Paytm: Paytm’s UPI payments: Two contrasting trends

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Digital payments major Paytm, which is run by One 97 Communications, has seen a stagnation in Unified Payments Interface payments originating from its payments bank over the last six months.

Data shared by the National Payments Corporation of India shows that from August 2023, payments originating from Paytm’s own UPI address started falling.

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In August last year, Paytm reported 455 million UPI payments on its own handle that is @paytm. But since then it fell all the way to 410 million in December last year. From 323 million in May 2022, these transactions had grown nearly 41% to 455 million in August 2023.Paytm Payments Bank was put under an embargo by the RBI in March 2022.

For understanding, UPI has two legs in a payment journey. One is on the issuance side, that is where a customer pays using the Paytm handle, which in many cases could be connected to the Paytm Payments Bank savings account.

Also read | Paytm parent One 97 Communications forms advisory committee to strengthen compliance

And the other is the acceptance side where the merchant or the beneficiary account is on Paytm. Analysis of industry data shows that since the middle of last year, Paytm has been fully focusing on the acquisition side.

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Data shows that Paytm’s acquisition numbers grew consistently to 2.8 billion transactions in December last year from 1.7 billion in December 2022.“After the bank went into an embargo, new customers were not joining the bank and on top of that the management was fully focused on acquiring more merchants for all forms of digital payments, thereby slowing down on issuance,” said a senior industry executive in the know.

Also read | Paytm’s Vijay Shekhar Sharma discussed exiting board, removing Paytm from bank name

To put things in perspective, State Bank of India, which is the largest player on UPI on the issuance side, reported 3 billion transactions on UPI in December 2023 compared to 2.1 billion in December 2022. This makes sense given the majority of banking customers in India have their primary accounts with SBI.

The Paytm leadership spoke about how the payment application had shifted focus on partnership with other banks for its merchant payments business over the last year or so since its own associate banking entity was under regulatory scrutiny.

On January 31, 2024, the central bank asked the payments bank to stop offering basic banking services within a month. Currently, the bank is in conversations with RBI and other lenders to transfer the business to some other lender, but no progress has been achieved.

In the meantime, the Directorate of Enforcement has started an enquiry on certain merchants using Paytm to accept payments and has looped in Paytm Payments Bank officials into the investigation too.

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