Paytm, Shriram Finance in pact to extend financial services to small merchants

Paytm, a major player in QR payments and mobile payments, and Shriram Finance, a leading retail NBFC company, have entered into a partnership, under which the former will offer users a range of financial services, including small business loans, by the latter.

The main objective is to target small traders who do not have assets or documents to benefit from loans from the formal sector.

Vijay Shekhar Sharma, founder and CEO of Paytm, said Shriram Finance’s expertise in the space is a key feature in the partnership, which seeks to bring together Paytm’s large payments user base, its digital loan distribution technology, Shriram Finance’s deep risk understanding capabilities and its strong expertise. In groups to provide loans to small units.

Explaining the rationale behind the partnership, Umesh Revankar, Executive Vice Chairman, Shriram Finance explained: “Paytm has potentially the largest digital platform and has built a robust network. We, at Shriram, have an ambition to reach out to all the small merchants across the country. When we wanted to lend to small business people, they didn’t have a financial track record or budgets. But he said that digital Paytm transactions create a kind of financial history and that helps us evaluate small merchants.

Through this link, Shriram Finance will be able to serve new types of clients including its existing clients such as taxi operators, who are all on the Paytm platform.

A range of products such as FASTag, fuel credits, insurance, etc. can be offered to Paytm users and both companies are engaged in discussions for the same. But they are more likely to start with small business loans to merchants.

Payment information is richer and can be leveraged to assess and extend credit to small businesses, said Bhavish Gupta, President and COO of Paytm. So far this has not been possible due to the poor spread of payments. Paytm was able to provide the information to understand merchants’ payment behavior.

The partnership will initially focus on Paytm’s voice box (a device that helps get instant voice confirmation of every payment received via a QR code) merchants. These soundbox customers have shown more potential than others for loans and other products due to better quality in their payment transactions. Paytm has about 3.4 crore merchants out of which about 75 merchants have megaphones.

Unlike traditional loans where the payment is made every month, the trader has to pay every day through various options in this. Usually the loan ticket size for small traders varies between Rs 25,000 to Rs 2.