Vijay Shekhar Sharma, the Paytm founder and CEO, grew up in Aligarh, Uttar Pradesh. A graduate from the Delhi College of Engineering, he built his first startup in college. Called XS Communications, it created Content Management Systems, which was used by publications including The Indian Express. In 2000, he founded One97, with a loan of ₹8 lakh. Paytm was set up in 2009 to offer a mobile wallet that consumers could access on their smartphones or the website. Today, besides the wallet, Paytm has an investment and wealth management arm, an e-commerce arm, and a payments bank. This edited version has been condensed for space and clarity.

Paytm is today valued at $16 billion and is the most funded unicorn in the country. Now the ecosystem has changed, there is UPI, e-commerce, lending verticals, you have bigger competitors. What do you see as the growth drivers?

Now it is the big game, there is a bigger plan. Earlier it was a startup game, which had the startup plan. It is no longer a one vertical business. It is now an ecosystem war. Just like in the U.S. and China markets, where ecosystems fight, it is all about the ecosystem [in India also]; it is not about payments anymore. I believe that with payments/financial services as a moat you are very well positioned, in fact in a dominating position, and we believe that while we have the largest number of users, the largest number of transactions,2 and those KPIs [key performance indicators], we will also be the largest revenue and profit generator, which is where the ecosystem today is going towards.

There is still a question mark on profits; you have attracted a huge amount of funding but profits are still a concern.

We are a 20-year-old company now. We, as a company, have always gone through the cycle of investment, generating cash, free cash, investment, generating cash, free cash. Right now, it is not about losses which are very high. We have reduced our costs dramatically without reducing the number of people. People costs have actually increased; the other costs have automatically optimised because our revenues have started kicking in. Right now, on a year-on-year basis, our losses will go down by at least 50%.

Has the wallet taken a back seat because of the other businesses coming in?

Paytm is a payment instrument ora payment app. Paytm is a payment app where you have a sigma, meaning choice of wallet, bank account, cards, EMI, and so on. So, Paytm consumers do not have the choice only of a wallet. We are as much a part of UPI as anybody else; actually in merchant payments we are the most dominant UPI player. When it comes to online, we dominate 70%-80% of the market share. The wallet has its own loyal consumer acceptance and UPI has its own loyal consumer acceptance and both will inevitably coexist.

What is the future of Paytm Mall?

Paytm Mall today spends about $1million and does on an annual basis, $3.1 billion GMV [gross merchandise value]. The problem is that you have a choice to benchmark it against very clearly retail proxy business models. Ours is a clean marketplace, has a lot more legs than any other marketplace and with a lot more capital in the bank and a lot more resources committed, than anybody else in the business. Everybody else, either they will struggle for the money, or they will struggle for compliance. We have money and we are100% compliant. For us, Paytm Mall is a journey which is not in a mature stage any which way; it is in its early days.

Some of your competitors in the wallet business are now owned by big companies. What is the future of this business?

When I had launched the wallet business, I had said that those who are serious about the commerce business will have to first build a payments business. Can payments acquire customers for commerce or can commerce acquire customers for payments? If you see that, payments have a higher frequency and a subset of those will do commerce and that’s a business model. Paytm is a business model where customers get acquired on payments, graduate to commerce—whether physical goods, ticketing, deals, gift vouchers, everything. Our commerce business combined, including tickets, e-commerce, physical etc., we are actually sitting with $32-billion annual GMV and are contribution positive. If you want to see Paytm as an ecosystem, we have regulatory obligations, [and] we cannot consolidate every revenue in every balance sheet.

As Paytm as a group becomes bigger and bigger, are you going to look at restructuring?

Inevitably, these companies will go to IPO for themselves. Paytm will be one holding company, and commerce and content, [and] these three things will be three different companies. The [payments] bank obligatorily will IPO after five years of profitability, and no company will IPO till the time we are very sure of profit predictions. Now, we have enough money to run for the next couple of years. Commerce and payments and financial services, we have money for the next five years.

In the light of the NBFC crisis, there is a fear in the financial market. How is it affecting you?

To be honest about it, any crisis for us is an opportunity to get into that market faster. We are not yet impacted by any such crisis.

Are you saying that none of the crises have hit you?

The crisis impact on our business model is less because of our spread...our reliance on these business models is much less. Our business model inherently grows because offline people are inevitably going to come online. This secular movement of offline to online supersedes any disparity. We can only say that it did not grow that fast. The biggest reason for success behind India’s Internet business models [is that] the penetration of the Internet took off in the last four years and the amount of comfort people got with their devices to do every other thing beyond content is because of the network effect. We are standing on the shoulders of the government's initiatives and data being cheap and customers being young.

Is full banking the next step?

We have applied for a lending licence, like a proper bank and we are hopeful that we will get it. It will be the biggest cash cow if we get it. As of now, we partner with NBFCs.

In these times as well, are you keen on NBFCs?

I would be. It is all about how sincere you are.

Has the customer acquisition growth slowed down? Three years ago, it was about 100-120 million. Now it is about 300 million.

And India will not have more than 500 million anyway. We always say we will bring half a billion customers to the fold of the [digital] economy because beyond that is probably not our customer base. We can only cater to the customer who wants payment, financial services, commerce. Really speaking, beyond India’s 500 million, they need grants, support and systems. But it can change. We have always very publicly said that we are targeting half a billion people. With that intent we started to look at outside markets, and that’s the reason we looked at Japan as a market and there our business is the largest payment business after a year[of being there].

Tell us about Paytm’s Japan business.

It has been an incredible partnership with SoftBank. They have done more than 20 million customers in a year, and on a pro-rata basis Japan [entity] PayPay [where Paytm is a stakeholder with SoftBank] does more transactions than India. So, Japan accelerated digitisation in a faster and steeper curve where cash was king more than this country. The reasons are two: One is that the comfort with technology is higher there and second, financial services are very costly there. We brought some fundamental changes. For example, if the shopkeeper accepts digital payments, the money comes in four weeks, there is a four-week delay; we give it the next day. And, in a country of 4-4.5 million SMEs, we are at 1-1.5 million merchants.

How have Masa [SoftBank founder Masayoshi Son] and SoftBank helped Paytm’s growth besides with money?

One of the things that Masa always brings to the table is aspirations which are global, aspirations which are larger than life, aspirations and expectations that are really huge, and the very reason that we are sitting here with 300-plus million [users] is the reason that we always wanted to take market share. And if that money wouldn’t have existed we wouldn’t have been able to take the market share on day one. And speaking of other business opportunities, we have had those to go to a few more countries with partners but we have been clear about it that we will never do something at the cost of India.

What are the new geographies you’re looking at?

What our learning has been is that our technologies are not necessarily only for consumers in emerging markets, frontier markets; they are as good and as useful for people in developed markets as well. My understanding has been [it has to go] from India to the developed markets—Japan, to the Americas, to Europe. I would prefer that to happen than go to frontier markets in Africa. Paytm will be making technologies for the world and the best benchmark for that will be the day when we go and land in the U.S.

What’s Paytm going to look like as an overall entity three years from now?

There will be three businesses [financial services, commerce, content]that we will be looking at. All three of them will have their ships sailing separately. Some of them will be listed. In three years, one or two of them will be ready to be listed.

How does that change an entrepreneur like Vijay Shekhar Sharma from a startup founder to someone who is running an Internet conglomerate?

I think it is a huge burden of learning with the times, where you have high competition and high learning of regulations. As an entrepreneur, it is a blessing to be at the centre of this and see this change in a life where India was changing. My role overtime is becoming that of the budget allocator. The role has become more of board management, team management. It’s more about senior team recruitment, adding management, expanding, and less about running the business.[Looking at his phone] The MISI get on the phone every day; thatMIS won’t probably stop ever, even though those companies will make billions of dollars for themselves.

Will you have partners like SoftBank in different countries?

The lucky thing for us is that we have shareholders on the board who are the best of China, Japan, and theU.S. When we go [global], which is a multi-year forward plan, that day we will look at who will be the right partner.

And, in the immediate future?

India is the game, India is the plan. The Indian market is going to grow obligatorily with a couple of trillion dollars being added in the next five to 10 years. Couple of trillion dollars added and fewer companies, it is a sweet spot for us. This is the home run for us.

(This story was originally published in the April 2020 issue of the magazine.)

Follow us on Facebook, Twitter & YouTube to never miss an update from Fortune India. To buy a copy, visit Amazon.