Banks see opportunity in Paytm implosion, look to corner QR code, sound box business

Paytm

Seeing an opportunity in the pickle Paytm Payments Bank (PPBL) finds itself in following action by the Reserve Bank of India (RBI), some banks are moving in to corner a larger share of the QR code and sound box business.

Recently,  frequently asked questions (FAQs) released by the central bank  on the PPBL issue had clarified that in order to continue receiving payments, merchants need to obtain fresh QR codes linked to an account with a different bank or wallet before March 15, 2024.

On January 31, the RBI imposed major business restrictions on PPBL, including a bar on accepting fresh deposits and doing credit transactions after February 29. On February 16, it extended the deadline to March 15.

Also read: Had to sell PhonePe to Flipkart so we could compete with Paytm: Sameer Nigam hits out at foreign-owned tag

Banks on the prowl

A senior Bank of India (BoI) official told Moneycontrol that the lender has told all branches to work on greater penetration of its QR codes after the Paytm crisis.

“We have asked all our branches to increase the penetration of QR codes across India,” the official said on condition of anonymity.

Also, BoI has hired an agency to advise the bank on increasing the penetration of sound boxes, the official said. He, however, did not mention the agency’s name. Per BoI’s December quarter investor presentation, the bank has 1.8 crore UPI users.

ALSO READ: Google to roll out SoundPod audio devices to small merchants in India amid Paytm crisis

Similarly, YES bank has started promoting its UPI application and QR codes after the PPBL crisis.

“We have launched Yes Pay Next recently, and the initial response has been encouraging enough for us to continue investment in this app, and service the UPI needs of customers,” Naveen Chaluvadi, Chief Digital Officer, Yes Bank told Moneycontrol.

Chaluvadi said that of late, the bank has seen a surge of enquiries regarding QR codes at its branches.

“However, we shall offer the merchant solution only where we believe it will help us service a wider range of merchant needs, and not just remain as a one-point solution provider to the merchant,” he explained.

He added that YES Bank has been issuing QR codes in the market through aggregators like Phonepe, Bharatpe, and others, and has been a leading player in this space.

An email sent to Bank of India remained unanswered.

How PPBL rivals are gaining

Further, PPBL’s fall is helping its rivals in the Fastag space, and also encouraging downloads of some alternative payments apps.

In the Fastag space, Airtel Payments Bank, for instance, is expecting to add a million customers in the next four months.

According to data shared by Appfigures, a mobile analytics platform, BHIM UPI downloads jumped to 331,781 on February 19 from 222,439 on the first day of this month.

PhonePe’s downloads surged to 503,436 on February 7 from 317,522 on February 1.

On the other hand, daily downloads of the Paytm app have fallen since February 1, a day after the RBI imposed curbs on the bank.

Also read: Fintech wars intensify as Paytm, Pine Labs, and PhonePe rivalry spills onto social media

The RBI action

On January 31, 2024, the RBI imposed business restrictions on PPBL. The central bank said a comprehensive system audit and compliance validation report of external auditors had revealed persistent non-compliance and material supervisory concerns in the bank.

The RBI barred PPBL from accepting further deposits and top-ups, or doing credit transactions in any customer accounts, prepaid instruments, wallets, Fastags, NCMC cards, etc., after February 29. PPBL can only pay interest, cashbacks, or refunds, the RBI has said.

On March 11, 2022, the RBI had barred PPBL from taking on new customers, saying that it had violated know-your-customer (KYC) norms.