Paytm wants to prise the vice-like grip of banks away from local moneylenders over the loan business. The mobile wallet company, which aspires to become a digital bank, has started offering unsecured loans to merchants such as the neighbourhood grocer or the mobile recharge shop or the auto driver, who use the wallet to accept offline payments.
“This is for all those who cannot get a loan from the bank because they do not have a credit profile,” said Kiran Vasireddy, Sr. VP, Paytm. Gupta is one of the 20-odd merchants who have taken such a loan in the last one-week since Paytm started offering it.
Gupta’s mobile recharge shop in Pitampura, West Delhi has a monthly turnover of Rs 2 lakh, and he needed Rs 25,000 to increase inventory. The loan was processed in two hours, said Gupta. “A bank wouldn’t have given me this loan, and the documentation process is harrowing,” he said. By the end of six months – that’s the end of the repayment tenure – he will have to pay just Rs 500 extra as interest on the loan. Loans can be repaid within two months to two years.
Paytm maps the wallet usage of merchants and based on this data makes credit profiles. And using this data it decides what amount to give to which merchant. The annual interest rate is 12%, but is connected to the tenure of a loan. “We are giving loans to 5-10 people every day,” said Vasireddy.
The loan amount ranges from Rs 5,000-100,000, and will go up eventually. Paytm has partnered with large financial institutions and NBFCs to fund these loans. This is not the first time an internet company is offering loans. Flipkart, Snapdeal and Amazon offer loans, but only to people who sell on their platform.
Mobikwik, a Paytm rival is looking at a similar offering. “We will start giving loans to merchants who use the Mobikwik wallet in the next 3-6 months,” said Upasana Taku, co-founder of Mobikwik.
Paytm already has 400,000 offline merchants including Mother Dairy booths and petrol pumps. By the end of 2016 it expects to have a million offline merchants, and four million by end of 2017.