Wallet Half Full?

Paytm's comeback trail looks open, but regulatory shadows haven't vanished entirely

- AJINKYA KAWALE

On August 5, Antfin, the Chinese investment arm of Alibaba, exited Paytm completely. A week later, on August 12, Paytm Payments Services Ltd (PPSL), the payments arm of One97 Communications (OCL), secured an in-principle nod from the Reserve Bank of India (RBI) to function as an online payment aggregator (PA).

This approval marked the end of a two-year wait, during which PPSL was barred from onboarding new merchants. The delay has caused the firm to lose ground in the fast-growing online merchant space, where rivals such as Razorpay and Cashfree Payments, despite facing their own temporary embargoes, have managed to surge ahead.

"One can connect the dots. The company cleared Chinese investment from its cap table, and soon after got RBI's nod to operate as a PA," said a top industry executive, requesting anonymity.

Yet, the question remains: Is Paytm out of regulatory knot?

Crisis to compliance

In its 24th annual general meeting in September last year, the company's founder, Vijay Shekhar Sharma, called for a "compliance-first" approach into its fintech business while focusing on regulation and the core business of the firm—payments and financial services.

"The important thing for us to remember is that if we do not make compliance and risk a core part of the business, then it does not become the bigger business that we envision," Sharma said after restrictions were imposed on Paytm Payments Bank, earlier in 2024. "As far as the group and entity is concerned, we now look at [a] compliance-first, technology-second approach," he added.

The remarks hold weight, as nearly 20 months on, the RBI has yet to lift the restrictions imposed on Paytm Payments Bank in 2024 over compliance lapses.

Even if restrictions are eased, the firm faces the daunting task of redoing the know your customer (KYC) checks for its large customer base.