India’s Paytm and Brazil’s Nubank could soon turn the corner to profitability thanks to surging demand for digital payment services in India and Brazil amid the ongoing COVID-19 pandemic.
“We could very well break even this year, we will start making money,” Paytm CEO Vijay Shekar Sharma said at the Reuters Next conference on Wednesday (Jan. 13). “I was surprised by the opportunity of monetization in 2020 during the pandemic, not just by our wealth accounts but also by lending.”
Paytm offers a wide array of digital products throughout India, including a merchant payment platform, money transfers, and bill payments. It also provides lending services such as merchant cash loans, personal loans, and credit cards.
The company, which was valued at $16 billion during a 2019 funding round, is backed by Chinese FinTech titan Ant Financial and Japanese conglomerate Softbank, Reuters said.
Sharma told the Reuters conference that while Paytm had no near-term plans to go public, it might consider it once it is profitable.
India has until this point been a cash-based economy, where even consumers shopping online often paid in physical currency via cash on delivery (COD). But several years of a regulatory push have combined with the increasing presence of India’s Unified Payments Interface (UPI) and months of COVID-19 to markedly reduce Indian consumers’ fondness for physical currency. Coupled with a global spike in contactless payment methods, India has been seeing a massive shift away from cash.
“We created our payments product to go wide and deep for customers — they can pay their school fees, order food, order up an Uber,” Paytm President Madhur Deora told PYMNTS in a recent conversation. “We made offline payments possible with a use of a standard button. [But] that all takes us to the next logical piece, which at this point starts to look a little bit like a ‘super app.’ The user can take all those payments they can make from the Paytm app and build a hub [to] manage their life issues.”
Brazil’s Nubank has also been boosted by pandemic demand for digital banking, Co-Founder Cristina Junqueira told the Reuters conference.
Junqueira said the health crisis has pushed many Brazilians to engage in digital banking for the first time, particularly to receive government stimulus payments.
The company is now looking to ramp up its lending business and could turn a profit within 18 months, said Junqueira, adding that it was in no rush to go public.
In June 2020, Nubank had a loan book valued at around $63 million, excluding credit cards, according to Reuters.
“As recovery approaches, there’s a lot of need to rebuild, and a lot of companies that went bust, and a lot of individuals in need of credit. We’re really hopeful that 2021 is a year we’re going to be able to maybe increase our exposure on the credit side tenfold,” Junqueira told listeners.
“We have so much more deposits than we can use in terms of funding, so we’re hoping to deploy a lot of that capital in 2021 and help stimulate economic development,” Junqueira added.
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