Wed, Jun 21, 2017 - Page 10 News List

Paytm seeking to offer money market fund

Bloomberg

India’s largest digital-payment company, Paytm, is seeking a license to set up a money market fund where users can store cash and earn interest, in competition with the nation’s banks, a person familiar with the matter said.

Paytm has applied to the Reserve Bank of India to start the fund and increase its offerings to its more than 250 million users, the person said, asking not to be named because the matter is private.

It is another step in the start-up’s push to disrupt the Indian financial services industry after it secured a banking license and began offering gold trading earlier this year.

The company is now officially called Paytm Payments Bank Ltd and is allowed to take deposits and pay interest, but not lend money.

Paytm is following the path of Alibaba Group Holding Ltd’s (阿里巴巴) financial affiliate, which set up its Yu’E Bao (餘額寶) fund less than five years ago in China and saw it become the world’s biggest such fund with 1.14 trillion yuan (US$166.89 billion) in assets.

Both Alibaba and its affiliate, Ant Financial Services Group (螞蟻金服), are investors in Paytm.

The Indian finance sector has long been dominated by traditional, government-backed banks, much like China’s. The nation’s leading money market funds are run by state-owned and private banks, including the State Bank of India and ICICI Bank.

Paytm founder Vijay Shekhar Sharma told reporters that he plans to invest US$1.6 billion over the next five years to expand the bank’s wealth management, insurance and lending businesses.

Paytm, a unit of One97 Communications Ltd, received US$1.4 billion in funding from Softbank Group Corp, in a round that is the biggest from a single investor in any Indian startup.

Softbank was an early investor in Alibaba and continues to hold a significant stake.

Like traditional money market funds started in the 1980s, the Paytm money market fund is to sweep leftover digital cash into a fund and pay users interest on it.

The rate of interest is not immediately known, but the fund will offer better returns than the interest rates banks offer on savings accounts, the person said.

Paytm, which expanded rapidly after the Indian government banned high-denomination currency notes in November, began offering digital gold trading to its users. That has quickly swelled to volumes that rival those at India’s largest traditional jeweler.

With more than 250 million users, the digital payment start-up founded in 2010 dwarfs its rivals and has more users than the top four credit-card firms in India combined.

By offering a wide suite of financial services, Paytm aims to get customers to increase their reliance on its mobile app.

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