Daybreak - Vijay Shekhar Sharma’s loss—20M Paytm Fastags—is his ex-colleague’s gain

Episode Date: March 8, 2024

As we know, Paytm* is in deep trouble but you know what they say about one man’s loss? It is another man’s gain.When the RBI  killed  Paytm Payments Bank’s services, it also meant it could not to accept deposits or top-ups in its customer accounts, including wallets and Fastag. Fastag is India’s electronic toll-collection system. Its basically a Radio Frequency Identification (RFID) technology-enabled card that is fixed on a car’s windscreen. It helps in making toll payments directly from the customer’s bank account or wallet…like Paytm walletNow Paytm happened to account for over a quarter of 82 million Fastags in India and with this RBI directive, nearly 20 million of these Fastags will be leaving the Paytm ecosystem. And of course, there is someone who wants to cash in on it.It is a 4 year old car services platform called Park+. And here’s the twist in the tale. Park+ was founded by Amit Lakhotia who was formerly at Paytm and he helped the company set up its payments business.Tune inAlso listen to: What will Paytm do now?*Paytm’s founder Vijay Shekhar Sharma is an investor in The Ken

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 Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. You must have been hearing about what is happening with Ptm. In case you haven't, I will quickly tell you.

The Reserve Bank of India barred Ptm from continuing all its banking services through PTAM Payments Bank after the 29th of February. Paytm Payment's Bank is a restricted digital bank that cannot lend, but it can take deposits up to 2 lakh rupees. It's been operational since 2017, and its services include current and saving accounts, fixed deposits with partner banks and balance in wallets, UPI and also Fast Tag among other services.

Now, the RBI has basically said that it cannot take any more deposit. or conduct credit transactions. This also means no top-ups on any customer accounts, prepaid instruments, wallets and cards for paying road tolls. In other words, the RBI has essentially killed Ptm payments bank. I did tell you all about it earlier in January, so you can actually go and listen to that episode if you want that story in detail. I'll link it to the show notes of this episode.

Anyway, the point is that Ptm is in deep trouble. But you know what they say? one man's loss is another man's gain. And that is exactly what is happening to Paytm right now. So when the RBI killed Paytm Payment Bank services, it also meant that Ptm Bank could not accept deposits or top-ups in its customer accounts, including wallets and fast tag. Fast tag is India's electronic toll collection system.

It's basically a radio frequency identification or RFID technology-enabled card that is fixed on a car's windscreen. It helps in making toll payments directly from the customer's bank account or wallet, like Ptm wallet. Now, PATM happened to account for over a quarter of 82 million fast tags in India. So with this RBI directive, nearly 20 million of these fast tags will be leaving the PTAM ecosystem. And of course, there is somebody who wants to cash in on it.

It is a four-year-old car services platform called Park Plus. And here's the twist in the tale. Park Plus was founded by Amit Lakotia, who was formerly at Paytm and he actually helped the company set up its payments business. The Ken spoke to him and here is what he told us. And I'm quoting, I feel that Ptm is very emotional for me. End quote. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Daeshirema, 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 Friday, the 8th of March. To begin with, let us quickly understand what FASTI is. The idea is to avoid traffic jams and long queues at tollboots on national highways. So the government came up with FASTag. It is essentially a cashless transaction through which the whole toll tax amount is collected. Now, Fast Tag is operated by 35 different banks which are governed by the National Payments Corporation of India, NPCI and the National Highways Authority of India. And Paytm Payments Bank was one of them.

So what happened when the government asked Paytm Payments Bank to shut down? For those who had been using Paytm's fast tag, it meant that they could not port their fast tags to another bank, which in turn means that they only have one option, which is deactivate Paytm Bank fast tags and apply for a new one. Deactivating is compulsory because according to the one vehicle one fast tag policy, no vehicle can have two toll passes registrations. And for distributors, it would mean an opportunity to make an annual revenue of more than 2,000 crore rupees by taking on Ptm's existing fast tag users to register with them.

And of course, that is what got Park Plus's Lakotia interested. Stay tuned. So the thing with Park Plus is that it can only distribute Fast Tags and not issue them. PayTM could do it with its banking arm and PayTM would then distribute them. So basically, Fast Tag distributors find customers for banks in return for a one-time commission on the registration fee. In Park Plus's case, it would also earn a recurring commission every time the car crossed the toll. Now, a huge part of Park Plus's revenue already comes from FastT Plus.

FASTag commissions. For the year that ended in March 2023, Park Plus earned a revenue of approximately 100 crore rupees and nearly half of it came from Fast Tag commissions. The company currently distributes nearly 2,000 fast tax in a month. So what's going in its favor is the scale that it provides, which is why it wants to tap into the 20 million PTAM Fast Tag users who are up for grabs right now. Currently, it has about 6 million users. and the plan is to double them at least. So how is Park Plus planning to do this? Stay tuned to find out.

One of the senior executives from Park Plus who spoke to my colleague the Ken reporter, Ronna Kumar Gunjin, told him that Park Plus executives are busy meeting issuing banks and figuring out distribution channels. Lakotia and Hitej Kupta, the co-founder and chief technology officer of the company, came up with a three-point strategy to grow the base of the company. of Fast Tag customers. Park Plus wants to cover as much ground as possible and be physically present in places where customers are likely to be. You know, places like car dealerships, stalls, parking lots and garages. One of the executives told the Ken that the idea is to have a big

on-street army and be present wherever there are chances of a conversion. So basically, whenever a Ptm fast tag needs a new tag, they should find Park Plus. The company is a company, is also doubling down on its banking partnerships. In the last couple of months, Park Plus has onboarded five new banking partners, taking the total to nine. So it now has a combination of larger banks like State Bank of India, HDFC Bank and ICSA Bank and their younger counterparts like Airtel Payments Bank, IDFC First Bank, and others. Now, it is important to understand that banks themselves could also issue fast tags on their own. But for them, it would be a logistical challenge because it would mean that they would have to deal directly with gig workers.

And now for the third part of Park Plus's three-point strategy. It is compliance. So Lakotia is implementing a measure where the company's on-ground staff take photos of cars to verify genuine customers. He says that there is no point in fraudulently spiking up the sale of fast-tag numbers and then having zero cross-sell and up-sell opportunities. Now, this makes sense because the company's other products are like parking and mechanic services and they require it to have an authentic customer base. So, Fastag is essentially going to be a customer acquisition funnel for Park Plus. And even if it manages half of the 20 million Ptm customers,

the company will see a whole new level of success. 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.