Paytm fiasco highlights need for firms to address security vulnerabilities: CAIT

RBI on January 31 directed its payments bank to stop accepting fresh deposits and making credit transactions after February 29

The Paytm fiasco underscores the importance of robust data security measures, regulatory compliance and highlights the need for companies to be vigilant and proactive in addressing security vulnerabilities, Confederation of All India Traders (CAIT) said.

“Such an unprecedented event in the fintech ecosystem of the country will not shatter the confidence of traders and others in the digital payment system built over the years. The Paytm fiasco underscores the importance of robust data security measures, regulatory compliance, and maintaining the trust of users in the digital payments ecosystem,” CAIT National President BC Bhartia said in a statement.

RBI on January 31 directed its payments bank to stop accepting fresh deposits and making credit transactions after February 29. Paytm Payments Bank has also been barred from accepting top-ups in any customer accounts, including prepaid instruments, wallets, FASTags and NCMC cards.

The Reserve Bank of India (RBI) said it was taking action against Paytm Payments Bank after the Comprehensive System Audit and compliance validation report of the external auditors revealed "persistent non-compliance and continued material supervisory concerns in the bank, warranting further supervisory action".

“The Paytm issue has highlighted the need for companies to be vigilant and proactive in addressing security vulnerabilities and ensuring the safety of user data,” Bhartia said.

Rejecting apprehensions in various quarters about reverting to a cash system, CAIT Secretary General Praveen Khandelwal said that the government has paved the path for the adoption and acceptance of digital payments in India, and it has now become routine.

“There are several options available in the market, and people can freely migrate to any other option of their choice. There will be no disruption in the digital payment ecosystem of the country; rather, it will become stronger, as several other digital payment players have taken aggressive steps by deploying their sales teams on the ground which will make greater awareness,” Khandelwal said.

The RBI's strong message indicates that building businesses without established regulatory frameworks is impractical, he said.

CAIT however expressed concern regarding the Paytm issue as millions of its users, prominently including a sizable number of small businesses, artisans, and women entrepreneurs, besides the general public, are customers of shopkeepers. There appears confusion among the trading community regarding the security of their money in various instruments of Paytm and the potential future actions by the RBI or any other government entities, he said.

“Reports regarding potential data breaches and security lapses within the Paytm app raise concerns about the safety of users' personal and financial information,” he added.