Payments giant Paytm is in the throes of tapping India’s thriving education sector as a new frontier of 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,” Vineet Kaul, senior vice-president, Paytm, told Quartz. “We are focused on the institutional segment including coaching [centres] where ticket sizes [transaction values] are higher.”
Given the size of India’s education industry, the sector is a minefield of opportunity for the company.
Opportunity and plan
India’s education market is expected to almost double to $180 billion 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 of over Rs 20,000 crore from the education business in the 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,” said Kaul. “We want to step in and handle tasks such as filling of forms and make all [fee] payments online at schools.”
Paytm also plans to tie up with various schools to sell and ensure door-step delivery of stationery 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,” 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. “With higher education getting expensive, we need an alternative system of lending with fair interest rates, that will instil a culture of creditworthiness among youth.”
Already, Paytm has on-boarded utilities, such as power discoms, onto its platform to enable bill payments for its customers. 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,” opined Harsh Shah, co-founder of Fynd, a Mumbai-based e-commerce portal. “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. I expect them to use their familiar strategy of incentives, cashback or coupons, to get traction for new services.”
However, Paytm is well aware of the pitfalls of overly relying on discounting, especially with educational services.
“Education has an aspirational value for students and parents alike,” admits Kaul. “A lot of thought and research goes into choosing an institute for higher studies. Nobody will choose an institute just because we are offering Rs 5,000 cashback.”
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,” suggested Valliappa. “I’m hoping the firm will take the lead in offering services, such as loans, that will maximise the benefits for needy students.”
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 norms.
“If the company is going to use the unified payments interface for new services then, possibly, there won’t be hurdles,” pointed out Shah. “But, if it’s relying on its wallet transactions, then meeting KYC requirements could prove to be the biggest bottleneck.”