External audit and forecasting market demand analysis for Paytm in Australian Market

This document provides an external audit and forecasting market demand analysis for Paytm in the Australian market. It includes a description of the product, micro and macro audit, and demand forecast for the new product in the new market environment.

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External audit and forecasting market demand analysis
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1. Description of the product
Paytm is a company that uses an e-commerce system of payment. It was established
in 2010 basing on an initial payment of $ 2 million. Patym was founded by an Indian known
as Vijay Shekhar in a part known as Noida near New Delhi (Khatri, 2019). The company
introduced paytm wallet, Indian Railways and by 2017, the paytm payment bank was
introduced with an intention of easing access to banking and financial services to people.
Paytm as an online platform has services like data card, prepaid mobile and utility recharge
(Hanlon, 2019).
2.(i). In this context, the segments that Paytm chose to develop some identified 7Ps
(product, price, promotion, place, packaging, people and positioning) was the “Instant Bank
Settlement especially for Merchants” (Bhalla, 2018). By launching this segment, the Paytm
merchants always identify their specified time for settling the collected payments or even
performing instant settlement as wished for which is made by their bank accounts directly.
Furthermore, liquidity plays a vital role about merchants in managing their cash-map on how to
spend and earn in order to stay in business. Also, Paytm introduced payments through scanning
using QR (Sharma, 2018). This can be done by selecting their preferred mean of payment such as
Paytm Wallet, BHIM UPI and even bank accounts. The company adopts the ‘increment of agents
within the micro context’, digital marketing, person-person interactions among others as the
touch points.

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Figure 1: Cash Flow Diagram for Paytm
Source: Morgan, 2019
The company introduces all safest modes of enriching merchants’ needs in order to
outweigh the competitors in the business (Sharma, 2018). The Paytm competitors are Instamojo,
Zeta and CC-Avenue. However, Paytm seems to be operating on a higher scale than all of these
products. They do operate and produce similar products that put the company in a highly
competitive market which entices them to modify working conditions (Sharma, 2018). It is
evident that, Paytm has a positive revenue trend with the total funding which was estimated to be
$2.3 billion in 2018 more than any other product (Bhalla, 2018).

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Figure 2: Information flow diagram
Source: Codeless platforms, 2019.
Figure 2 shows the way how information is distributed from the main source of Paytm up
to the users with reliable services that have undergone different channels.
Figure 3: Product flow map
Source: Official Paytm Blog, 2019

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Figure 3 above shows the cycle of products at Paytm. Besides, it shows that there is a lot
of usage of the products and people and some queries received from the users of the product.
ii. Micro Audit
Increasing the number of agents for Paytm within India is among the touch points for the
company. The importance of this touch point is to increase on the number of offline merchants.
At first, these agents will be spread in different cities and parts of India where the clients are
based (Kaushish, 2018). The company will hire about 10,000 agents with an intention of
widening the ‘offline merchant network’ to almost 20 lakh touch points . this is likely to take
place before the current fiscal year ends (Hanlon, 2019). Today, the firm of Alibaba employs
almost 4,000 agents of that kind and about one lakh ‘offline merchant’ is available on the
platform. Since there are very many Indians who have adopted the use of Paytm Wallets to make
their transactions offline, the opportunity of establishing several touch points in every town and
city of India to efficiently provide customer satisfaction services to the customers (Kaushish,
2018). The intention of setting up these points is to reach the clients faster, support the on-
boarding teams as Paytm continues enlarging India’s widest payment network. Basing on the
words of Amit Sinha, the senior vice president of Paytm, ‘ the merchants of Brick – and - mortar
and many more sectors which are online – to – offline having a large opportunity for companies
using digital payment more so in the Rs 500 and Rs 1,000 notes being ‘demonetized’ (Khatri,
2019). The target groups are thus the people of India who are interested in the services provided
by Paytm. The company is also interested in providing employment opportunities to the citizens
of India through making them its agents (Khatri, 2019). In addition, the company brings its
customers closer and provides quick services to them too. The reason as to why this is done, is to
make people aware and grab the market for digital finance services.

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In addition, digital marketing of the company’s services using the Instant Bank
Settlement such is ever in existence on their ‘Paytm business app’ with which merchants are able
to track and access their payments as well as their settlements within the real time (Nielson,
2017). This touch-point is hoped to benefit the total of 9.8 million merchants who are partnering
with Paytm in their offline premises. Therefore, the cash flow of Paytm rotates on the instant
bank settlement as when more clients use the services, the more the revenue is attained. The
digital marketing helps the company to create awareness of products within its locality in order
to reach out the merchants either offline in their premises or online (Bhalla, 2018). Website
interaction brings closer the merchants to access the products and services within the stipulated
time period (Scott, 2018). In addition, such touch-point helps the company to reach a variety of
groups of people without separation of individual classes such as elite/literates, social class
among others. It is evident that that payments and the size of transactions using digital platforms
are expected rise as time goes on changing either monthly or yearly.
iii). Macro audit
The demand and market performance of a product in any market whether new or existing
is influenced by several factors. aspects such as the political, social, economic and legal among
other macro aspects are critically analyzed in the new Australian market. Socially, Australian
citizens are continuously changing towards more technologically advanced ways of making
payments (Australian Bureau of Statistics, 2018). It is for such reason that companies including
fintechs, afterpay, are registering success in the market. Australians changing behaviors towards
the use of electronic methods of payment are very positive indicators that the country has the
market potential for Paytm Company. About 7.2% of Australians are currently using newly
published electronic methods of making payments. This, therefore, caters for about 1.5 million of

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the entire Australian market. The figure below is an illustration of the market percentage
ownership of the electronic and digital payments market.
Fig. 4 Digital payments usage rate in Australia
Source: Morgan, 2019.
Sine paytm is an e-commerce company, technological development and advancement is a
vital factor for the company's success. Australia, however, would provide a highly conducive and
viable market opportunity. Presently is it estimated that about 12.4% Australians are currently
using technological methods of making payments over fintechs and it is only about 2.4% have
not embraced the technological trends. On the contrary, in a situation where the Australian
market or economy was incapacitated by several technological constraints, then this would have
significant negative impacts on the operations of the company (Webalive, 2019). For example,
low levels of technology would mean that the country doesn't have a viable market demand for
digital services such as online banking. Because people are not highly illiterate about the nature
of service that the company provides, it would require extensive sensitizations and promotions

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(Commission Factory, 2018). In the long run, this would ultimately result in high costs of
operation yet with low profitability.
The political atmosphere is another important aspect that is an important aspect of
determining performance and profitability. A highly unstable political environment together with
poor or technological development would set worrying market trends. However, the e-
commerce market in Australia shows a viable potential. For instance, over 46% of the country
has embraced technology and the Australian e-commerce policy would highly favour the
company activities. Paytm is highly in line with the Australian e-commerce policies such as
those regarding payment methods that are highly reliable, easy to use and yet very secure.
Therefore, paytm will find Australia a profitable ad viable market opportunity to conduct
business.
In terms of demographics, the company would mostly appeal to the middle age
Australian population since it is a technological business entity (Morgan, 2019). Therefore,
Australia would still qualify to be a good market venture since the country's median age lies
around the age of 30 to 35. This is an implication that out of the total estimated population of
25,088, 636 people and with 90.1% being urban-centered, the market is highly present. Such
demographics represent a positive market possibility. On the other, unfavorable population
demographics characterized by old age would signify challenges and impacts such as low
profitability.
Economically, the purchasing power of the country plays a similarly important role in
influencing business transactions and activities (UK Essays, 2016). Macroeconomic factors such
as inflation, unemployment, interest rates and so on greatly determine the level of profitability in

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an economy. Countries that have low levels of inflation would mostly appear to be having high
purchasing power; low levels of unemployment would still imply that the per capita income is
relative (Oxford college of marketing, 2019). Such conditions represent favourable transaction
conditions. On the other hand, high inflationary levels and rates of unemployment are likely to
result in low incomes and yet with a high cost of operation.
3. Forecast
Demand and forecast for a new product or service in a new market environment are
highly unpredictable. This is because consumers have very limited or no awareness of the
product or service. Therefore demand forecasts for the paytm in the Australian market will
significantly depend on the market penetration rate of about 71.0% and further expected to
increase to 77.4% by2023. The high costs of new market entry and penetration are likely to make
the demand forecasts and returns are highly very low (Frue, 2017). This is especially during the
early periods of product introduction on the market. However, several techniques of demand
forecast such as regression, scenario planning, and Box-Jenkins methods can be used to predict
and forecast demand. Due to the above existing market conditions in the Australian economy
assumptions will be based on the market returns and projected relative growth rates will be used.
It is estimated that about 8 out of 10 Australians are involved in online shopping and the digital
market (Mordor intelligence, 2019). It is further illustrated that by 2021, the Australian e-
commerce and digital market in which paytm operates will be valued at around AUD 35.2
billion. Over 47% of Australian shoppers are identified to be using credit cards to purchase
products online and this compiled with the growing internet usage in Australia makes a good
platform for paytm operations. The graph below shows a simple projection of the market.

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Fig.5 Australians who make payments online
Source: webalive, 2019.
Assumptions for the two year market demand will be carried out on a 2.4 annual
percentage increase in sales, customers and revenues. The company will as well use a benchmark
of serving a total of 15, 0000 customers for the first year (Classens, 2015). Since this is a new
and highly competitive market, the price and promotion strategies will be effectively used.
Basing on the linear method of forecasting, the company is expected to realize annual revenues
and customer growth to be the same for the second year. Furthermore, an average unit price of $
15 for services provided. From the above assumptions, the demand projections are expected as
below:
Given the estimated percentage growth of 2.4%, benchmark customer base of 150,000
and an average price of $15: Then the annual sale for the first year will be equal to:

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First-year revenues = (average price* customer base)
= $15*150,000
= $2,250,000
Therefore, according to the assumption if market demand is forecasted to increase by
2.4%, then the new base will be equal to 153,600 customers. From such an increase in the
customer base, revenues are will as well increase by the same percentage. During the second
year, the company will have annual revenues of $ 2, 304,000 obtained as $(15*153,600). Such
assumptions are set below the Australian average e-commerce market growth of 7%. Therefore,
such assumptions have been used as very minimal returns and level of demand growth rates.
Conclusion
The Australian e-commerce market is a viable and potential market to invest as it is
comprised of significant growth opportunities. The median age ranging between 30 to 35 years
of citizens comprised with the technological trends are an advantage for a new digital company
such as the paytm to tap into the market.

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References
Australian Bureau of Statistics. 2018. Australian Demographic Statistics, June 2018. Retrieved
from https://www.abs.gov.au/ausstats/abs@.nsf/0/1CD2B1952AFC5E7ACA257298000F2E76?
OpenDocument
Bhalla, T. 2018. Paytm introduces ‘Instant Bank Settlement’ for merchants to improve daily
cash-flows. Retrieved from: https://yourstory.com/2018/11/paytm-introduces-instant-bank-
settlement-merchants-improve-daily-cash-flows
Classens, M. 2015. The Macro Environment- Six Forces In The Environment Of A Business.
Retrieved from https://marketing-insider.eu/macro-environment/
Commission Factory. 2018. Australian E-Commerce Statistics; Old Bricks and Mortar Stores
Fighting the Transition to Online With Fierce Conviction. 27th. Sept. 2019. Retrieved from
https://blog.commissionfactory.com/ecommerce-marketing/analysis-of-australian-ecommerce-
statistics
Frue, K.2017. What Is Macro Environment Analysis? Retrieved from
https://pestleanalysis.com/what-is-macro-environment-analysis/
Hanlon, A. 2019. What is the 7Ps Marketing Mix and how should it be used? Retrieved from:
https://www.smartinsights.com/marketing-planning/marketing-models/how-to-use-the-7ps-
marketing-mix/
Kaushish, P., 2018. Who are the competitors to Paytm? Retrieved from:
https://www.quora.com/Who-are-the-competitors-to-Paytm

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Khatri, B., 2019. E&Y Audit Reveals INR 10 Cr Paytm Mall Scam Over Fraudulent Cashbacks.
Retrieved from: https://inc42.com/buzz/ey-catches-cashback-fraud-at-paytm-mall-scam/
Mordor Intelligence. 2019. Digital Payments Market- Growth, Trends And Forecast (2019-
2014). Retrieved from https://www.mordorintelligence.com/industry-reports/digital-payments-
market
Morgan. R. 2019. Majority of Australians Now Use Digital Payments – A Potential Threat or
Opportunity? Retrieved from http://www.roymorgan.com/findings/7846-digital-payments-
201901202125
Nielson, J. 2017. Perceptual Maps: A Step By Step Guide To Analyzing Value, Competition and
Opportunities. Retrieved from: https://ignitionframework.com/author/jaketheinnovativemanager-
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Oxford College of Marketing. 2019. The Impact Of Micro And Macro Environment Factors On
Marketing. Retrieved from https://blog.oxfordcollegeofmarketing.com/2014/11/04/the-impact-
of-micro-and-macro-environment-factors-on-marketing/
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https://medium.com/@stefanscott3/marketing-importance-of-marketing-mix-7ps-8a5463fd070d
Sharma, S. 2018. Paytm rolls out Instant Bank Settlemet for Merchantss to imrove daily cash
flow. Retrieved from: https://www.techcircle.in/2018/11/30/paytm-rolls-out-instant-bank-
settlement-for-merchants-to-improve-daily-cash-flow

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UK Essays, 2016. Macro Environmental Factors That Affect Firms. retrieved from
https://www.ukessays.com/essays/business/macro-environmental-factors-that-affect-firms-
business-essay.php
Web alive. 2019. The State Of Australia’s E-Commerce In 2019. 27th. Sept.2019. retrieved from
https://www.webalive.com.au/ecommerce-statistics-australia/

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Appendices
Appendix 1 is an illustration of the penetration rate in the Australian e-commerce
market
Source: Statista, 2019.
Appendix 2: Shape of Australian e-commerce sales
Source: Statista, 2014

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Appendix 3: Australian online growth rates by category
Source: web alive, 2019.