Even as One97 Communications Ltd (OCL), which runs Paytm, started migrating users to new unified payments interface (UPI) IDs or handles last week, it will take another couple of months before the company can start onboarding new customers to its UPI platform.
The inability to onboard new customers as well as getting every single customer consent before giving them new UPI handles is taking a toll on Paytm’s market share in the ecosystem, which dropped to nine percent in March, the lowest in four years.
“The migration is likely to take another two months. Till then, they cannot onboard new customers as per the regulatory guidelines,” said a senior banker who works closely with UPI ecosystem.
On April 17, Paytm announced that it has started migrating its customers to its partner payment service provider (PSP) banks from Paytm Payments Bank Limited (PPBL), which was forced to stop banking operations after the Reserve Bank of India’s wide-ranging restrictions on the entity. A PSP bank connects a third-party app with the banking network. Earlier PPBL acted as the sole PSP bank for Paytm.
On March 15, Paytm started working as a third-party application provider (TPAP) with Yes Bank, Axis Bank, HDFC Bank and SBI as PSP partners, the day the RBI’s sanctions took effect.
“@paytm’ handles are to be migrated in a seamless manner from Paytm Payments Bank to a set of newly identified banks to avoid any disruption. No new users are to be added by the said TPAP until all the existing users are migrated satisfactorily to a new handle,” the RBI clarification on February 23 said.
Around 75 percent of Paytm’s GMV (Gross Merchandise Value) happens through UPI payments and hence, maintaining the company’s market share is important. Paytm has cut off all its business ties with PPBL to avoid any uncertainties. Paytm has around nine crore UPI customers, who need to be migrated to new UPI handles.
"We are collaborating with our banking partners to facilitate the migration of both merchants and consumers, which is progressing steadily. Our core business model focuses on acquiring consumers and merchants and offering them a range of financial services. With new payment partnerships with leading banks and financial institutions, we have expanded opportunities to enhance our services. We are committed to growing the UPI ecosystem in partnership with NPCI, extending it to every nook and corner of India," a Paytm spokesperson said in a statement to Moneycontrol.
Paytm did not say how long the migration process will take.
UPI is growing quarter on quarter with new users being added every day. Paytm remains a popular app with customers, and not being able to serve those new customers is forcing them to go to the top two players – PhonePe and Google Pay – skewing the UPI ecosystem into a duopoly kind of situation.
“The biggest challenge for UPI right now is to make sure that Paytm migration is completed as soon as possible. During the last two months and probably over the next couple of months, our focus remains to make sure that the process goes smoothly. The sooner they start onboarding new customers, the better for the payments platform,” said a senior banker who works in the UPI ecosystem.
However, Paytm’s merchant migration is complete and there have not been any restrictions on acquiring merchants. Paytm has likely signed up private sector lenders HDFC Bank, Axis Bank and Yes Bank as partners for migrating merchants. These merchants were onboarded on the Paytm app as UPI merchants by the embattled PPBL.
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