PayTM plots move into asset management in India

PayTM, the Alibaba-backed Indian smartphone payments platform, plans to enter the asset management market a month before it begins banking operations in the country.

The group, which has attracted more than 170m users since it started seven years ago, told the FT that its aggressive strategy to disrupt traditional finance will soon extend to loans, wealth management and mutual fund products.

The move could give PayTM an even larger slice of the rapidly growing ecommerce market in India, which has been driven by the increasing numbers of non-banks to experiment with traditional finance.

Its popular smartphone app, which is used by millions of Indians to pay for services, bills and tickets, accounts for a quarter of digital payments.

From next month, PayTM users will be able to open savings accounts and use their phones to deposit and withdraw cash at about 3m shops that already accept PayTM payments.

“We’re going to offer people everything from super easy-to-understand mutual funds [to], over time, more sophisticated asset management products,” said Madhur Deora, chief financial officer of PayTM.

“If you are a customer and you keep your money in a PayTM account I don’t necessarily see why you should keep all your money in a savings account. We can make products that are available to you that are super-liquid.”

PayTM funds are expected to work like Yu’e’bao, a money-market fund controlled by Alibaba’s financial affiliate Ant Financial, which has attracted more than 300m smartphone-based investors in China. Yu’e’bao allows customers that use Alipay’s epayment system for online shopping to direct cash into investments for returns that beat those offered by bank accounts.

Alibaba, the Chinese ecommerce group, and Ant Financial invested about $680m in PayTM in 2015.

According to analysts, smartphone-based financial services are set to become increasingly common in the developing world as the regulatory landscape becomes more sophisticated.

“In India we already have a breed of funds called liquid funds that offer fairly attractive returns and easy liquidity,” said Kaustubh Belapurkar, director of fund research at Morningstar. “Where we currently lag behind is perhaps the prevalence of online transaction capabilities — this is fast changing.”

Last year, the Reserve Bank of India introduced rules to allow supermarket chains, fintech groups and mobile phone operators to launch ‘payments banks’, with the intention of boosting online transactions and including more of the public in a patchy banking system.

Arun Jaitley, India’s finance minister, who launched the first payments bank last week with Bharti Airtel, the world’s third-largest mobile phone operator, sees payments banks as crucial to the economy — especially after 86 per cent of the country’s currency was removed from circulation in November last year.

The banks can accept deposits up to Rs100,000 and have to invest 75 per cent of the total in government securities. According to central bank rules, they cannot lend money.