Daybreak - Paytm wants to know: where are the merchants without QR codes?

Episode Date: January 10, 2024

Paytm*, the fintech giant that was last valued at $16 billion would've never been able to get where it is now without its field agents. Field agents are to fintech payments companies, what delivery partners are to Zomato, Swiggy: their backbone.Out of the 70,000 odd fintech field agents in India, Paytm has about 35000 of these  all around the country. The fintech giant boasts of nearly 40 million registered offline merchants now thanks to the work of its agents.But things are changing now. It's become very challenging for them to onboard new merchants, especially in urban areas, where there are barely any businesses left to tap. As for rural areas, which have a bigger share of untapped merchants, fintechs think its too expensive. Plus the growing competition amongst fintechs has made merchant loyalty difficult to maintain.The market has become saturated and of course, who could be feeling the most pressure but these agents.But what do fintechs expect them to do? Tune in.(*Paytm founder Vijay Shekhar Sharma is an investor in The Ken)Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.   

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Ramon Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

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Paytm, the fintech giant that was lost valued at $16 billion, would have never reached where it is now without its field agents. They are to paytm what delivery partners are to Zumato and Swiggy, their backbone. Ptm has about 35,000 of these agents all around the country in cities and towns. A usual day in the life of field agents starts with a meeting at 9 a.m. The team leader reviews their past and present work,

discusses projections and assigns tasks for the day. These tasks include acquiring new QR code merchants, visiting active merchants, renewing inactive merchants, and selling soundboxes and loans. Thanks to their hard work, the fintech giant now boasts of nearly 40 million registered offline merchants. But things are changing now. It is becoming super difficult for these agents to get new merchants to sign up, especially in urban areas where there are barely any new

businesses left to tap. And as for rural areas which have a bigger share of untapped merchants, FinTechs think it is too expensive to go after them. Plus, the growing competition amongst fintech has made merchant loyalty difficult to maintain. The market has become saturated. And of course, who could be feeling the most pressure but these agents? So what do these fintech expect them to do? They cannot go and tap into the rural market because these very fintechs don't think it is cost-effective. And in urban areas, there are barely any new merchants left to acquire. They surely cannot expect their agents to miraculously make new merchants appear out of nowhere, right? Turns out, fintechs are now focusing on upselling merchants with higher value offerings

like soundboxes and loans. And unlike QR codes which were free, these come with a price tag, which makes matters only worse for field agents. Welcome to Daybreak, a business podcast from the Ken. My host, Nickda Sharma, and I don't chase the news cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Wednesday, the 10th of January. How did Ptm build its ground force in the first place? Let us go back seven years when the fintech boom actually started in India. There were two things that mainly set it off. One, demonetization of course, and number two, the launch of Reliance Geo.

My colleague Gorev Narona spoke to an ex-field agent and they told him, when Geo stormed the telecom market, a lot of field agents staff from the other networks lost their jobs. BATM managed to capture this workforce and got busy acquiring agents. And over time, the fintech created a solid sales mechanism. A fintech executive told the ken that the first step was to get merchants to. to start using the app to accept payments because that is the most engaging element for merchants. By 2018, which is two years later, Ptm's agents systematically carpet-bomb the national capital with QR codes. The ex-field agent who spoke to Gourav told him that Ptm had about 1,000

field agents in New Delhi at that time, and each agent would visit four to five merchants in a day and they would cover 100,000 merchants in a month. These agents would provide new QR codes to merchants and resolve other issues. And the merchants were very happy because why not? They were getting serviced for a free product. The agent said that no fintech spends on merchandising and promotions like Ptm. And this is quite true because out of the $960 million that Ptm raised from its IPO, it has spent more than one-fifth on expanding its merchant base and deepening its partnership

with existing merchants. But again, how long could it carry on giving out free QR codes? Enter soundboxes, those devices with speakers that give merchants audio confirmations of the payments that they receive. PATM had the first mover advantage here, but that could only take it so far. A former FinTech employee told us, and I'm quoting, if we notice that a popular merchant doing 100 to 500 transactions per day is using our product for only about 10 transactions, we provide that merchant with free Soundbox to encourage loyalty. So as more and more FinTech started offering Soundbox devices, customer service and support became important to convince merchants to switch and stay.

So how did Ptm do it? The ex-feel agent explained it to us. They said when a Ptm-Free agent visited a competitor's merchant, they would ask a nearby Ptm merchant to demonstrate the assistance feature on their app. A Ptm agent would then arrive within an hour, irrespective of where the assistant request was raised from. Ptm was able to build merchant loyalty with the soundbox as there is a certain level of exclusivity in usage.

Now, thanks to this, the devices boosted the FinTech's ability to offer loans. But soundboxes did not come for free. Now, these agents who were used to pushing out freebies without revenue goals are suddenly under pressure to sell products that demand a price. Stay tuned for more. A former field agent described what it is like for them. He said, selling a soundbox for $2,000. counts as three points. If the merchant subscribes to the soundbox with monthly rentals, it counts

as two points. Acquiring a QR code merchant meanwhile is just one point. He told us how all these conditions have resulted in an attrition rate of up to 70%. It is the same with other fintech too. For example, at Bharat Pay selling a loan scores more points than acquiring a QR code merchant. And if an agent earned six out of 12 points in a day, their attendance gets marked as half day. Anything less than that, and they do not get paid for that day. Some fintechs also make it compulsory for agents to acquire at least one new merchant a day. A former agent claimed that because of this, many agents allegedly have started gaming the system. They onboard friends as merchants and ask them to make a few transactions.

And like all of this was not bad enough, field agents who were paid a fixed monthly salary of 18,000 rupees pre-pandemic now have daily minimum task criteria to meet. These criteria are now dependent on whatever the fintech chooses to focus on. So all of these reasons, the saturated market for QR codes, the commodification of the soundbox, and not to forget, the minimum target criteria, have led agents to fall back on mis-selling. A former payment fintech employee told a Ken and I'm quoting, we noticed that some new sandbox merchants would simply stop using the product when the monthly rentals started getting deducted. End quote. And can you guess why this was happening? It was mainly because field agents

were wrongly selling it to these merchants as a free product. So it was not so surprising when a former field agent told the Ken that seven out of every 10 new recruits quit to join other gig companies like food delivery or bike taxi aggregators. The rest find it difficult to switch because of a lack of sales experience. For them, employment options are limited to pay-tm, phone pay, Barrett Pay and Google Pay. But in the end, the amount of money pay-tm makes does depend on its field agents hitting their targets. Most of these agents who choose to stay because of their limited sales skills do not see their incomes rising much. And this is because their targets have been standardized across the industry. Obviously, these agents are resisting moving down as gig workers. But moving

up is almost impossible in the current system. And in the end, like Goroz says, they become captive employees of these fintech companies. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.