India’s Paytm can finally resume UPI onboarding in the country

Paytm, a prominent Indian financial services firm, has received approval from the National Payments Corporation of India (NPCI) to resume onboarding new users to its Unified Payments Interface (UPI) platform after an eight-month regulatory ban.

UPI to account for 90% of retail digital payments in India by 2027

India is propelling itself into a new era of financial transactions as the county’s appetite for digital transactions continues to grow. According to a report by PwC India, the Unified Payments Interface (UPI) is set to reach mind-boggling heights, with a projected one billion transactions per day by the financial

TechloyEmmanuel Oyedeji

This approval, granted on October 22, 2024, comes after Paytm complied with various regulatory guidelines concerning risk management and customer data protection.

The UPI system, developed by the Indian government, processed over 12 billion transactions in May 2024 alone as recorded by European Payments Council showcasing how vital it is to India's online payment landscape.

Currently, Walmart-owned PhonePe and Google Pay dominate the market, handling approximately 85% of UPI transactions in India per Business Standard. Based on reports from MoneyContol, Paytm's market share has dwindled from 13% to 8% due to restrictions imposed by the Reserve Bank of India (RBI) in March, citing repeated violations of regulatory rules related to its banking subsidiary.

Following the RBI's actions, Paytm reported a significant revenue decline for the second quarter ending in September, with earnings falling to ₹1,660 crore ($1.97 million) down 34% from nearly ₹2,518.6 crore ($3 million) the previous year. The halt in onboarding new UPI users worsened the downturn, causing the company’s monthly transacting user base to drop from 7.8 crore ($78 million) in Q1 FY25 to 7.1 crore ($71 million) in Q2 FY25, which reflects a 25% year-on-year decline

Despite these challenges, reports show that Paytm recorded a gain of ₹1,345 crore ($16 million) from the sale of its entertainment ticketing business to Zomato. The firm also noted a 13% quarter-on-quarter reduction in employee costs, surpassing its guidance of a 5%-7% decline, while overall indirect costs decreased by 17% to ₹1,080 crore ($13 million).

Now, as Paytm regains approval and prepares to onboard new users, it could begin to see a much-needed raise in valuation and market share over time.