Paytm (probable acronym for Pay Through Mobile) was launched in 2010 as a mobile bill payment and recharge website and grew up to offer utility bill payment services too.


In early 2014, it launched the Paytm Wallet which was kind of pre-paid online card and then late 2014 it launched it’s own e-commerce platform too. With Ratan Tata and Alibaba coming forward to fund it in March 2015, it has easily caught the fancies of everyone. A rapid growth, with about 25 million user-base in March 2015, it indeed is the biggest Wallet provider in the Indian market.

That’s a successful business by all means! Kudos!!

But then why this article heading about a scam?

Well, there’s a catch which seems to have been overlooked!

Paytm-offersWith about 20% – 70% (sometimes 100% too) cashback on everything that is available on Paytm, it has picked up really quick as the preferred choice of shopping. However, almost 20-25% of the time, Paytm just cancels the order and refunds the money in your Paytm Wallet, so that you can make further purchases again.

Good! They’re honest!! My money is safe!!! What’s the catch in that? Are you just trying to malign the brand’s image???

Well, wait till you’ve read this article completely.

Ever though how would a company sustain itself, if everything it sells is cheaper than everyone else, to the extent that they don’t seem to be true? What’s their business model? Come on! Everyone knows that there are no free lunches in this world!

There are frivolous reasons that the orders are cancelled (will post more about that with proof later), and they are cancelled for a benefit to the Paytm. What happens when your order  gets cancelled and the money is refunded to your Paytm Wallet? Do you immediately go and purchase something else just because you want to spend the amount? More often than not, you wait for appropriate item and appropriate offer — 10-15 days on average?

Now consider this:

With 25 million (thats 2 Crores 50 Lakhs) wallet holder, if every user has just 1 Rupee balance in the wallet, think of the simple interest that it would earn in any bank! Let’s just do a simple calculation:

Amount in Wallet @ 1 Rs per user = 2,50,00,000 Rupees
Simple interest @ 4% for first 6 months = (2,50,00,000 X 4%) / 2 = 10,00,000 / 2 = 5,00,000 Rupees
Amount + Interest after 6 months' period = 2,50,00,000 + 5,00,000 = 2,55,00,000 Rupees
Simple interest @ 4% for the next 6 months = (2,55,00,000 X 4%) / 2 = 10,20,000 / 2 = 5,10,000 Rupees
Total Amount in account at the end of the year = 2,55,00,000 + 5,10,000 = 2,60,10,000 Rupees
Total profit = 2,60,10,000 - 2,50,00,000 = 10,10,000 Rupees

That’s just 10 Lakh 10 Thousand Rupees (INR 10,10,000) annually on a simple interest @ 4% paid bi-annually as in saving accounts.

Ummm.. organisations don’t run on just 10 Lakh odd Rupees per year. They have huge budgets and this is just peanuts!

OK, we know that there are banks which offer 7% interest on saving accounts having amounts over 1 Lakh (Yes Bank, for example). Further, how many of us just keep 1 Rupee in the Wallet?Paytm Wallet - 03June2015

Well, my wallet has over 1000 Rupees! And I assume that at least 20% of the Paytm Wallet users would have around 500 Rupees in their wallet (and that’s a very conservative estimate). Now factor them as above for calculations:

20% of 25 Million = 2,50,00,000 X 20% = 50,00,000 Users
Assuming Rs 500 in each = 50,00,000 X 500 = 2,50,00,00,000 Rupees
Simple Interest @ 7% for first 6 months = (2,50,00,00,000 X 7%) / 2 = 17,50,00,000 / 2 = 8,75,00,000 Rupees
Amount + Interest after 6 months' period = 2,50,00,00,000 + 8,75,00,000 =  2,58,75,00,000
Simple Interest @ 7% for the next 6 months = (2,58,75,00,000 X 7%) / 2 = 18,11,25,000 / 2 = 9,05,62,500 Rupees
Total Amount in account at the end of the year = 2,58,75,00,000 + 9,05,62,500 = 2,67,80,62,500 Rupees
Total Profit = 2,67,80,62,500 - 2,50,00,00,000 = 17,80,62,500 Rupees

Now? What about the whopping amount of Rupees 17.8 Crores?? Did it caught your eyes and shook your mind?

If you wish now to think realistically, think about the returns a typical real estate or a mutual fund or share market would give. The actual figures are manifold!!

Now tell me – is Paytm a Scam? or not?

I wonder how this is operating right under the nose of SEBI & RBI. Isn’t that flushing the PSU Banks of their money??


In a day or two, I’ll post on what reasons Paytm cancels the orders frivolously. Stay tuned…

* The calculations in this post are simple calculations in layman's terms and may not be accurate.
A margin of 10% error is possible.

Update 04 June 2015 14:40 hrs
Just received a call from someone calling from Paytm (+91-120-4770370). What the person tried to clarify is that all the amount in the Paytm Wallet resides with an escrow and they don’t earn any interest as illustrated above. I have asked them to put this information in public domain on their site and then I can put a disclaimer linking to that piece.

What interests me is that there had been no follow up for my grievance requests for last so many weeks and then I receive a call with a promise to look into all my complaints in even less than one day of posting this! What would happen if I continue with expose?