Unanswered questions on Paytm’s digital gold?

Digital Gold by Paytm

Been hearing a lot of advertisements on Paytm Digital Gold on radio in the last few days, possibly because of Akshay Tritiya. I decided to look at their scheme, more closely at their terms and conditions and there seem to be a couple very important questions which need to be addressed.

Question 1. Since a customer can buy digital gold which they can at any time redeem into real gold and have it delivered to them, what is the kind of ratios Paytm / MMTC would be maintaining for this.

E.g, If I buy 1 gram of digital gold, would Paytm instruct MMTC to keep 1 gram of real gold under my account in their vault or would they be keeping just a fraction? Now let’s assume 10,000 people buy 100 KG of digital gold collectively. Would MMTC be keeping 100 KG as deposit or would be be keeping just a % of the deposit.

This question is important because Gold is not an infinite resource, even government and banks long back moved to Fiat currency because they could no longer be able to keep the equivalent stock in gold. This questions becomes even more important when there is an emergency and people want to keep their assets close to them and all of a sudden a lot of people want to convert their digital gold into real gold… would Paytm / MMTC be able to supply the gold on time if at all?

Question 2: The second biggest question would be that if Paytm / MMTC are just keeping a fraction of your digital gold investment in real gold then what are they doing with the remaining money? Is it kept safe in an escrow account or do they have the permission to use it however they like.. e.g advertising a whole lot more to get even more digital gold customers?

Both the above questions are extremely important as this ensures or does not ensure the safety of your investment. Before you invest in such schemes, I would encourage you to read Paytm’s policy and other details.

Freecharge’s FLAT 100% cashback, wtf?

So today i saw the papers, 1st page ad. from Paytm which was offering upto 100% cashback on transactions, then i turned the page over to see an ad. by Freecharge offering FLAT 100% cashback across lacks of stores. This made me read the headlines 2 times. Now ofcourse there has to be a catch to this madness.. right? Sure enough, there is.. at the bottom, barely readable text which stated that the maximum cashback will be Rs.100. Totally misleading.

Travel websites have been doing this for ages, giving 50-70% cashback on tickets, only to realise that the maximum amount never crossed few hundred rupees… and now, paytm, freecharge is doing the same thing.

Makes me wonder when these companies say that they have millions users, how many of them are actually active users and not just a one time signup who thought they were getting a deal of a lifetime and ended up with Rs.5 as cashback. 😛