This is a hands-on partnership. Earlier, Paytm had four people managing risk. Alibaba has since brought in 15 risk profile engineers from China to Paytm’s head office in Noida. The geeks from Alibaba will help Paytm plug leakages to a more acceptable level of 0.003% of transactions.
“Alibaba made us look and think different -like a large company and not a startup,“ says Paytm founder Vijay Shekhar Shar ma. “Our outlook of business execution has changed now. Earlier I was bothered about getting 100 million or 500 million users. Now it’s what potential new businesses we can do with this large user base.“
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Alibaba is helping Paytm on two fronts: technology and business. Paytm’s payment platform runs on 200 servers and it now plans to expand to 1,500 servers to accommodate new users and enable multiple transactions in real time -from bill payment to shopping.
Margins in the wallet business are small, less than 2%. Frauds can hit growth badly and also turn away existing and new customers. This is where the Chinese knowhow is helping build a secure platform.
“We are developing a new risk management product for Paytm,“ says a Chinese engineer from Ant Financial at Paytm who requested not to be named. “We have seen and done that in China. Now we are implementing the same here.“
Last week, about 25 engineers and business managers from Ant Financial and Alibaba were at the Paytm office, interacting with the local team, training them on how to manage and build scale. The marketplace part of Paytm’s business runs on Amazon Cloud while payments run on a proprietary cloud. Clients who use the platform include Uber, Bookmyshow.com, Manappuram Finance, oil marketing com panies HPCL and BPCL, Unicef, several schools and other institutions. Says Sharma: “Alibaba is helping us build the largest payment cloud in the country .“
Adds an investment banker who advises global investors on startups in India: “Alibaba knows how to run the platform as they know how to handle scale.“
If Paytm were to do it all in-house, it would take several months, probably more than a year. “With Alibaba the time to market shortens and our vision to scale multi plies,“ says Sharma.
For instance, electricity bill payments were dearer for Paytm as power suppliers were not paying margins for bills paid on the Paytm platform. “We don’t make money on this,“ Paytm officials told Alibaba executives. “But Alibaba insisted that we not only continue this business, but also grow it as payoffs will come later,“ says Sharma.Alibaba pointed out that data collected from bill payments is a gold mine. In future, credit ratings of consumers and purchasing ability could be linked to bill payments.
How important Alibaba is to Paytm is best captured in a competitor’s voice. “I won’t comment on individual companies, but I feel it’s not trivial to compete with rivals who have run the business for 20 years at a global scale,“ says Latif Nathani, VP & managing director eBay India.
With Alibaba, Paytm also gets a shot at global markets. Alibaba and Alipay, which are already the largest commerce and payments platform in China, are expanding outside.
Alibaba is building a network of international merchants who will accept Alipay wallets. Paytm could piggyback on this network. “Alibaba wants to increase our business volume,“ says Sharma.
So tomorrow, Macy’s (a department store chain in the US) could accept ApplePay , Alipay and even Paytm. A shopper from China will use Alipay and another from India will use Paytm. “They plan to make us ubiquitously available, much like they are planning for Alipay ,“ adds Sharma.
Alibaba also encourages Paytm to partner businesses to bring scale and stickiness. For this, Paytm will be spending about $500 million -to build the ecosystem for Paytm use case. So Paytm could explore partnerships with say , Foodpanda or TinyOwl by taking a 20-30% stake. “I won’t run those companies, but the goal will be encourage them to use only Paytm wallet. In return, Paytm will drive traffic to these food ordering apps.“
Likewise, partnerships could be stitched in logistics, loyalty rewards platform, medicines. This is similar to what Alibaba is doing in China. Last week, Alibaba unveiled a $4.5 billion partnership with Chinese electronic retailer Suning Corp to expand its electronics offering.
Alibaba may be helping, but India is not China. India’s GDP per capita is about $1,500 and China’s is $6,800. “Alibaba does acknowledge that we have the numbers but not the value,“ says Sharma. “But they are patient.“
Without Alibaba, Paytm would have achieved only 50% of what it has now, says Sharma. He sums it up well. “(Without Aibaba) I would have got the money and spent it, but would not have been sure what to do.I have a partner who knows what to do.“
Source: The Economic Times