Paytm ties up with ICICI Bank to offer consumer credit, free banking services

Payments bank Paytm has tied up with ICICI bank to offer a number of banking services like consumer credit, zero-balance account as also free IMPS, NEFT and RTGS transactions as it aims to expand its customer base to half-a-billion.

Under the tie-up, Paytm, the country's largest digital wallet, will also offer its customers up to Rs20,000 in interest-free credit for the first time for everyday uses ranging from movies to bill payments to flights and white goods. The amount would remain interest free for a period of 45 days. Thereafter, an interest of 3 per cent will be levied.

Besides issuing a free digital card at the time of account opening, Paytm account holders will also be offered a free insurance cover of up to Rs2 lakh in case of death or permanent disability, according to the terms and conditions.

Paytm plans to selectively offer the services initially, before extending it to non-ICICI Bank customers as well.

Paytm-ICICI Bank Postpaid offer is a digital account with instant activation and involves no documentation or branch visit, as activation is fully online. It also does not involve any joining or hidden administration fees.

The credit account, which is based on a new Big Data algorithm by ICICI Bank, makes real-time credit assessment of customers. The algorithm uses an intelligent combination of financial and digital behaviour of the customer, including credit bureau check, purchase patterns, frequency of purchase to ascertain the creditworthiness of a customer within a few seconds.

Paytm-ICICI Bank Postpaid will also offer a quick checkout to customers with the Paytm Passcode.

After the credit is availed, a consolidated bill will be generated on the first day of the next month, which has to be paid by the 15th of the month.

Customers can pay using Paytm Wallet, debit card or internet banking of any bank.

"We believe our customers are sincere with their payments and Paytm Postpaid will play a major role in helping them pay for their daily expenses on time. This will democratise access to credit including those with less disposable income," said founder and CEO - Paytm, Vijay Shekhar Sharma.

"In the last 2 years and the next three years, we would have invested Rs18,000-20,000 crore. I don't want to talk about profitability right now because we are still in an investment phase," Sharma told reporters. Sharma said its platform processes about 2,500 million transactions annually worth of Rs80,000 crore.

"We expect this to grow to Rs1,00,000 crore by the end of the fiscal. The number of merchants on our platform will also touch 60 lakh in a few months," he added.

To facilitate verification of account holders, Paytm plans to invest $500 million in KYC (Know Your Customer) operations. It is setting up KYC centres across India to complete the KYC formalities for customers and make them eligible for a payments bank account.

A user can add up to Rs 20,000 in a calendar month in Paytm Wallet. However, a KYC (Know Your Customer) verified user can maintain up to Rs 1,00,000 at any point of time.

Although the payments bank can't offer financial products of their own as a business entity, it can act as a business correspondent and partner with other financial institutions and banks to offer loans, fixed deposits, insurances and mutual funds. "We invest deposits only in government bonds. None of your deposits will be converted in to risky assets," the company said in a press release.