Alibaba-funded Paytm has begun its move from being just a digital wallet brand to a financial services provider. The seven-year-old company introduced its first wealth management product called Digital Gold that allows buying and selling of gold through its digital wallet platform.
The company has roped in MMTC-PAMP—a joint venture between publicly-owned MMTC and Swiss precious metals refiner PAMP—to develop this product. “We wanted to bring a product that is easily understood by the masses and is scalable. Other products like mutual funds are not easily understood by the common man, and this is why we choose to go with gold as our first wealth management product. We wanted to cut every fee and every hassle,” said Vijay Shekhar Sharma, founder and chief executive officer, Paytm.
Starting at Re 1, users can buy 24K gold with 999.9 purity on the Paytm platform at global market-linked prices that get updated in real-time. The purchase is stored in an insured MMTC-PAMP owned locker, till the user demands a physical delivery, which comes at a charge. Selling is also done through the platform, and attracts a convenience fee, but users can’t buy and sell on the same day.
Sharma is tapping at the obsession for yellow metal in the country. “India has three times more jewellery shops than bank branches. By bringing such a mass market product we believe that we can touch a chord with the Indian masses again,” he said. According to World Gold Council (WGC) estimates, Indian households currently hold more than 24,000 tonnes of gold worth $900 billion. Further, WGC says in a report that
With this new product, Sharma wants to democratise investing in gold. But will consumers actually get hooked? Suresh Sadagopan, founder, Ladder7 Financial Advisories, a Mumbai-based financial planner, says that although this is a convenient product with a low ticket-size, it won’t change the way people buy and sell gold. “It will not alter the demand for gold. Those who buy gold for consumption will continue to use traditional channels. What you might see is that those looking at gold as in investment could start using this channel,” he explains. Compared with other gold investment products such as exchange-traded funds (ETFs), this product rides on the convenience that a digital wallet comes with. Furthermore, unlike an ETF where higher amounts needs to accumulated (at least 2kgs) to take physical delivery, with Paytm’s digital gold the minimum amount to be accumulated is just 1gm.
Paytm’s move towards financial services comes on the back of losses in its digital wallet business, which has wafer-thin margins. With the payment bank license still stuck with the regulator, Sharma has been under pressure to stem the flow. “We want to offer all sorts of financial services like wealth management and deposits. Very soon we will even offer digital gold loans. Deposits will happen when our bank is launched. For now, we will be focussing on wealth management,” he says.