Payments giant Paytm is in the throes of tapping India’s thriving education sector as a new frontier for growth.
One97 Communications, which owns the Paytm digital wallet and e-commerce platform Paytm Mall, is looking to leverage its two key business arms, to become a one-stop shop for parents and students seeking educational loans, scholarships, or just a convenient way to pay fees.
For this, Paytm plans to set up a new vertical, Paytm Education, that will be hosted on its payments app and integrated with Paytm Mall, the Softbank-backed company announced last week.
“Schools and higher education hold immense growth potential for us. We are focused on the institutional segment including coaching (centres) where ticket sizes (transaction values) are higher,” Vineet Kaul, senior vice-president, Paytm, told Quartz.
Given the size of India’s education industry, the sector is a minefield for the company.
The opportunity and the plan
India’s education market is expected to almost double to $180 billion (Rs12 lakh crore) by 2020 from $97.8 billion in 2016, according to various industry estimates. India is also home to the world’s largest population of people aged between six and 17 years, which has catalysed the growth of digital learning methods in recent times.
With such a huge market to tap, Paytm is targeting a gross merchandise value (GMV) of over Rs20,000 crore from the education business in financial year 2020.
To achieve this, the firm has identified a few gaps in the market that it hopes to fill.
First, Paytm is in talks with a few schools to handle all aspects of admissions, which is considered a tedious process. “Many schools don’t want to handle the paperwork involved in admissions. We want to step in and handle tasks such as filling of forms and make all (fee) payments online at schools,” said Kaul.
Paytm also plans to tie up with various schools to sell and ensure door-step delivery of stationary and uniforms through Paytm Mall. It aims to onboard 35 million users across 20,000 private schools, 1,000 higher educational institutes and 1,000 coaching institutes in a year or two.
Then, there is a bouquet of services like child education insurance plans targeting parents, and educational loans for the higher education sector, for which Paytm says it will partner with various financial services companies.
“Often, students are denied loans by banks. With higher education getting expensive, we need an alternative system of lending with fair interest rates, that will instill a culture of credit worthiness among youth,” said Chocko Valliappa, founder of Vee Technologies, a Bengaluru-based information technology firm, and the vice-chairman of Sona College of Technology, Salem, Tamil Nadu.
Advantage Paytm
Already, Paytm has on-boarded utilities, such as power discoms, onto its platform to enable bill payments for its customers. Now, can it do an encore in education?
Experts think the company is in a strong position to do so. It already offers fee payment services at over 10,000 educational institutions.
“Paytm has established itself as a trusted payments company. It’s not going to be difficult for the company to provide a payment channel for consumers to pay for insurance (like children’s education plans) and other services,” opined Harsh Shah, co-founder of Fynd, a Mumbai-based e-commerce portal.
“I expect them to use their familiar strategy of incentives, cashbacks or coupons, to get traction for new services,” added Shah.
However, Paytm is well aware of the pitfalls of overly relying on discounting, especially with educational services.
The challenges
“Education has an aspirational value for students and parents alike. A lot of thought and research goes into choosing an institute for higher studies. Nobody will choose an institute just because we are offering Rs5,000 cashback,” admits Kaul.
To overcome the challenge Paytm is in discussions with students, parents, and institutes to come up with specialised offerings to meet the ecosystem’s requirements, he added.
“An innovative loan structure where repayment starts after a student is gainfully employed could help Paytm attract consumers. I’m hoping the firm will take the lead in offering services, such as loans, that will maximise the benefits for needy students,” suggested Valliappa.
Another hurdle would be navigating the regulatory maze. Education loans and fee payments are big-ticket transactions unlike digital payments, which is Paytm’s familiar turf. High-value transactions can only be done by customers who complete Know Your Customer (KYC) norms.
“If the company is going to use the unified payments interface (UPI) for new services then, possibly, there won’t be hurdles. But, if it’s relying on its wallet transactions, then meeting KYC requirements could prove to be the biggest bottleneck,” pointed out Shah.