Paytm blends analytics, offline communication to woo small town merchants

After it announced that it was shifting its cash-back focus from peer-to-peer UPI transactions to offline merchant payments at retail kirana stores, Paytm saw the number of merchants joining the platform double in the past six months (200,000 versus 100,000) compared to the preceding six in smaller towns. It is now planning to increase this figure to a million in the next six months, says the company's senior-vice president Deepak Abbot. Kirana here is an umbrella term comprising almost any consumer-facing business, big or small, in any part of the country, says Abbot adding that acquisition is a relentless pursuit in these areas where the next phase of “growth will come from”. 

“The number of merchant clients who download our business app launched a year-and-a-half ago is increasing. The number of transactions per client may be low but we do not see them in isolation. So, even if the 200,000 new members make four-five transactions, it translates to a million new transactions which would not have been there in the first place. This is why we need to keep signing merchants across new towns so that the collective number becomes big and triggers repeat transactions,” he says. 

That might be easier said than done as many in the smaller towns remain reluctant citing poor connectivity and data vulnerability. Of the current base of 13 million merchants, only a couple of millions are from smaller centres. 

Take Arun Choudhary, an area manager for the company in Haryana. He says the company’s agents face quite a few challenges on the ground. Choudhary was based in Delhi earlier in a similar role in Paytm and found Delhi shopkeepers were more open to new technology and embraced digital payment platforms more easily, thanks to their own awareness and the post-demonetisation demand that was a windfall for the company in terms of customer acquisition.  

“The younger shopkeepers recognise the brand. Others are sceptical when we ask them for their details as they fear — albeit unnecessarily — that the data might be used to siphon off the money from their bank accounts. They are reluctant to share the one-time password generated at the time of the registration. Then there are those who are existing Paytm users and don’t feel the need to install the business-specific app. We have to tell them what the differences are and how there are other gains to be made,” Choudhary explains. 

It is then left to the 80-odd agents in the state to allay these fears. The new merchants who sign up become the brand ambassadors for the next lot.

Experts say Paytm — which claims to hold 80 per cent of the merchant digital wallet market in India at present — has much to gain being the first mover in these markets. A vast, scattered and offline market in the country means a wide canvas, opines Ankur Pahwa, partner and national leader, ecommerce and consumer internet, EY India. “Because of the government push, you will see much more digitisation happening across tier II, III and IV cities. Since this takes away the hassles of managing cash, there will be takers for such apps. With an app like Paytm the merchant also doesn't need card supporting infrastructure.”

EY’s Global FinTech adoption Index 2019 suggests that the number of FinTech adopters in India are on the rise with 87 per cent respondents saying they have adopted FinTech or are aware, up from the 52 per cent in 2017. 

Paytm's Abbot adds the new locations are chosen strategically keeping the user base in mind. “Let’s say, using analytics, we have discovered that we have 50,000 users from Kartarpur who are using the Paytm app. So, we send people and get merchants on board, who, once the initial fears are allayed, expects our platform to bring business for them. So each time we build a local customer base, we send notifications to all our users in that geography about the new places where they can make digital payments. Their visits ensure that we manage to add to the consumer base of these shopkeepers.” 

Similarly in Uttar Pradesh, the company is eyeing towns that may be categorised as small but has population in excess of 500,000 to ensure that the customer and shopkeeper base is sufficiently big. Then there are merchant- and customer-specific incentives, that pave the way for more transactions. In some other cases, the agents go to the merchants and encourage them to use the transaction more often. 

Pahwa says the challenge will be for the companies to find out what other products they can sell to the customer for a margin-uplift. “They have to come with newer and specific financial products to keep themselves relevant. Things like loans, various kinds of insurance,” he adds

Some of it is happening already, according to Abbot, who highlights that the cost of acquisition in smaller towns is way higher than bigger cities and hence a strong business model is imperative. “We tell small merchants that based on the number of transactions that you do, we build up your credit rating and you can get an instant loan that you can use.”

Paytm is also trying to diversify the revenue basket for this clientele. Abbot gives the example of Sapoli village in Uttarakhand where one shop services 70-80 houses around it. “Now our business app opens up the option of paying the electricity bills of all these 70-80 houses through it and the shopkeeper can earn commission from us. Because some of these houses don’t even have a smartphone and have to travel for a few kilometres in a hilly terrain and then queue up to pay the electricity bills, it is a win-win.”