Zomato, a prominent player in the food delivery app, has announced its decision to surrender its payment aggregator (PA) license and withdraw its application for a mobile wallet license. This decision was disclosed in a filing with the stock exchange on Monday.
The Gurgaon-based startup revealed that it has incurred an impairment loss of Rs 39 crore, which was initially invested in its wholly-owned subsidiary, Zomato Payments, holding the PA license.
However, Zomato clarified that its payments subsidiary will continue its other operations despite surrendering the license.
This move comes shortly after Zomato received final approval for its PA license from the Reserve Bank of India (RBI) on January 25. Explaining the rationale behind the decision, Zomato cited the evolving landscape of India’s payments industry over the past few years.
The company expressed its apprehension about lacking a significant competitive advantage in the payments space, deeming it commercially unviable at this juncture.
Zomato acknowledged that the practical challenges of entering the payments business became more evident during the preparatory stages.
The withdrawal aligns with the company’s strategic decision-making process amidst changing regulatory requirements and market dynamics.
The timing of this withdrawal coincides with the RBI’s stringent Know Your Customer (KYC) norms for payment aggregators.
While most license holders are established players, Zomato’s entry as a new player presented unique challenges. It would have faced stiff competition from established players like Razorpay and Cashfree in the payments landscape.
Zomato’s decision underscores the dynamic nature of India’s fintech ecosystem and the complexities involved in navigating regulatory requirements.
Despite this setback, Zomato remains focused on its core business of food delivery while evaluating opportunities for sustainable growth in the ever-evolving digital economy.
