Paytm, once hailed as the poster child of India’s startup ecosystem, is facing ongoing struggles as it grapples with a regulatory clampdown that has severely impacted its business. In the first quarter, the fintech company reported a 36% decline in revenue and a more than doubled loss of $100 million.
The decline in revenue can be attributed to the Reserve Bank of India’s (RBI) order for Paytm to cease most operations at its subsidiary, Paytm Payments Bank. This subsidiary played a crucial role in processing the mobile payments that the company heavily relied on. The full impact of the RBI’s clampdown is now evident in Paytm’s business performance.
The central bank’s decision barred Paytm’s Payments Bank from offering key banking services, such as accepting fresh deposits and credit transactions. To continue providing services, Paytm had to form partnerships with other banks in India. While this move allowed them to maintain some core services, it undoubtedly affected their revenue.
Despite the challenging circumstances, Paytm’s shares initially declined but have since recovered, indicating that investors had anticipated the impact. The company had already warned of a decline in revenue in the previous quarter, demonstrating their ability to adapt to the changing landscape.
Paytm was once a pioneer in India’s mobile payments industry, successfully attracting millions of users to its wallet app and facilitating their first digital transactions. However, in recent years, competition from Walmart-backed PhonePe and Google Pay has intensified, leading to a decline in Paytm’s fortunes.
PhonePe and Google Pay now dominate over 86% of transactions on UPI, a government-backed payments network. UPI has become the preferred method for online transactions in India, with over 11 billion transactions occurring each month. This surge in UPI’s popularity has adversely affected wallet businesses like Paytm and reduced reliance on traditional card networks.
While Paytm faces challenges, the company remains hopeful about its path to recovery. Its business with merchants, including issuing credit, is showing signs of improvement, indicating the continued trust and confidence of its stakeholders. Paytm acknowledges the support of its merchant partners and consumers on its platform, recognizing their contribution to its ongoing journey.
