In New Delhi's posh southern suburb of Malviya Nagar, Saurabh Kumar, a neighbourhood toy shop owner, is unperturbed by the controversy and rumours surrounding Paytm’s unavailability at a later date.
“Acha tha Paytm. Settlement instant tha. (Paytm was good with its instant payment settlements),” he told Moneycontrol when we visited his shop on February 19.
Kumar is among the 60 lakh merchants who used Paytm Payments Bank Ltd (PPBL) as their settlement bank account. Since the Reserve Bank of India’s (RBI) directive enforced crippling restrictions on the payments bank, which could render the institution almost dormant post-March 15, Kumar has closed his PPBL account and transferred the money to a different bank account.
He has a second Paytm QR code linked with another bank account and now accepts payments through it.
Paytm’s troubles had several competitors trying to poach its loyal merchant base. Despite the allure of new offers and the fear of uncertainty, a significant number of small merchants, including vegetable vendors, paan shop owners, and juice corners, remain resolutely tethered to Paytm. For them, familiarity and reliability outweighed the benefits offered by competitors, despite their limited knowledge about the restrictions.
“Bank account he to change karna hai. Kar lenge (Just have to change the bank account linked),” was the constant refrain of most of the 25 merchants Moneycontrol spoke with in the locality. They did not have complaints about the money transfer or payment settlement either.
What Datum Survey says
A survey of 2,000 merchants done by market intelligence firm Datum Intelligence between February 7 and 15, shared exclusively with Moneycontrol, seems to attest to the anecdotal experience.
Around 80 percent of the merchants said that they are either staying or waiting for more information before shifting. Only 13 percent planned to shift to competitors.
To assuage any misgivings merchants could develop over the functionality of @paytm handles and Paytm QR codes, the company has been on an overdrive to reach out to the merchants over the past month along with newspaper advertisements.
“Paytm agents had come (between February 10 and 13). They explained everything and even helped with making a switch to another account which we already had,” Kumar said.
On February 16, the RBI in the frequently asked questions (FAQs) on Paytm clarified that merchants can continue using the Paytm QR and handles seamlessly even after March 15 as long as their settlement account is with another bank and not PPBL.
“71 percent of merchants are feeling confident to continue using Paytm for payments after a reach out by a Paytm representative. Only 11 percent are less confident about using Paytm for payments and around 14 percent are still looking for more information,” says the Datum Intelligence survey.
Among the survey respondents, 76 percent of merchants were using Paytm for accepting payments followed by 41 percent for PhonePe, 33 percent for Google Pay and 18 percent for BharatPe.
In overall consumer acceptance, Paytm emerged as the preferred app for 58 percent of the merchants surveyed followed by PhonePe for 23 percent, Google Pay for 12 percent and BharatPe for 3 percent despite the stringent RBI action.
Among the surveyed, 39 percent of merchants were using Paytm Soundbox for accepting payments. About 5 percent of the merchants have taken a loan using Paytm app and around 90 percent of them were already contacted by a Paytm representative after the RBI decision.
More good news for Paytm
The Datum survey period was before the RBI FAQ on Paytm, which clarified that all the Paytm devices, QR codes and handles will work. This would have swayed any fence-sitters to move to other platforms.
On February 23, RBI had asked the National Payments Corporation of India (NPCI) to facilitate the migration of all UPI @paytm handles seamlessly to three or four commercial banks to avoid disrupting the country’s popular digital payments platform.
“This is good news for Paytm. The two clarifications from the RBI on UPI and merchant devices will minimise the damages for Paytm,” said Satish Meena, an advisor for Datum.
Paytm has a 13 percent market share in UPI debit payments and around 20 percent market share in credit payments. This is because since merchants get more credit payments in a day compared to regular users, Paytm has a higher market share as a beneficiary account.
Paytm facilitates close to three billion credit payments every month through PPBL. One97 Communications’ associate company PPBL acts as a payment service provider (PSP) bank for the Paytm app.
For UPI payments to go through after March 15, PPBL will have to continue working as a PSP bank for Paytm until other banks take over the accounts and migrate those into their systems, all of which can take up to three to six months, according to bankers working with Paytm.
Moneycontrol reported last week that Axis Bank, HDFC Bank and Yes Bank had submitted a proposal to work as PSP bank for Paytm as a third-party application provider (TPAP) app, much like its competitors, PhonePe and Google Pay.
Challenges remain
However, even a drop of 20 percent could be a big setback to Paytm. The crisis has hit the company’s brand image. Not everyone is feeling like the toy shop owner Kumar.
Rohit Sharma, a kirana store proprietor, migrated from PPBL account and soundbox to Canara Bank's offerings, catalysed by the cloud of uncertainty surrounding the former's reputation.
“The bank's office is right across the street—if any issues arise, assistance is just steps away," the bank’s agent assured Sharma. For Sharma, traditional banking institutions not only have a perceived reliability but also promise tangible support in the transition to a new bank account.
Frustrations with Paytm's past services also played a role in some merchants' decisions to switch and this just acted as a catalyst.
Rahul Makhija, a Mother Dairy shop owner, for instance, switched to PhonePe and its soundbox after experiencing poor customer service from Paytm.
“I sought help with my soundbox (Paytm) a couple of times, but in vain. PhonePe agents told me that they would do everything from scratch. We have a ‘legitimate’ bank for your business account. So I made the switch. Don’t care if it is Paytm or anyone else,” he said.
Not everyone is happy with the switch and is even switching back to Paytm. Mohammad Aarif, an apparel merchant, said that he found other terms and fees to be confusing with Google Pay, which also recently launched its soundbox type product.
“The condition was to have 400 transactions for free charge, but a penalty of Rs 5 on anything less than that. Why would we pay a penalty for low transactions? Paytm is much better,” Aarif said. He spoke to his neighbourhood shopkeepers who told him to open a new account and link the same with the Paytm QR code.
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