NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, March 13, 2015

Paytm, a India-based mobile payments service operated by (now) Alibaba-backed One97, has introduced a big new feature that lets 25 million users transfer money to bank accounts.

Mobile wallets, like that of Paytm, have grown in popular in India, where credit card adoption is low and many services, including online retailers, process a lot of cash-based transactions. (Its billion-plus population is estimated to have just 450 million bank accounts, with many unused.) Wallets are at the intersection of that, providing greater reliability than cash, but without requiring users to get bank accounts.

Now that it allows users to transfer money into their bank account (or that of a friend), Paytm’s wallet — which is supported by Uber, among other services — becomes a more versatile way of managing small cash floats.

Those using the new Immediate Payment Service (IMPS) service can transfer a maximum of 5,000 INR ($80) per day, and up to 25,000 INR ($400) per month. The minimum amount per transaction is 1,000 INR ($16), and the sender should have at least 2,000 INR ($32) in credit.

One97 has spoken of this new feature before, but its introduction is all the more fascinating considering Alibaba’s investment in the company last month. That deal, which was pegged at $200 million at a billion-dollar valuation for One97, was the Chinese giant’s first in India. It was actually conducted via its Ant Financial Services Group, which runs Alipay, China’s top payments service.

Ant, which is tipped for a China-based IPO this year, last year secured regulatory approvalto launch its own internet bank in China. Its public listing is supported by a number of state-owned banks in China, which suggests that it will work with the system rather than to disrupt it, but Ant’s influence on Paytm’s plans — which could, theoretically, include more banking-like services now that it offers IMPS — will be one to watch. A representative said Paytm doesn’t plan to enter banking itself, but tapping into Alibaba stands to be hugely beneficial.