Paytm Payments Bank’s exit from Fastags may be a windfall for rivals

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Crisis-ridden Paytm Payments Bank’s (PPBL’s) exit from the Fastag business may prove to be a boon for rivals. Airtel Payments Bank, for instance, is expecting to add 1 million new customers in the next four months, according to a person who is familiar with this matter.

"We have an active Fastag customer base of 1 and 1.5 million as of February 15, 2024. We are now expecting to add over 1 million customers in the next 3-4 months," said the person.

According to data provided by PPBL on their website, the bank has issued 8 million Fastags.

"We have over 100 million customers with KYC, and add 0.4 million users every month. We are also the largest issuer of Fastags, with over 8 million units issued," says the PPBL website.

As per a recent directive from the Reserve Bank of India (RBI) on February 16, Paytm Fastag customers are allowed to use their existing balances, and no end date has been specified for the same. However, they are restricted from adding additional funds to these instruments beginning March 16.

List of banks

The National Highways Authority of India (NHAI) has removed PPBL from its list of banks authorised to issue Fastags as the company faces regulatory action over alleged violation of rules.

The banks the NHAI has listed for Fastag services include Airtel Payments Bank, Allahabad Bank, AU Small Finance Bank, Axis Bank, Bank of Baroda, Bank of Maharashtra, Bandhan Bank, Canara Bank, Central Bank of India, City Union Bank, Cosmos Bank, Equitas Small Finance Bank, and Federal Bank, Indian Overseas bank.

It also features Fino Payments Bank, HDFC Bank, ICICI Bank, IDBI Bank, IDFC First Bank, Indian bank, Induslnd bank, J&K Bank, Karnataka bank, Karur Vysya bank, Kotak Mahindra Bank, Nagpur Nagarik Sahakari bank, Punjab National Bank, Saraswat bank, State Bank of India, Thrissur District Cooperative bank, UCO Bank, Union bank of India, and Yes Bank.

An official of a large private sector bank said, "We are getting lots of customers because of this Paytm Fastag issue. We are expecting some more customers as when their balances are exhausted, users will shift banks to take a new Fastag."

Fastag is a device that employs Radio Frequency Identification (RFID) technology for making toll payments while the vehicle is in motion.

The RFID chip is affixed on the windscreen of the vehicle and enables a customer to make toll payments directly from the account which is linked to the Fastag. Fastags are operational at over 750 toll plazas, including all national highway toll plazas and over 100 state highway toll plazas across the country.

"People are searching for one digital payment account (for all services), which fintech players can't provide, but being a payments bank we can do it," said another banker who declined to be named.

On January 31, the RBI imposed major business restrictions on PPPBL, including barring it from accepting fresh deposits and doing credit transactions after February 29. The central bank had in March 2022 barred PPBL from onboarding new customers.

In a press release, the RBI said that the nodal accounts of One97 Communications and Paytm Payments Services are to be terminated at the earliest, in any case not later than February 29, 2024.