Delhi NCR-based payment and commerce company Paytm turned into a knight in shining armour for lakhs of Indian citizens who were left helpless after a sudden demonetisation jolt given to them by their very own government on the night of November 8 last year. Since then, Paytm has become a household name and has been climbing the success stairs like no one else in the digital-payments sector. And now, in an effort to offer more to its customers, Paytm is seeking to obtain a license to create a money market fund in which users can keep their cash and earn interest, according to a report in Bloomberg.

The report claims that by creating a money market fund, Paytm is ready to go head to head with Indian banks as the Indian subcontinent is moving away from cash towards a cashless economy. According to the report, the leading digital payments company in India has applied with the central reserve bank in India (RBI) to launch the market fund as soon as possible and make this offering available to its more than 250 million existing customers.

If Paytm is able to obtain this license, then this would be another successful step in the company's strategy to disrupt India's financial services industry after it acquired a banking license and began offering gold trading services earlier this year. The company, which is now called Paytm Payments Bank Ltd., is currently legally allowed to take deposits and pay interest but not lend money as loans.

One look at some of Paytm's most recent moves tells us that the startup is following the path of one of its chief investor, Chinese ecommerce giant Alibaba, which already offers a fund via its payment arm, Ant Financial. Started less than five years ago in China, the Yu'E Bao fund has now become the world's biggest such fund with 1.14 trillion yuan ($167 billion) in assets. The Chinese ecommerce giant invested in Vijay Shekhar Sharma's Paytm two years ago in 2015. As of today, its stake in Paytm has grown to 60 per cent.

For the longest time now, India's finance sector has been dominated by traditional, government-backed banks, similar to the situation in China. Notably, its leading money market funds are also being driven by state-owned and private banks including the ICICI Bank and State Bank of India. Paytm's market will aim to place the leftover digital cash into a fund that will accrue interest for account holders. Though the interest rate that would be offered to the Paytm account holders hasn't been revealed in the report but it is most likely to be in harmony with savings account rates offered by traditional banks.

According to Vijay Shekhar Sharma's recent interview to Bloomberg, he plans to invest a whopping $1.6 billion in expanding the company’s wealth management, insurance and lending businesses over the next five years. So, in the recent future we can see a lot of new launches and announcements coming from Paytm.

The mobile wallet business has been the biggest gainer of the Indian government's surprise demonetisation move. The drive, which ended up sucking out 86% of the country's currency in circulation, resulted in a temporary cash crunch situation, which ultimately led to people turning to digital wallets to satiate their cash hunger. Paytm is currently leading the space with over a whopping 250 million users.

[Top Image: DealStreetAsia]

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