Hi, this is Pratik Bhakta in Bengaluru. The stringent action by the Reserve Bank of India (RBI) against Paytm Payments Bank could have a positive fallout. It can actually push One 97 Communications, which runs Paytm, to focus on what it does best — build distribution.

It can also focus on technology and product development like it did with Soundbox — a desi way of reducing fraud and confirming merchant payments.


With Paytm Payments Bank staring at an uncertain future, it all comes down to the Paytm app for founder Vijay Shekhar Sharma. On Google Play Store, Paytm has more than 500 million downloads. Ten crore people use the app monthly along with around 4 crore merchants.

Also read | Persistent non-compliance by Paytm, action proportionate with regulations, says RBI

If the banking business switches off from March 1, Paytm will still be left with an envious distribution heft. Plug-in financial services, payments through UPI, credit, wealth management, and insurance distribution — Paytm has a super app on its hands!

The end of the payments bank era: With Paytm, perhaps the Reserve Bank of India wants to draw the curtains on one of its ill-fated experiments: Payment Banks. The concept simply failed to catch on. Fino Payments Bank wants to graduate to a small finance lender. The telcos Airtel, Idea, and Jio have too much going on in their core business to focus on banking. And IndiaPost? Well, it will continue to exist.

Also read | Paytm’s Vijay Shekhar Sharma discussed exiting board, removing Paytm from bank name

Paytm crisis timeline

In an era of open banking and open payments, it is best to differentiate a bank and a payment platform. The experiment with Paytm showed that fintechs are good at distribution and innovation. Let core banking be with the traditional lenders while fintechs build intuitive apps.

Like a banker said: “The payment bank experiment was doomed to fail from the start. Initially, there was excitement, but later large corporations realised there is no money to be made in this business.”

Also read | CDSL reviews Paytm Money’s KYC process

Opportunity for fintech Paytm: For the longest time, Paytm operated in the zone where it wanted to build everything in-house. Be it commerce, insurance, mutual funds — everything was to be built from scratch. But now it will have to focus on partnerships, and that might be a good thing.

Players like PhonePe built an entire financial services platform through partnerships. Paytm will have to focus on that. Let us look at the various businesses of the fintech startup to understand how it can get back on track.

UPI: Work as a third-party application on three or more lenders.

UPI market share by volume

Merchant payments: Move nodal accounts to other lenders, and focus on merchant acquisition. Something that Paytm was doing for card payments over the last two years anyway. From nowhere in the card-based offline payments landscape, Paytm has now emerged as one of the top players.

Credit: The payment bank licence prohibited Paytm from entering into credit, so it had to work with lenders to give out loans. Now Paytm can double down on this business, build it responsibly, and abide by the digital lending guidelines of the central bank.

Insurance: Leverage the insurance broking licence and sell insurance products that can be embedded with other financial services.

Broking: It is anyway one of the largest direct mutual fund distributors in the country; it can now focus on stock trading too. Interestingly, Paytm Money reported a net profit of Rs 42.8 crore in FY23.

“Paytm was always designed as a platform for customer satisfaction. Now, without the regulatory restrictions of being a bank, they can actually focus on building a super app,” said a founder of a fintech startup that competes with Paytm.

Read Our Detailed Coverage On The Paytm Crisis

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Key Reads This Week

Tata Neu

Tata Sons to invest $1 billion more in digital arm: Tata Sons is poised to invest about $1 billion in Tata Digital, over the next few years. This comes as the parent of the diversified Tata Group puts a pause on external fundraising for the ecommerce entity housing the superapp, Tata Neu. Earlier in the week, Naveen Tahilyani was appointed as chief executive officer and managing director of the Tata group’s ecommerce unit, replacing Pratik Pal.


Juspay, Zoho, Decentro secure RBI nod for payment aggregator business: Two fintech startups Juspay and Decentro received the final licence to operate as payment aggregators on February 6.

Court relief for Byju’s in TLB lenders’ suit: Byju’s won a legal reprieve on Monday when a civil court in Bengaluru declined to grant a plea by its lenders challenging Manipal Group Chairman Ranjan Pai’s acquisition of a 40% stake in the embattled edtech firm’s subsidiary Aakash Institute.

Byjus GFX taking stock

Meanwhile, CEO Byju Raveendran told employees the company has credited January’s salaries.

Licious lays off 80 employees as part of ‘operational reset’: Omnichannel meat retailer Licious has laid off 80 employees, representing 3% of its total employee base. The firm said the layoffs were part of an “operational reset to sharpen growth focus”.

Results Corner


SoftBank’s India portfolio value rises 9% to $14 billion: The fair value of SoftBank’s India investment portfolio across Vision Fund I and II stands at nearly $14 billion — up by 9% as of December 2023. SoftBank swung into profits for the first time in five quarters with a net profit of over $6 billion for the three months ended December.

Subdued consumer spends weigh on food-delivery growth: Zomato | Gurugram-based Zomato, which reported a fourfold sequential jump in its December-quarter net profit, said a broader slowdown in discretionary consumption had crimped the growth of its mainstay food-delivery business.

In a letter to shareholders, Zomato’s food-delivery CEO Rakesh Ranjan pointed out that the demand environment in the October-December period was muted for the broader restaurant industry.

Nazara Technologies reports 47% growth in quarterly profit, revenue up 2%: Gaming and media firm Nazara Technologies said its profit after tax grew 47% on year to Rs 29 crore for the quarter ended December 2023. Revenue grew by 2% to Rs 320 crore.

Nykaa net profit doubles in Q3, operating revenue up 22% to Rs 1,789 crore: FSN E-commerce Ventures Ltd, the parent company of beauty and fashion retailer Nykaa, posted a twofold increase in net profit and 22% growth in operating revenue for the fiscal third quarter when festive season demand boosted the performance of retail and ecommerce firms.

Mamaearth Q3 profit soars 265% YoY to Rs 26 crore: Honasa Consumer, which owns and operates Mamaearth, reported 265% growth in its consolidated net profit to Rs 26 crore for the quarter ended December. Revenue from operations in the third quarter increased 28% on year to Rs 488 crore.

Other Top Stories

Satya Nadella

Microsoft to train 2 million Indians in AI by 2025: Satya Nadella | Microsoft will train more than 2 million people in India with artificial intelligence skills by 2025 under an initiative that will help generate more jobs, chairman and chief executive Satya Nadella said on Wednesday.

Firms say instead of blanket ban, axe deepfakes with ‘ill intent’: Instead of imposing a blanket ban on “deepfakes” across the internet, social media companies have proposed that the government introduce proposals only to ban or take down content that was released with “criminal or ill intent”, sources in the know of the development told ET.

Vanguard slashes Ola valuation by 29% to below $2 billion: A fund operated by US investment major Vanguard has marked down the fair value of ride-hailing platform Ola’s parent ANI Technologies to $1.88 billion as of November 30.

ETtech Deals Digest: Startup funding drops 17% to $155 million this week


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