For Paytm, gold is not just another product in its ever-widening cache of products. The company wants to revolutionise the way Indians buy gold and make it their entry point into its wealth management portfolio.

In April end, Paytm launched its gold offering, allowing users to buy, store and sell gold digitally, targeted at lower-middle and middle class Indians.

What better product than gold, asks Krishna Hedge, senior vice-president (business) at Paytm, to get people to do micro-investments — something no bank or financial institution has been able to do so far in India.

Hegdge is on the right track. For many Indians, gold is a form of wealth or investment. Last year, although there was a 21% drop in demand for gold, Indians bought a whopping 675.5 tonne of the yellow metal. The dip, according to this Financial Times article, does not mean Indians are losing their love for gold, but rather that the way they buy gold is changing — it is becoming increasingly popular as an investment product. “More people bought gold last year than all other financial products put together,” says Hedge.

When Paytm says “micro-investments”, it’s talking really small — it plans to make gold available for as low at Rs 1! “Our aim is to convince the paanipuri wala or any other roadside vendor to buy gold,” says Hedge.

Once people get used to buying gold for small amounts, Paytm hopes it can replicate a similar model of micro-payments in its other wealth management products, including mutual funds, equities and other financial products.

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The strategy is similar to the company’s other businesses. “Wallets was the payment mechanism for the masses. Payments Bank is the deposit product for masses. Gold is the wealth management product for masses,” adds Hedge.

Paytm is following in the steps of Alibaba, which holds a stake in the former. Taking off from the Chinese ecommerce giant’s business model, Paytm wants to be a bank, an ecommerce company, a seller of digital services including movie and flight tickets, and an asset management firm — all rolled into one.

Go small to reach small-town India

Paytm first introduced gold as a pilot project in October 2016, spurred by its success in getting people to use its mobile wallet to make recharges, pay utility bills, pay taxi drivers and local merchants, and other types of payments.

Currently, the company is adding shine to its gold business and plans to take it to the masses by enabling really small investments in gold.

The average ticket size, Hedge says, is pretty small, varying between Rs 1,000 and Rs 1,500. “Nobody (has) figured out how to bring gold online in a way suitable for the bottom of the pyramid. The roadside vendor… all of them think of gold, but they can’t buy it,” says Hedge. Paytm is working full steam ahead to fill this gap.

Things are already beginning to move. Since its launch a little over two months ago, Paytm has already sold more than 100 kg of gold.

Paytm’s strategy is being validated by the fact that most of the buying is happening in small cities like Kanchipuram, Dhanbad, 24 Paraganas, Burdawan, Godavari and Thiruvallur. Paytm has already received orders from 6,000 pin codes.

Aparna Singh, in her early thirties, who runs recruitment agency Vconnect Consultancy, has grown up in a family where gold is a mode of saving. “My parents saved the entire year to buy gold during Diwali,” she said. “Paytm’s virtual gold shop allows me to buy gold of any value, anytime. Over the past week, I have bought Rs 4,000 worth of gold.” Singh’s first buy was just worth Rs 10.

Hegde adds that the company has realised people buy gold at odd hours. On July 7, between midnight and 2am, 270 people bought gold worth Rs 2,75,000, at an average ticket size of a little more than Rs 1,000.

In the future, Paytm will sell mutual funds, equities, and other financial and wealth management products, but for now, it’s focussing on strengthening its gold offering.

To ensure credibility of its gold, Paytm has partnered with the Metals and Minerals Trading Corporation of India (MMTC), one of India’s largest metals trading company, and offers 24-carat gold with 99.9% purity.

When someone buys gold on Paytm, it is stored with the MMTC. The buyer pays 3% GST and receives an invoice on email. The price includes the charge for accessing the payment gateway and the technology cost, which comes to 2% to 2.5% of the gold price. Still, its cheaper than the gold available in the market, emphasises Hedge.

In case you want to wear the yellow metal

Paytm is also trying to change the way people buy jewellery in India, says Hegde. “Right now, by default you buy jewellery and gold together. The idea is to separate buying gold from buying jewellery.”

So while the company is trying to get people to buy gold online, it is also offering them the option of transforming the gold to jewellery by partnering with jewellery chains such as Tanishq, Kalyan Jewellers and P C Chandra, among others. Once the partnerships are in place, the buyer can walk into any of these stores, transfer the gold to the jeweller’s account, and purchase jewellery by paying just the making charges.

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By the end of 2017, Hedge says, Paytm will have tie-ups with jewellers in at least 50 Indian cities. Smaller single-shop jewellers can register themselves on the Paytm website.

For those who do not want to buy jewellery but still want physical gold, Paytm is offering home delivery of gold coins at the rate of Rs 600 per 10gm.

Similarly, if someone needs money, they can sell their gold back on the Paytm app or website. The money will be transferred to the seller’s bank account by the MMTC, and a nominal convenience fee of Rs 10 will be charged.

But not everyone is convinced it’s “gold for the masses” approach will turn the market around in favour of digital buying of gold. Some of the buyers like Singh, remain sceptical. “I have a concern. God forbid, if something happens with Paytm or with my account, who will take the onus of it. Their terms and conditions are little ambiguous on this front,” Sinha said.

“There are two extremes — for one segment, wealth is only gold and they buy straight from jewellers; the other extreme is people don’t care about gold and have wealth managers to take care of their investments,” said Harminder Sahni, founder of consultancy firm Wazir Advisors.

Between these two extremes lies India’s largest population base. But Sahni is sceptical whether a significant number of people from this segment will buy gold or not. However, he adds, “Even if 5% buy (gold), it will become a huge business. There are other financial tech companies (like Tauro and Fisdom) who are offering wealth management for masses.”

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