The founder and chief executive of India’s largest digital payments company has barely slept and is nursing a head cold. Having just arrived at Paytm’s office, Vijay Shekhar Sharma discovers the coffee machine is broken. No time to send out for java. He settles for tea and plunges into a vortex of meetings-parsing a government circular on mobile swipe services, war-gaming a team member’s appointment with the Central Bank the next day and viewing new app designs.
It’s barely an hour into the workday.
Sharma is pushing himself to extremes because he knows this is a pivotal moment for Paytm (which rhymes with ATM). Two months ago, with no warning, the Indian government said it was scrapping 500- and 1,000-rupee banknotes, in a stroke excising four-fifths of the nation’s paper money.
The move was designed to curb endemic corruption. But it also had the effect of accelerating India’s transition to digital payments, and the mobile wallet market is expected to explode to 300 billion rupees ($4.4 billion) by 2022 from 1.54 billion rupees last year, according to a forecast by trade body Assocham and researcher RNCOS.
No company is better placed to benefit than Paytm, which says it has signed up more than 20 million users for a total of 177 million since the government bombshell-making it by far the largest company of its kind in India. “They got in early in a country with over a billion people who lack access to traditional banking and they got a big boost from recent extinguishing of larger bills,” says Kevin Carter, founder of San Francisco-based EMQQ, an emerging markets e-commerce exchange traded fund.Despite a first-mover advantage, Sharma is taking nothing for granted. Dozens of rivals have piled into the market, and some are using Paytm’s Chinese connections against it. In 2015, Alibaba Group Holding and its financial affiliate bought a 40 percent stake in the Indian startup. The two countries have long had a fractious political relationship and Paytm’s competitors are trying to appeal to Indians’ nationalism.
Sharma also recognizes the difficulties of popularizing digital payments in a nation where most people don’t have bank accounts. “There are the digitally savvy and then there are those who do not even own a cellphone,” he says. “For many of them, it is not just a leap frog but a triple leap frog.”
Sharma, 38, hails from a small manufacturing town and spoke only Hindi growing up. He taught himself English while attending engineering school in New Delhi and now speaks it impeccably. A self-described hippie businessman, Sharma adores Indian street food and is prone to quoting lines from his favorite pop songs, even crooning mid-conversation. An entrepreneur since his college days, Sharma was so broke at one point he says he couldn’t afford a cup of coffee.
Like founders the world over, Sharma changed business models multiple times before settling on Paytm. He founded the parent company company called One97 Communications in 2000 when fewer than 10 million Indians were online. Over the next dozen or so years, the startup variously offered a people search service, sold ringtones, hawked Bollywood movie songs and provided mobile user analytics.
In 2014, Sharma moved into digital payments as millions of urban Indians began shopping online. He was steadily pushing into financial services when the government announced the demise of the two largest banknotes on Nov. 9. With Paytm Payment Bank receiving regulatory approval this month, Sharma is gearing up for the next phase of growth by starting to collect deposits and sell mutual funds and insurance in March.
The currency change forced people to trade in their old notes; those with suspiciously large amounts had to explain where they got the cash. In subsequent weeks, the bills were replaced with new 500- and 2,000-rupee notes. But the exchange sparked chaos, with Indians around the country lining up for hours to trade in defunct notes and scrambling to get their hands on the new currency.
Sharma is betting many will see digital payments as a logical solution, while the government is hoping the technology will make it harder for tax-dodging Indians to hide so-called “black money.”
Sharma says Paytm has been signing up the equivalent of a small European country’s worth of customers every week and has attracted a range of vendors from Burger King and Domino’s to roadside tea sellers and rickshaw drivers. He says the number of transactions have almost quadrupled to 2 billion in 2016. The surge in new business prompted Paytm to double server capacity and go on a hiring spree. And it has meant extra long days for its founder, whose Twitter feed has become a fire hose of resumes, love notes and customer complaints. “Overnight,” Sharma says, “we went from a new thing to a must-have.”
Paytm is shooting to be a Wells Fargo-Mastercard-Square mashup and become the go-to app for all financial transactions. Indians will be able to save, buy insurance and mutual funds and use the company’s digital payment app to shop online and in the physical world. But like any startup, Paytm is struggling to tear ahead without the wheels coming off; that’s much harder to do in India than in Silicon Valley.
Consider recruitment. When demonetization hit, Sharma wanted to double headcount to 12,000 in the following weeks, then grow it again to 20,000 by the end of 2017 — a monumental undertaking. During a meeting with his human resources team, he asks why they’re having such a hard time filling 20 senior positions. The HR managers remind him that India’s fintech sector is so new that few people have the right skills. When one executive suggests poaching from consumer-products companies, Sharma cuts him off. “We should avoid the box-movers, let’s go after every growth marketing head in the startup industry.”
Security is another concern. Rumors circulated last month that an anonymous group called Legion, which gained notoriety hacking prominent Indian twitter accounts, had penetrated Paytm’s servers. Meanwhile. national police are investigating users and a few employees accused of bilking the company of millions of rupees.
Almost every day, Sharma asks his security team if the firewall has held. So far, so good. But he knows one major hack and exposure of customer data could lay low his young company. “There’s so much talk of Russian hackers,” Sharma tells the team, “it’s time to advance security to the top of our agenda.”
Paytm is running television commercials in major cities. In one, the woman of the house gripes about demonetization and wonders how she’s going to pay her helper, seen dusting in the background. The helper pulls out her phone and says, “Didi, chinta mat karo, Paytm karo” (“Sister, don’t worry, use Paytm.”). The ads target urban Indians who have more than a passing familiarity with the mobile web and represent most of the customers who have signed up in recent weeks.
But to truly succeed, Sharma must attract hundreds of millions of rural Indians. To reach them, he has taken out full-page ads in newspapers, translated the app into several Indian languages and dispatched some 6,000 salespeople to the countryside to sign up merchants. Sharma has even set up how-to-use-the-app boot camps.
So far, the financial services industry is playing catchup. The nation’s largest lender, State Bank of India, finally got its mobile wallet service going in mid-December. A national cashless payment system set up by leading banks totted up a mere 250,000 transactions in the first week of December compared with Paytm’s millions. The chief of the consortium, prosaically called Unified Payment Interface (UPI), lamented that it couldn’t hope to match Paytm’s advertising budget. The government’s own all-bank app, which uses the UPI, has just been launched and is gaining traction.
But rivals are waking up to the Paytm threat. In November, when the company began letting customers use its app to process credit and debit cards, card issuers warned that Paytm’s technology didn’t fully secure users’ personal information. Sharma withdrew the product the very next day. In a widely circulated video, Meera Sanyal, former CEO of Royal Bank of Scotland in India and a prominent politician, said: “We are being pushed to use Paytm which is controlled by the Chinese company Alibaba.” She exhorted Indians to use the UPI app instead. In another attack, the founder of digital payments rival MobiKwik said foreign investors’ stakes in digital payments startups should be capped to ensure consumer data isn’t ‘routed out’ of the country.
If any of this fazed Sharma, he didn’t show it. After spending the day meeting colleagues he prepared to jet off for a four-city, five-day business trip. He instructed his two assistants to get cough syrup, a new pair of glasses, an inhaler and his suit from the dry cleaner for his trip to Tokyo. There, he planned to meet SoftBank Group Corp. Chairman Masayoshi Son, who he describes as “a friend of my friend,” Alibaba CEO Jack Ma. On the way back from Japan, Sharma would stop over in Mumbai to receive an Entrepreneur of the Year award.
“I want to be India’s first $100 billion company by value,” Sharma says, pausing to sing along to Coldplay’s A Head full of Dreams playing in the background. “I think I’ve landed in the world where there are miracles at work,” he croons. “Head full of dreams‚ head full of dreams.”
Bloomberg