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Business News/ Money / Personal Finance/  Is Paytm Payments Bank saga casting a shadow on India’s UPI success story? 3 experts weigh in
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Is Paytm Payments Bank saga casting a shadow on India’s UPI success story? 3 experts weigh in

Most fintech players believe that crackdown on Paytm Payments Bank is a setback, albeit temporary, and does not encapsulate the state of affairs of the industry. They also assert that the UPI’s success story is yet not ripe, and has several more milestones to achieve

UPI, as a mode of payment, has caught up in a big way with customers and merchants alike. The total volume of UPI transactions stood at ₹18.41 lakh crore in January 2024Premium
UPI, as a mode of payment, has caught up in a big way with customers and merchants alike. The total volume of UPI transactions stood at 18.41 lakh crore in January 2024

Notwithstanding the UPI’s success story that has earned commendation in India and overseas with volume of transactions surging at a frantic pace, the unanticipated crackdown on Paytm Payments Bank has caught everyone by surprise.    

For the uninitiated, RBI barred Paytm Payments Bank from accepting any customer deposits after Feb 29 citing non-compliance. The deadline was later extended to March 15.

Meanwhile, UPI as a mode of payment is catching up in a big way with customers and merchants alike. The total volume of UPI transactions stood at 18.41 lakh crore in January 2024, which was 41 percent higher than the corresponding figure one year ago. 

Merely a blip?

We spoke to a number of fintech industry stakeholders to get a sense of what they perceive would be the outcome of the current set of circumstances revolving around Paytm Payments Bank. 

Most of them believe that it is a setback, albeit temporary, and does not encapsulate the goings-on in the fintech sector.

They also argue that the UPI’s success story is still not ripe and it has several more milestones to achieve. One such milestone is the UPI credit line getting activated by banks. 

Ashwin Bhambri, Founder, Phone par loan, saysThe UPI rails have global scalability and its success in India as an alternative to MasterCard & VISA can be replicated in many other countries."

ALSO READ: RBI allows pre-sanctioned credit lines through UPI

As digital payments continue to evolve, many more financial instruments will be rolled out, thus expanding the UPI’s footprint in size as well as in the volume. 

 “The recent crisis in a large payments bank is only a temporary setback rather than a reflection of the overall health of fintech companies. Although it may have momentarily hurt investor trust, particularly amidst heightened regulatory scrutiny, it underscores the growing importance of adhering to governance and compliance norms within the sector," says Gaurav Jalan, Founder & CEO, mPokket.

“The recent crisis in a prominent payments bank has certainly caught market attention. At this juncture, it's premature to fully grasp the long-term implications of this event. However, it is anticipated that investment in the fintech sector will persist, particularly within enterprise-focused fintech companies," says Sameer Singh Jaini, CEO and Founder, The Digital Fifth. 

“This might have a temporary impact on investor sentiment but on a better understand of the RBIs point of view it’s a mere blip that's agnostic to fintech innovation & investments," says Ashwin Bambri.

QR codes to continue 

What has, in fact, has kept the stakeholders’ confidence intact is that the paytm wallet users will continue to have a normal digital payment experience even after the March 15 deadline

This would be made possible when the transactions made on Paytm wallet are backed by other bank(s) instead of Paytm Payments Bank. In order to keep Paytm QR codes running, One97 Communication is expected to open settlement accounts with one or more banks,

Additionally, Paytm is likely to get the ‘third party application provider (TPAP)’ licence, on the lines of Google Pay and PhonePe, which means paytm wallet and QR codes would continue to work once linked to other bank(s), and therefore, it would not need to have its payment bank backing its wallet service. 

Paytm-related anxiety?

In an apparent attempt to allay the concerns of stakeholders, Finance Minister Nirmala Sitharaman on Monday held a meeting with top executives from leading fintech firms such as Amazon Pay, Zerodha, Cred, LendingKart. 

“During the meeting, no Paytm-related anxiety or concerns were shown by startup founders and other fintech entities present during the meeting," said one participant on the condition of anonymity.

Additionally, Sitharaman has asked the Reserve Bank of India (RBI) to hold monthly meetings with fintech companies in order to address regulatory concerns. 

 

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Published: 29 Feb 2024, 09:24 AM IST
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