There was a time in the early 2000s, when Vijay Shekhar Sharma was struggling to make rent. He had tasted some early success, selling his first company within a couple of years of graduating from engineering college. But after a year of starting his second company, he hit rock bottom financially, and took to coming home late and leaving early to avoid running into the landlord of his South Delhi barsaati.
Eventually the landlord cottoned on to what was going on. And he would send a domestic help up in the mornings to summon Sharma. "I'd say aap chaliye, main aata hoon. He'd be like, nahi, aap chalo mere saath," Sharma recalls, laughing.
The landlord was kind and gave Sharma a long rope, but would advise him periodically: "You should save money for your basic needs, including rent."
The company Sharma was struggling to get going then, One97 Communications, is today valued at $5 billion, thanks to the stupendous success of its digital payments and e-commerce business—Paytm. And Sharma is on the cusp of his next big leap, which aims to bring banking services to millions of India's unbanked, hopefully enabling them in the process to save money for their basic needs.
When I mention the billions he and his company are worth today, Sharma tells me about an email signature he had in college. Now, to fully appreciate its audacity, you must know that Sharma grew up in a small town near Aligarh, with modest means and immodest intellect, went through school with Hindi as medium of instruction, and cracked his engineering entrance examination by reading the same textbook first in Hindi and then in English.
Paytm now has 150 million digital wallets, and big online shopping firms have all either acquired digital payments companies or incubated their own. But Paytm has a stickiness that others find it hard to match.For years now, among millions of users, the company has acquired a solid reputation and loyalty by making routine digital payments such as mobile recharge, utility bills, DTH and broadband payments and now even school and college fees, incredibly easy. When you save the consumer's time, you are giving them money. Add to it a layer of attractive cashbacks, and you have the winning Paytm formula that Sharma is hoping will grow into a big part of India's digital payments infrastructure.
Being proven right is one thing, but starting an ecommerce business nearly sank Paytm. Unlike the payments business, the online shopping play burns a lot of cash. So in January of 2015, Paytm was left with just enough cash to run another month. Apart from depleted reserves and surpluses, Sharma had also exhausted the money he borrowed pledging his shares. The runway really was short at this point.
Chinese online shopping giant Alibaba's payments unit Alipay took a 25% equity in Paytm in February 2015, averting a crisis. In September this year, Paytm raised more money, and secured a $5 billion valuation. Now some view India's high stakes e-commerce battle as eventually boiling down to one between Amazon and Alibaba, which has invested in Snapdeal and Paytm.
"I think the beautiful thing is that there are journeys that have stages. It is okay to be at a certain stage when you are taking a punt shot. It is totally wrong to be at the same stage when you are following a particular trajectory. Does it mean that we'll take that situation now? Totally not. We are extremely paranoid about how much cash we carry and what we spend. Like we always want to carry at least three years worth of forward cash."
India has about 150,000 bank branches and about 200,000 ATMs for a population of 1.3 billion. Although the country has recently aggressively opened bank accounts in a bid to promote financial inclusion, poor access to branches and ATMs means actual use is scarce, with some 40% of new accounts remaining unused.
Sharma is among the 11 entities who received licences last year to launch the so-called payments banks, a new banking model focused on facilitating transactions and improving access to the banking system.
Sharma tells me the new bank is on the last leg of pre-launch work and could be rolled out anytime this year with Reserve Bank of India clearance.
How is it planning to shake things up?
For one, the Paytm Payments Bank is going to have a million points from where cash can be withdrawn. The entire banking system—all the bank branches and ATMs cumulatively—currently offers only a third of that. Sharma's bank will basically turn any merchant and corner store into a cash withdrawal point called 'Paytm ka ATM'.
[C]loud is a really powerful word. The bank, the financial services and the deposits payments have to become just like that. I sit here and say that I'll pay it and that's it.Vijay Shekhar Sharma
The company has developed an app called Golden Gate, which will facilitate this.
How does the authentication work?
It will be a combination of several things. It will utilize the Aadhaar backbone, which means the devices with merchants could be equipped with fingerprint or iris scanners, or both.
And what Sharma says next is so staggering, that I stare at him in disbelief.
Paytm Payments Bank is going to authenticate transactions using voice as a unique biometric signature. In effect, this means you can walk into any establishment that is a 'Paytm ka ATM' and ask for money. And when it asks for authentication, the customer will get a call on their phone, and they just have to say a pre-set pass phrase, like "My name is Meena."
"Your voice is as unique a signature as iris or fingerprints," says Sharma, adding that the technology works even if you have a cough or cold. It works in any language.
What about false negatives and false positives, which can wreck the bank's reputation?
Sharma says it's adequately robust and like any new technology, keeps getting better.
Paytm is working with another company to deploy the technology. He shows me a video demo on YouTube. Is an acquisition on the cards? "Nothing, nothing," he says, and I'm convinced it's one of those denials that confirm the story.
A bank where authentication is as easy as speaking to a teller, with one million touch points. What it can do to universalize banking and expand the reach of the formal economy is tremendous.
Sharma says he wants the experience as close as possible to a private banking experience.
"Say you are a customer of this large Swiss bank and you are in New York from India and you need some cash. What do you do? You walk in, and say hey I need some cash. The teller will ask you for your passport, and they will look you up, and they will ask you how much you want. And that's it. This is going to be just like that."
There is another element to this speech thing—it follows the arc of technology, where it eventually seeks to approximate a human interface.
"Computing went from a large room to desktop to pocket. Displays went from VGA to XGA to retina display. What is happening is that everything is getting more humanized. Storage went from storage sets to optical drives to flash drives to disappearing in the cloud. Computing has now vanished from the pocket into the environment. That means technologies such Alexa. So computing and the capability of technology starts from a large, bulky experience and becomes magical when it is literally in the air. That's why cloud is a really powerful word. The bank, the financial services and the deposits payments have to become just like that. I sit here and say that I'll pay it and that's it."
He intends to let millions of Indians withdraw cash out of thin air. I can't wait to watch this technology in action.
"You are now a minor press baron," I remark.
"More like a Wordpress baron," he says, laughing uproariously. (Wordpress is a popular web- and blogs-publishing platform.)
Sharma says these are not investments in the traditional sense.
"I fundamentally believe that in the era of social distribution of content and given the kind of stories social networks can bring up, it is an obligation for certain people to be the torchbearers of truth and reality. It is so easy to create a URL called abcdnews.com. Gullible consumers who do not even know the internet will not be able to figure out whether it is wrong or it is right.
They can put out an unreal fact and make it viral so that it looks real. My personal view is that it is an obligation for all of us who are digital natives, the first generation who've seen the real world and digital world, to support quality content and quality journalism in whatever way we can.
I don't think that I am supporting them because I believe it will make a ton of money. I do believe that it should get sustainable. That is why I am putting this money in risk capital. More people should build these and more people should support them."
I agree wholeheartedly.