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When India demonetized, a mobile wallet company stepped in

Students report back on growth in India’s mobile commerce sector.

By Liz Karagianis  |  June 1, 2017

2017-bank-line-India

Mobile commerce expanded rapidly after the Indian government recalled 86 percent of the country’s currency last fall. The crisis led to long lines at banks.

Paytm — India’s largest mobile payments company, which began as a small startup and is about to go public — grew fast after the government demonetized last fall. The sudden move left India, one of the most cash-dependent countries in the world, without money needed to run the economy. 

The boon for Paytm, an acronym for “pay through mobile,” came last fall after India’s prime minister deemed 86 percent of the currency in circulation to be invalid. The move was meant to cut corruption, transfer more of society into the formal market, increase tax income, and digitize more of the economy. Along the way, India’s lack of cash made digital wallets — which store information for online payments — a must, propelling Paytm into the business stratosphere. More than 193 million consumers use Paytm’s mobile wallet and more than 5 million online and offline merchants use Paytm’s digital payment services. The company estimates it will have more than 500 million users by 2020. In May, the company launched Paytm Payments Bank.

Recently, a group of MIT Sloan students participated in an India Lab action learning project, which for six consecutive years has sent teams to Delhi to work at the burgeoning company. Students contributed to Paytm’s progress, said Nina Brentlinger who — along with Brandon Lang, Nick Del Vecchio, and Burton Woodhull, all MIT Sloan MBA ’17 — was part of this year’s team. This year, the team identified the financing needs for micro, small, and medium enterprises in the Paytm ecosystem and recommended sources of capital for a loan product offering. 

2017-India-Lab-3India Lab team members at the Taj Mahal in Agra, India

Brentlinger recently discussed the mobile commerce, or m-commerce, company and how it can provide opportunity in India.

Do you believe that m-commerce will surpass online electronic commerce in the United States and India?
Absolutely. In the same way that many developing countries leapfrogged the fixed-line technology with mobile phones, m-commerce allows a much wider swath of the population in India to be connected and make purchases online. In fact, a recent report from the market research firm, IMRB International, showed that more than 80 percent of Indians consider mobile devices as their primary means for connecting to the internet. Although not to the same extent, we are seeing similar trends in the United States, which will certainly extend to consumer shopping habits.

What useful services does Paytm provide? 
Paytm users can reload mobile phone balances; pay electricity and other utility bills; book tickets for planes, trains, and other travel services; pay for Ubers; and more. Consumers can also use Patym Wallet to make cashless payments using QR codes or bar codes and a one-time password that is valid for only one login session.

“Patym accepted here” stickers are ubiquitous in India. We saw them stuck to Ubers, convenience stores, flower stands, and all kinds of small businesses.  

How will Paytm help change the world?
Improving access to financial services will create enormous economic opportunities for the most disadvantaged individuals and for micro, small, and medium enterprises in India. For example, a recent McKinsey report stated that digital finance has the potential to increase India’s gross domestic product by $700 billion by 2025 and bring 21 million new jobs to the country. As far as changing the world, the same report predicted that widespread adoption of digital finance will increase emerging economies’ GDPs by $3.7 trillion by 2025.