Wonder How Online Portal Earns In spite of Cash Backs.

Ever Wondered How These Online Shopping Portal Gives So Much Cash Back and Running.

Site Like Flipkart, PayTM, FreeCharge, Amazon, Snapdeal etc sites provide cash back on every transaction you do on their site either it is electricity payment, mobile payment or any shopping which you won’t get it in traditional shopping.

you can even pay for your Electricity bills which was once considered as the most tiring job for Indian kids to go out to the Electricity office and get it done right away so that they don’t charge you any late charges. But now, it doesn’t matter how late you pay your bills. The amount of cashback that you receive for every single payment through Paytm or from any website portal is quite good enough to cover all the late charges that you have been and were paying since the evolution of humans began.



Mobile Recharges – Remember those days when we didn’t have any android smartphones ? Those ‘Recharge -Wale-Bhaiyas’. The point is that they don’t recharge your phones for free. They do charge commission from THE TELCO Companies. Now the same is also true in case of Freecharge or Paytm. Even they also earn some commission from each recharge which ranges from 2% to as high as 5%. This again depends on whether you are directly connected to the Telco’s recharge platform or are using an Aggregator (like Oxigen, Euronet, Cyberplat).

But again they also have to pay for the gateway payment charge that accounts roughly around 1.8-2%. Although it can be lower after the recent 1% cap on debit card MDR by RBI.

So the net revenue per transaction would be around 0.5-1%. And that’s the revenue (not the profit) a recharge site makes.

Sponsored Advertisements And Collaborations – Currently Paytm has more than whooping 100 million users. And this gives the sponsors a strong reason to invest their time and money on Paytm site. Just have a look on the image below.

From various Insurance Companies to Education Institutes, Hotels and Amusements Parks, all are linked to Paytm. Now these sites may offer coupons from many companies that does have commission from brands on redemption of their free coupons offered by them. So that is also how such websites earn profits.

According To A User on Quora, the money kept in the wallet is actually stored in an ‘Escrow account’ and, on average, generates interest income which is almost equivalent to the interest income coming from any random Fixed Deposits stored in any bank. However, the interest income is not passed on to any customer or the users of Paytm. But the interest income is passed on to the Paytm Company, i:e the Website itself offering cashbacks in return.
So basically PAYTM is not playing any Test Match rather they are actually playing a T20 from very first day a user start giving profit to them without knowing.

Now Let me surprise you with some facts which are total contrary to what I have stated.


E commerce leads Paytm to Rs 372 crore loss in 2014 15 Times of India


So you might be wondering how are they still giving so much of cashbacks even when they are suffering such huge losses.
Answer is simple. When you have a person whose name is Jack Ma, Founder of Ali Baba (Chineese E-Commerce Giant), financially supporting your company and funding you $200 Million with another $500 Million, you ought to make profits.

So basically, they are using their investor’s money for various advertisement promotions, cashbacks and discounts.


Some of The Opinion Added:-

Apart from all this they provide cashback for attracting customers and make a huge customer base ! You might be aware why alibaba is a financer for them just because it knows Paytm will give them biggest ecommerce database for future plans ! Paytm cashback policy is majorly at there cost means apart from earning interest and net off they still provide cashback at there own cost. Let me take a example- I bought a prestige air fryer whose market value was 13000 and Mrp was 15000 ! But Paytm was selling it for 11000 and 5000 cashback!
Now this cashback is huge amount and is at cost of Paytm expense and this much amount can’t be earn from any bank intrest ! So dear friends we should be happy we are getting such great offers from Paytm ! Let them follow behind strategy of customer database building and let us avail such huge benefits till company is providing.

In todays world information is money and in the growth phase of any company…the first priority is to gather information and make a huge user base

Paytm, Flipkart etc. are making their business associated with our habit……so that we become lazy enough never to go to the billing office again….even when the cashbacks will be turned off…people will be using the platform just as they do now….out of laziness and habit…thats what the plan is…losing now to earn big later!!

I hope I was able to clear some of your doubts. If you have any additional information please feel comfortable to share with us in the comment section below ! !


Source:- From Internet Blogs

Best Regards

CA Ayush Agrawal





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