In January, Paytm faced a major setback when the Reserve Bank of India (RBI) ordered Paytm Payments Bank Ltd. (PPBL), its banking affiliate, to cease operations. This regulatory blow has significantly impacted Paytm, leading to a 55% drop in its shares. Furthermore, RBI mandated the removal of Renu Satti as the chief executive of PPBL, citing concerns about her leadership capabilities in the banking sector.
The regulatory challenges have taken a toll on Paytm’s position in the unified payments interface (UPI) market in India. Once a leader, Paytm’s market share has been declining for four consecutive months, dropping to 8.1% in May from 13% in January, as per data from the National Payments Corporation of India (NPCI).
UPI, managed by the NPCI, facilitates instant money transfers by linking banks with fintech apps like Paytm, PhonePe, and Google Pay. Despite the setback, the UPI network recorded a staggering 14.04 billion transactions in May, a 5.5% increase from the previous month. However, Paytm’s struggles have allowed competitors to gain ground, with PhonePe holding a dominant 49% share and Google Pay capturing 37%.
In response to the RBI’s order, Paytm’s founder and CEO, Vijay Shekhar Sharma, has sought to stabilize the company through strategic partnerships with top Indian lenders such as Axis Bank Ltd., HDFC Bank Ltd., and State Bank of India Ltd. These alliances aim to facilitate the instant money transfers that PPBL previously handled. Despite these efforts, the company acknowledges the financial impact of these disruptions. In the latest earnings filing, Sharma highlighted the anticipated short-term effects on Paytm’s revenue and profitability due to the regulatory challenges faced in Q4.