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    Categories: Mobile Wallet

HDFC MD Says Wallets Like Paytm Have No Future; Snapdeal May Merge With Paytm As Losses Increase To Rs 160 Cr/Month

HDFC Bank MD Launches Scathing Attack On Digital Wallets, Says They Have No Future!

Indian e-commerce and digital wallet industry is right now undergoing a tremendous transformation, as legendary leaders are questioning the very basic business model and once flamboyant e-commerce portals are on the verge of closing down or getting merged with larger players.

While HDFC Bank’s Managing Director has launched a scathing attack on Paytm, Snapdeal is now reporting losses to the tune of Rs 160 crore month, and may soon merge with Paytm’s e-commerce business.

Paytm is the common denominator here, being accused of running a business with no future, and at the same being coming in to rescue a failing e-commerce business.

HDFC MD: Paytm Has No Future

Just couple of days ago, 7-year-old Paytm compared themselves with 211-year-old State Bank of India, when their founder, Vijay Shekhar Sharma said that while SBI has 202 million accounts, Paytm has 190 million accounts.

It was definitely a path-breaking comparison, which can be described as disruptive, dominating and somewhat egoistic.

It seems that this statement hasn’t gone down well with the legends of banking industry.

HDFC Bank’s Managing Director Aditya Puri has launched a scathing attack on digital wallets, especially Paytm, when he said that mobile wallets have no future in a country like India. Interestingly, both Sharma’s and Puri’s statements were shared during the same Nasscom Summit.

Aditya Puri accused ‘wallets like Paytm’ of running a flawed business, as he said, “You cannot have a business that says pay a Rs. 500 bill and take Rs250 cash-back..”, adding, “Wallets as a valid economic proposition is doubtful.”

He shared that Paytm is right now incurring losses of Rs 1600 crore/year (as per numbers shared by Paytm earlier), and declared that such wallets have no visible future in the market.

His exact quote: “I think wallets have no future. There is not enough margin in the payment business for the wallets to have a future,”

In fact, he directly challenged Paytm, when he said, “Is this wallet any better than mine, other than a cash- back? I don’t have a Rs. 1,651 crore loss. You eliminate the loss, then we will talk,”

Most probably HDFC is upset that their own mobile wallet Chillr failed to take off, whereas a new entrant like Paytm has totally disrupted the market. We are still waiting for Vijay Shekhar’s statement on this issue.

Snapdeal-Paytm Merger Soon?

While HDFC Bank’s Managing Director has launched a scathing attack on Paytm, Snapdeal is now reporting losses to the tune of Rs 160 crore month, and may soon merge with Paytm’s e-commerce business.

Meanwhile, on the other end of the spectrum, India’s 3rd largest e-commerce player Snapdeal is on an emergency mode now. And Paytm may come to their rescue very soon.

As per a LiveMint report, Snapdeal is currently incurring losses worth Rs 160 crore per month, whereas they were able to raise only Rs 140 crore in the current fiscal year, compared to Rs 9400 crore it raised in 2014 and 2015. If we believe this report, then Snapdeal has only Rs 1100-1200 crore left in their banks, along with Rs 300-400 crore with Freecharge.

This simply means that they don’t have enough firepower left to sustain their operations, and maybe this is the reason that they recently terminated their affiliate marketing program as well.

This is the reason that Snapdeal and Paytm have initiated high-level talks to merge their respective e-commerce businesses into one.

One of the officials, who is close to these talks, said off-the-record: “Snapdeal and Paytm have held talks to merge and this deal is driven by Alibaba..”, adding, “The managements of Snapdeal and Paytm are waiting to see how the two companies fare in the first two months of 2017,”

Now, Alibaba has 40% stake in Paytm and 3% stake in Snapdeal. And if this deal is successful, then it will mark Alibaba’s grand entry intro hardcore B2C e-commerce business in India, as they will emerge as the single biggest investor in the merged entity.

Paytm, which itself is bleeding red with 312% more loss in FY 2016, has already spun-off its e-commerce business into a new entity called Paytm E-Commerce Pvt. Ltd, which set the foundation perfect for such a merger with Snapdeal and maybe Alibaba in future.

Snapdeal’s current valuation has decreased to $3-3.5 billion, down from $6 billion when it raised their last funding.

Do you think that HDFC MD is grossly incorrect in describing Paytm’s business as flawed? Will Paytm-Snapdeal merger really happen? Do let us know by commenting right here!


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Mohul Ghosh :Mohul keenly observes the nuances of Indian startup world; and tries to demystify the secrets behind Technology, Marketing, Mobile and Internet. He is a Writer by passion, Marketer by choice and Entrepreneur by compulsion. Follow him on Twitter here: @_mohul