Paytm doubling down on banking partnerships to streamline business

One97 Communications, the operator of the Paytm brand, is intensifying its focus on partnerships with banks to transfer its Bharat Bill Payment System (BBPS) from Paytm Payments Bank (Paytm PB) and concentrate on acquiring new merchants through these collaborations, according to people close to the development.

The company is moving swiftly to finalise these partnerships after the Reserve Bank of India (RBI) extended the deadline for restrictions on deposit and credit transactions of Paytm PB to March 15 last week. The banking regulator mentioned that customers and merchants might need “a little more time to make alternative arrangements”.

“There is a revised deadline in place, and the company is looking to accelerate the finalisation of banking partnerships since the deadline is less than a month away. It is in talks with HDFC Bank, Axis Bank, and others for these partnerships. This includes arrangements for BBPS, and more focus on acquiring merchants,” a person in the know said.

Paytm did not respond to queries sent by Business Standard until the time of going to press.

BBPS is an integrated bill payment system that offers interoperable bill payment services to customers through a network of agents, enabling multiple payment modes, according to the RBI.

The company received final approval from the banking regulator to operate as the Bharat Bill Payment Operating Unit (BBPOU) last year.

“As an entity under BBPS, our associate bank has received the final authorisation to conduct bill payment and aggregation business as a BBPOU,” the company had stated in a blog dated January 17, 2023.

Meanwhile, in a report, brokerage firm Bernstein noted a 10 per cent drop in application (app) traffic, stating that it expected limited damage to the long-term user/merchant base.

“The daily downloads for the app have seen a sharp decline (minus 50 per cent), but the daily active user (DAU) count has only declined by minus 11 per cent since the Paytm PB ban. Similar to the consumer app, the merchant app’s daily downloads have seen a sharp decline (minus 40 per cent), but the DAU count has only declined by minus 3 per cent since the Paytm PB ban, indicating the stickier nature of merchant relationships,” the report observed.

With a merchant base of over 40 million customers, Paytm has around 600,000 live merchant loans. Of this, close to 10-15 per cent have a loan and repayment account set up with Paytm PB.

“The limited impact on app traffic for both consumers and merchants corroborates our view that the disruption to gross merchandise value/merchant loan growth might indeed be a short-term phenomenon,” the report said.

Meanwhile, in a list of frequently asked questions released last week, the central bank, while referring to Paytm PB’s BBPS, said customers can continue to make payments from their Paytm PB account through BBPS up to the balance available.

“Since you (users) will not be able to credit any further funds into your accounts or wallets with Paytm PB after March 15, 2024, it is advised that you may make alternative arrangements with another bank account for BBPS before March 15, 2024,” the regulator had said.