risks and get upside in the markets.
• Control emotions: We see our knowledgeable young investors do a fantastic job of placing 7 great trades, and then get the 8th trade goes so wrong that the profits of all previous trades are gone. It is crucial to be able to control greed, fear, and FOMO. Young investors should develop a structured trading process vs. one based on emotions or gut feel.