SUMMARY
- NPCI has granted Paytm the approval to on-board new UPI users.
- This approval is expected to lead to an increase in UPI transaction volumes for Paytm.
- The approval is contingent upon the fintech company’s adherence to all NPCI procedural guidelines.
The shares of One 97 Communications, the parent company of Paytm, saw a rise of around 3% on October 23. This was due to the National Payments Corporation of India (NPCI) granting Paytm the approval to on-board new UPI users, nearly nine months after the Reserve Bank of India (RBI) had placed a ban on the addition of new customers.
In a letter to Paytm’s founder and CEO Vijay Shekhar Sharma, the NPCI chief Dilip Asbe gave the green light for the fintech to begin onboarding new users. This approval is expected to lead to an increase in UPI transaction volumes for Paytm.
The NPCI has granted approval to Paytm to onboard new UPI users, contingent upon the fintech company’s adherence to all NPCI procedural guidelines and circulars related to risk management, brand guidelines for app and QR, multi-bank guidelines, TPAP market share, and customer data.
Earlier this year, RBI had imposed restrictions on Paytm Payments Bank Limited (PPBL), effectively barring Paytm from onboarding any new UPI users as PPBL powered the fintech’s entire UPI stack. In response, Paytm partnered with Axis Bank, Yes Bank, SBI, and HDFC Bank as its payment service provider (PSP) banks to offer UPI services.
In January 2024, Paytm accounted for a 13% market share in UPI transactions, but this slipped to around 7% in September due to the RBI-imposed restrictions. Despite these constraints, Paytm still processed over 100 crore transactions in September, making it the third-largest UPI payments processor in the country.
During Paytm’s recent post-earnings call, the company’s cofounder and CEO, Vijay Shekhar Sharma, stated that Paytm’s first loss default guarantee (FLDG) approach would bolster its distribution-led merchant loan business.
This development comes on the heels of Paytm’s announcement on October 21 that it had recorded a net profit of ₹930 crore in Q2 FY25, a significant turnaround from the net loss of Rs 290 crore in the same period last year.
However, this profit was largely attributed to a one-time gain of Rs 1,345 crore from the sale of its movie ticketing business to Zomato. Without this, the fintech would have faced a net loss of Rs 415 crore, exceeding the loss reported in the year-ago period.
The Noida-based firm’s revenue for the September quarter declined by 34% YoY to Rs 1,660 crore. Sequentially, however, the income increased slightly from Rs 1,501 crore in Q1. Its net payment margin increased to Rs 465 crore, largely on account of improvement in payment processing margin, better device realization and growth in GMV.
