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Paytm's ‘Up to 100% Cashback': Economics and Emotions

CASE FRAME, E-COMMERCE
ET Cases, 7 pages

Case Preview

Paytm’s ‘Up to 100% Cashback’: Economics and Emotions

 

This Case Frame, based on a 2-page advertisement of Paytm in The Economic Times (November 3rd 2015), has been constructed to understand the basic business building blocks of a mobile wallet company like Paytm and also to examine the ‘cashback’ scheme. How does a mobile wallet company like paytm make money through cashbacks? What is the business logic of cashback? As per The Internet and Mobile Association of India (IMAI), as of June 2015, there were 354 million internet users in India, 213 million of which were mobile users. The mobile commerce revolution has just begun in India and with aggressive Mobile wallet companies like Paytm, PayU Money, Mobikwik, etc., the Indian retailing space, in urban, semi-urban and even in rural areas, is poised for a metamorphosis. This Case Frame can be used to  construct different contours and possible and emerging scenarios of Indian mobile commerce in the years to come..............

Teaching Note Preview

Paytm’s ‘Up to 100% Cashback’: Economics and Emotions

 

Synopsis

Mobile Wallet companies are poised to change the way Indian consumers buy goods & services and pay their utility bills. While Internet has enabled e-commerce, the ubiquitous mobile phone has enabled M-commerce. Paytm, which was also awarded with a Payment Bank license by RBI, is set to change the dynamics of Indian e-commerce and M-commerce with its robust technology, vendor network and most importantly through its aggressive marketing strategies, especially through its cashback offers. This Case Frame can be used to introduce the participants/students to the concept and operation of mobile wallets in India. The Case Frame provides scope to explore answers to the following questions: What are the four types of mobile wallets? How do mobile wallets make money? How does increasing Mobile Commerce impact e-commerce? What are the challenges for mobile wallets? Do mobile wallets enable financial inclusion?

This Case Frame also provides scope to analyze the business and economic logic of cashbacks. An often-used mechanism to boost their topline, many mobile wallet companies like Paytm, PayU Money, MobiKwik, etc., use cashback schemes. What are cashbacks and how do they work? What are the differences between discounts and cashbacks? How do mobile wallet companies make money through cashbacks, especially when they announce 100% cashback? How does 100% cashback work for the consumer, mobile wallet company and the vendor? Do cashback schemes induce impulsive buying/consumption?

Prerequisite Conceptual Understanding

The participants/students should be familiar with the following concepts for an effective analysis of this Case Frame:

  • • The Concepts of Business, Revenue and Operating Model

 

Mandatory Exercise

The students/participants should visit www.paytm.com and analyze the broad business contours of Paytm’s business from the stand point of view of the following:

  • • Business and Revenue Model
  • • Operating Model
  • • Benefits to Customers and Sellers, Vendors, Suppliers and Brands

 

Case Positioning and Setting

This Case Frame can be used for either of the following:

  • • MBA Program – e-commerce Course – Mobile Wallets module – To understand the concept, operating and revenue model of a mobile wallet company, Types of  mobile wallets and to examine the challenges for mobile wallet companies in India
  • • MBA Program – Banking Course – Mobile Banking and Financial Inclusion  module – To understand the differences between mobile banking and mobile wallets, discuss and debate on how mobile wallets can aid in financial inclusion and  also examine Banks’ initiatives to offer mobile wallet services
  • • MBA Program – Sales Management/Retail Management Courses – Discount and cashback Offers module – To understand the business and economic logic of cashback schemes, the differences between discounts and cashbacks and examine the behavioral kinesthetic behind Hurry, Last Day, Big Billion Day, Best Price Guaranteed, etc.

 

Preamble to this Case Frame’s Classroom Analysis

This Case Frame is meant to sensitize the participants/students to the concept and operation of mobile wallets in India with a scope to analyze the business and economic logic of cashbacks. The sequencing of questions – organized through the four sections given in the Case Frame – is meant for this purpose. However, as can be seen, the questions related to the 2-page advertisement appear in the last section as a sufficient understanding of the basic business buildings of a mobile wallet company and cashback schemes is necessary to address the questions given in the last section. Accordingly, the Case Frame was orchestrated in the following way [Exhibit (TN)-I]...........




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Abstract

This Case Frame is meant to introduce the participants/students to the concept and operation of mobile wallets in India with a scope to analyze the business and economic logic of cashbacks. With the advent of burgeoning e-commerce growth in India, related technologies too have been shaping up Indian e-commerce eco system. One such technology, like mobile banking, has been mobile wallets. Although mobile wallets phenomenon is at a nascent stage in India, with about 150 million users (out of 1.3 billion), there is enough potential to be explored in the years to come. What are the four types of mobile wallets? How do mobile wallets make money? Do mobile wallets enable deeper penetration for e-commerce? What are the challenges for mobile wallets? Do mobile wallets enable financial inclusion? An often-used mechanisms to boost their topline, many mobile wallet companies like Paytm, PayU Money, Mobikwik, etc. use cashback schemes. What are cashbacks and how do they work? What are the differences between discounts and cashbacks? How do mobile wallet companies make money through cashbacks, especially when they announce 100% cashback? How does 100% cashback work for the consumer, mobile wallet company and the vendor? Do cashback schemes induce impulsive buying/consumption?



Pedagogical Objectives

  • To understand the concept and operating model of a mobile wallet company and discuss their operating model and possible sources of income
  • To examine the relationship between mobile wallet companies, banks and debate if mobile wallets can aid financial inclusion objective
  • To discuss and debate on the economic and business logic of cashbacks and examine how mobile wallet companies make money through cashbacks and also examine how companies use behavioral kinesthetic to indulge consumers
  • To analyze Paytm’s “CASHBACK” advertisement (The Economic Times, Bengaluru Edition, November 3rd 2015) in the light of previous analysis and discussion

Case Positioning and Setting
This Case Frame can be used for either of the following:

  • MBA Program – e-commerce Course – Mobile Wallets module – To understand the concept, operating and revenue model of a Mobile Wallet company, Types of Mobile Wallets and to examine the challenges for mobile wallet companies in India
  • MBA Program – Banking Course – Mobile Banking and Financial Inclusion module – To understand the differences between mobile banking and mobile wallets, discuss and debate on how mobile wallets can aid in financial inclusion and also examine Banks’ initiatives to offer mobile wallet services
  • MBA Program – Sales Management/Retail Management Courses – Discount and Cashback Offers module – To understand the business and economic logic of cashback schemes, the differences between discounts and cashbacks and examine the behavioral kinesthetic behind Hurry, Last Day, Big Billion Day, Best Price Guaranteed, etc.



This Case Pack Includes:
- Abstract
- Case Frame
- Teaching Note (**ONLY for Academicians)
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