Paytm has introduced its first credit card

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Paytm, the biggest mobile wallet in India, introduced the Paytm First Credit Card, its first-ever proprietary credit card, per TechCrunch. The Citibank-issued card will be India’s first unlimited 1% cash back credit card.

Thomson Reuters

Cardholders will receive Citibank benefits throughout shopping, dining, and travel. And in the first four months of issuing the card, cardholders can access discounts worth Rs 10,000 ($142) on spending of Rs 10,000. Paytm First Credit Card will work worldwide and will be contactless-enabled.

Here’s what it means: Paytm has been diversifying its offerings amid mounting threats from competitors, and a credit card could ultimately allow it to distinguish itself to win customers.

Paytm is the frontrunner in the Indian mobile wallet space, but it’s seeing threats from other major players that have entered the market. WhatsApp Pay, for example, is anticipated to be Paytm’s biggest threat when it finally completely rolls out in India. And other tech giants like Amazon and Google have moved in on the opportunity.

That’s caused Paytm to pursue more avenues of growth beyond its mobile wallet in the hopes of reaching 500 million users by 2020: It launched point-of-sale (POS) devices and operates Paytm Payments Bank, which allows it to offer checking account services, among many others. A rewards credit card could be a lucrative recurring revenue opportunity for Paytm that it could upsell existing customers on and attract new users to.

The bigger picture: Given Paytm’s popularity, this credit card could help drive the adoption of credit cards in India more broadly, as penetration remains low.

Fewer than 50 million people in India have a credit card — that’s less than 4% of the population. Cash still comprises around 70% of India’s total transactions by value, making it hard for banks to assess someone’s credit score. And for noncash payments, consumers have largely turned to mobile wallets, like Paytm and its competitors, causing credit cards to remain an unpopular payment method.

Paytm could leverage the reach of its mobile wallet to drive credit card penetration, which could open up opportunities for providers across the payments ecosystem. Paytm counts more than 200 million active users, which gives it the potential to issue cards to a substantial number of consumers. Paytm could use the $356 million funding it raised from Berkshire Hathaway last year, which it said it would use to expand its offerings, to partially fund efforts around this credit card.

If Paytm drives significant adoption of its card — it hopes to gain 25 million cardholders in the first few months — it could help along credit card penetration in India as a whole. That would be good news for organizations beyond Paytm itself, as greater credit card adoption could create opportunities for others like POS providers, for example, especially if more merchants want to accept card payments.

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