Paytm is having the week every Indian startup dreams of.
In what the payments company calls “the largest (funding) round from a single investor in India,” it has raised $1.4 billion from Japanese telecom and internet giant Softbank. “This investment will help Paytm grow its leadership in the country’s payment ecosystem, expand its user base and build a suite of financial services products for its users,” the company said in a press release on May 18.
Short for “Pay Through Mobile,” Paytm’s QR code-based payment service is the face of digital payments in India today. Already the country’s largest bill-payment and recharge platform, Paytm’s digital wallet—launched in January 2014—has become the biggest in the country, with over 220 million users. In the wake of the November 2016 demonetization, millions of merchants, from massive stores to roadside fruit and vegetable vendors, adopted the platform. The success pushed founder and CEO Vijay Shekhar Sharma into the billionaire’s club. Earlier this week, the company celebrated a pickup in its digital gold platform, citing transactions totaling 40kgs of gold over the last few months.
This otherwise winning performance has come with a few mishaps. First, critics lambasted its television spot with the tagline “Drama bandh karo… Paytm karo” (Stop being melodramatic, use Paytm) left a bad taste, trivializing the struggles of millions of Indians stuck in lines outside banks and ATMs to access their own money. Then, the service encountered technical glitches and scams. In January 2017, a video of Sharma’s intense, abusive rant at a company party drew ire.
Still, its reputation has been mostly escaped damage. Paytm’s latest funding round also signals that investors are showing faith. The same day it announced its billion-dollar-plus funding round, Paytm’s parent company, One97 Communications, debuted on LinkedIn’s list of the most sought after workplaces in India. It came in as the fourth most-preferred company to work at, beating the more mature ride-hailing startup Ola as well as software giant HCL Technologies.
Softbank joins Chinese investor Alibaba in backing Paytm, so the company now boasts investors from the mainland as well as Japan. Headed by Japan’s richest man Masayoshi Son’s investment, Softbank has a stake in e-commerce company Snapdeal (which it is reportedly on the verge of selling) that runs its own payments platform, Freecharge. Rumors of Paytm acquiring Freecharge have also been swirling this month.
“We believe we have a great opportunity to bring financial inclusion to half a billion Indians,” Sharma said following Softbank’s investment by in his brainchild. Paytm has vowed to invest Rs 10,000 crore (approximately $1.6 billion) over the next three to five years to realize its vision.
Its next frontier of growth is the Paytm Payments Bank. It finally received its license to operate from the Reserve Bank of India this week, too. The bank cannot lend money, issue credit cards or give advance to customers and each account can only store up to Rs 1 lakh ($1,540). It can, however, issue cheque books and debit cards—enough to pull millions of unbanked Indians into the mainstream economy. The bank will begin operations on May 23.
Coming Soon @PaytmBank ! #23May pic.twitter.com/YHpHk7A93h
— Vijay Shekhar (@vijayshekhar) May 17, 2017