Abstract

In June 2015, HDFC Bank, one of the largest private sector banks in India, launched PayZapp, a digital wallet. PayZapp was a mobile application which was intended to be used as a payment and purchase solution. It was positioned as a one-step payment gateway with features like Near Field Technology (NFC) and reflected credit card balance. PayZapp was developed by HDFC Bank in response to the payment services offered by digital wallet companies like Paytm and MobiKwik. Paytm was launched in 2013 and was backed by investors like Jack Ma of the Alibaba Group, a Chinese ecommerce giant. It had become the largest payment services company with 150 million users within a year. The company had spent Rs 5000 million on advertisements and cashback to gain customers in 2014-15. Paytm had also got a payment bank license in January 2017. The case discusses the efforts made by HDFC Bank to transform itself into a digital bank in the context of the challenges it faced from digital wallet companies like Paytm. The changing needs of customers due to internet penetration and smartphones are also discussed. An attempt is made to understand why it won’t be easy for payment service companies to disrupt the banking sector and why banks were at a greater risk of being disrupted than at any other time in the past. The case concludes with questions for readers to draw a future path for of an established a company like HDFC Bank to fight disruptive companies like Paytm.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Analyze the impact of disruptive innovation on market leaders.
• Understand why market leaders are vulnerable to losing market share when disruptive technology gains acceptance among customers.
• Analyze the reasons why established companies who satisfy every wish of the customers fail to invent disruptive technologies.
• Identify the threats that Paytm poses to HDFC Bank in the near future.
• Suggest ways in which HDFC Bank can counter the threats from emerging digital payment service companies in future

Keywords

HDFC Bank, Paytm, Banking, Disruptive Innovation, Business Model, Payment Service Company, Digital Wallet Companies, Strategic Management