Paytm, operated by One97 Communications, has officially received approval from the National Payments Corporation of India (NPCI) to start onboarding new UPI users. This marks the end of a regulatory freeze imposed earlier this year.
A Major Milestone
This approval is a crucial turning point for Paytm, especially after the heightened scrutiny it faced from regulators. With this development, the company can broaden its user base and solidify its standing in the competitive digital payments arena. Following this approval, Paytm is poised to enhance its service offerings and regain traction in the UPI sector. It is vital for the company to adhere to all necessary guidelines to sustain this approval and effectively serve its customers moving forward
Overview of the Ban
In January 2024, the Reserve Bank of India (RBI) banned Paytm Payments Bank Limited’s (PPBL) UPI services. This action was taken due to compliance concerns with operational guidelines. The RBI pointed out problems with risk management and customer data protection. Reports indicated that PPBL failed to meet regulatory standards for safeguarding payment information. This lack of effective risk management was a key reason for the UPI service restriction. The ban significantly affected PPBL’s ability to offer UPI services. It limited the bank’s growth in the digital payments sector. Addressing these compliance issues is essential for PPBL to restore its services and regain user trust.
Impact on Paytm’s Market Share
The recent ban significantly hampered Paytm’s ability to onboard new users, which in turn affected its standing in the digital payments market. Prior to the suspension, Paytm enjoyed a 13% share of UPI transactions in India. However, with the inability to attract new users, its market share plummeted to 8%.
Competitive Landscape
During this period, rivals like PhonePe and Google Pay strengthened their positions. Together, these two platforms now dominate the UPI space, accounting for approximately 87% of all UPI transactions. This shift has left Paytm with a diminished presence in a highly competitive market.
Positive Developments
On October 23, shares of One97 Communications, Paytm’s parent company, surged over 11% following the NPCI’s approval to onboard new UPI users. This approval comes nearly nine months after the Reserve Bank of India (RBI) imposed a ban on adding new customers.
Financial Performance
Additionally, Paytm reported a net profit of ₹930 crore for Q2 FY25, a notable recovery from a net loss of ₹290 crore during the same period last year. However, it’s important to note that this profit was largely driven by a one-time gain of ₹1,345 crore from the sale of its movie ticketing business to Zomato. Without this gain, Paytm would have faced a net loss of ₹415 crore, surpassing the losses reported in the previous year.
