BENGALURU/MUMBAI (Reuters) - India’s Paytm plans to sell 5 tonnes of gold valued around $200 million this year, the digital payments firm said on Friday, as it strives to develop a viable business from its e-wallet platform.
E-wallets like Paytm, Citrus Pay and MobiKwik, which allow users to transfer money into virtual wallets via smartphone apps, have proliferated thanks to venture capital backing, but many are struggling to find a long-term profitable model.
Paytm, backed by Japan’s SoftBank Group and China’s Alibaba, is attempting to leverage its e-wallet to let customers buy and sell gold while getting a cut from each transaction.
“This is our way into wealth management,” Krishna Hedge, a senior executive at Paytm, told Reuters.
India is the world’s No. 2 consumer of gold behind China, with many saving their money in gold, using it to hedge against inflation and for gifts at special occasions. The country imports about 800 tonnes of gold a year.
The company launched its gold offering at the end of April and aims to sell 5 tonnes of gold in the fiscal year to March 2018. That amount of gold would be worth about 14 billion rupees ($217 million) at current prices.
Clients will be able to buy and sell even miniscule amounts of gold digitally for as little as 1 rupees ($0.0155) via Paytm’s platform.
Paytm said it will not only allow users to trade in digital gold but it will also ship gold coins across much of India for those who want the metal delivered.
“This is actual physical gold that is stowed away in our vaults when you make a purchase,” said Hedge.
The 24-carat gold is sourced from a venture between Indian bullion importer MMTC and Swiss gold refiner PAMP.
Paytm, which leads the crowded e-wallet space in India, currently has more than 225 million users.
The industry enjoyed a huge boost from the federal government’s move to demonetize old high-value bank notes last year. The ensuing cash crunch sparked a surge in e-wallet transactions in a country where credit and debit-card usage is still limited.
Paytm now has plans to offer limited financial services through its niche bank.
“They are likely to add more such financial services in future and could even offer micro loans through tie-ups with banks,” said Neil Shah of technology research firm Counterpoint.
Reporting by Nivedita Bhattacharjee and Sankalp Phartiyal; Additional reporting by Rajendra Jadhav; Editing by Euan Rocha and Elaine Hardcastle
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