The demonetization decision by the Government of India in November 2016 opened new horizons for digital wallet companies. One of the objectives of demonetization was to transform the Indian economy into a cashless economy and the digital payments industry was in a position of strength to leverage on this opportunity. One of the biggest beneficiaries of demonetization was Paytm, one of the popular mobile wallet services in India, as people moved toward cashless payments. To take advantage of the growing use of digital payments, Paytm diversified its business to the payments banking industry and launched Paytm Payments Bank at the end of 2017. Even though the demonetization decision, high penetration of the internet, and increase in the number of smartphones had created a new avenue for cashless transactions, it was not easy for Paytm Payments Bank to capitalize on the opportunity as the majority of the people still preferred cash transactions. The case helps to understand the diversification strategy adopted by Paytm and the pros and cons of a cashless economy. Considering India’s move to cashless transactions, can Paytm’s diversification into Payments be seen as the right step toward its becoming a vertically integrated financial services company?
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The case is structured to achieve the following teaching objectives:
To understand the pros and cons of a cashless economy.
To understand the various types of diversification strategies.
To understand the reasons behind Paytm’s diversification to payments banking.
To understand and analyze the strategy adopted by Paytm to diversify into payments banking.
To understand the challenges and opportunities for Paytm in the evolving payments landscape in India.