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Update: Paytm has withdrawn its “App PoS” feature (hat tip: Rohin Dharmakumar), saying:

Post our launch, we have had several discussions with stakeholders on how we can make this process even more secure. Based on some suggestions from the industry, we have decided to add additional certifications and features before making it available to merchants. We will re-launch this product as soon as we have updated the product. following criticism regarding the lack of security

Essentially, the product was criticised for not being secure enough, given the potential that the merchant could have a screen reader application, or an application that logs the 3D Secure or Verified by Visa password when a consumer adds it. This is a very responsible move from Paytm.

Some of the criticism:

Yesterday: “We want to be the largest acquirer in the country, with an order of magnitude of tens of thousand merchants. This year we are expected to clear Rs 30,000 crore of payments. We’re headed towards 2 billion transactions this year. Today we have 1.5 million merchants who accept payments using Paytm. We’re expecting this to become 15 million by the end of this year,” Paytm CEO Vijay Shekhar Sharma said while announcing that the Paytm app is being upgraded to allow merchants to accept card payments, and essentially operate as a virtual point-of-sales terminal. At present, this is being launched on Android, since iOS requires an approval process.

Some notes and comments

1. Just a payment gateway integration: Essentially, this is just a payment gateway integrated into an application, and nothing more. Paytm has partnered with Citibank for this. Frankly, any payments app can do this, and this is not the same as a physical machine. India has 1.5 million traditional PoS machines, and Paytm is trying to add to that by calling this an “App PoS”.

2. Too much friction: The user experience has significant friction. The user will have to take the app from the merchant, type in card details, the CVV to be taken to the bank gateway and enter their card details. Lets not forget that bank gateways are currently struggling with online payments.

3. Rs 50,000 limit: Merchants are allowed to accept Rs 50,000 per month, because of limitations put in by the RBI. Yesterday, the RBI allowed every payment company to sign up a merchant by self declaration. This is useful for merchants, in order to accept at least some payments. On the limit, Sharma said, “If a merchant receives Rs 50,000, then he will be able to move Rs 50,000, and move it to the bank. We’re trying to convert the merchant into a full merchant, and offline shopkeepers can accept higher limits.” Paytm has more than 10,000 people on the street signing up merchants.

4. MDR (essentially the fee that merchants are charged): The fee is 0% on debit cards for a merchant to transfer money to a bank account till 31st December 2016.

“Till 31st December we’re allowing this money to be taken to any bank’s account for free. We’ll launch a Paytm payments bank, and post 31st December, we’ll allow free payments to the Paytm Payments bank. Why not allow every shopkeeper, using Paytm as a platform, accept Rupay, Visa and Mastercard.” Sharma later clarified that later Paytm will charge 2% for Credit Cards. “This is a charge to a banks payment gateway.” Right now Paytm is paying the MDR for debit cards.

5. Paytm’s marketing budget “is Rs 500-600 crore, but we keep a fund for exceptional circumstances. We’ll spend around 3x of our monthly marketing budget (for seasonality). Last year, Paytm spent Rs 2546 crore on marketing.”

6. On readiness for demonetization: “I wish we could have been a lot more ready. Our teams are working hard to launch products quickly. We launched 10 languages a few days ago. We at least launched a few key features in local languages, in terms of what matters most.”

6. Data:
– Signing up close to 40,000 merchants a day, and this is going to 70,000 per day.
– People were doing 3 transactions in a week, now they’re doing 3-4 in a day. (from Deepak Abbot)
– Paytm expects 10 million app downloads for PoS this week.
– Top cities: Hyderabad followed by Chennai are Paytm’s top two cities. Volume in Bombay, Bangalore and Delhi has shot through the roof, but the smaller cities have seen significant growth.
– 55 crore debit card holders and 75 crore debit and credit cards.
– “We’re adding 500,000 users a day right now. Just last month, we’ve added 100k the month before. Daily new user growth is 5x.”
– The daily average transactions are growing at 140%
– “We’re on our way to complete 2 billion transactions this year.”
– Paytm customer base is 158 million today
– 700,000 merchants accept debit and credit cards.
– “We’ve committed Rs 5,000 crore to this. We reported Rs 1,000 crore revenue, around Rs 2,500 crore in spends, so we lost around Rs 1500 crore.”

7. “Not a very large number of people are adding cash to Paytm right now, and we’ve not focused on increasing that.”

8. On Demonetization: “This is the time when people are being forced to change. In these unprecedented times, we aren’t supposed to change our behaviour, but we are supposed to change everybody’s behaviour. It’s bound to generate some change (in behaviour). In the history of mankind, no human race has moved forward without some pain. Whenever Apple adds a new device, they add a little bit of pain. In the long term, the impact and benefits will be bigger and better. This is time for all of us to change.”…”Digital payments take you far. Once a small merchant starts to accept payments, they become part of the financial ecosystem. The power of digital payments is that it will enable data which the financial ecosystem can use to generate loans and inclusion.”

9. Quips from Vijay Shekhar Sharma:
– “We’re investing more in digitization than the government is. No one is investing as much as we are in keeping the media… (running). By we, I mean the startup industry.”
– “In the beginning technology companies first get users, and then start monetizing after building a moat.” This is a risk-reward business model.
– “We don’t look at P&L loss, but we look at cash-flow. We always have cash in our bank. Right now what we’re spending will allow us to spend at the current place. With the bank, we’ll have new revenue line items. We are acquiring consumers. We believe the payments bank will make money in the next two years. I don’t think we have an obligation to make money for the next two years. Once people switch, we will reap our dividends in the long term, not short term.”