Paytm's PA nod may increase market competition in digital payments

RBI's in-principle approval allows Paytm to resume merchant onboarding, lifting 2022 restrictions and opening the field to stronger competition in the payments space

The Reserve Bank of India’s in-principle approval for Paytm Payments Services to operate as an online payment aggregator paves the way for the company to on board more merchants, which may also intensify competition in the digital payments ecosystem.  

 

This comes at a time when it competes with a market of 55 fully licensed rivals but the payments market is still ripe for growth.

 

The lifting of merchant on boarding restrictions comes more than two years after they were imposed on the company in November 2022. The only business restriction that remains now is on its associate entity, Paytm Payments Bank.

 

In the past two years, multiple fintech companies have been recognised as an online payment aggregator, each vying for new merchants.

 

“Paytm already had a certain number of merchants that it continued to service even after restrictions were placed on different businesses. While it is difficult to take on board new large merchants currently due to the size of its competitors, the company may still be able to scoop some out for itself,” a top executive at a large payments company said, requesting anonymity.

 

Experts added that the RBI’s in-principle approval could further pave way for increased competition in the digital payments ecosystem. 

 

“With an established presence in offline merchant acquiring, this development could support their broader acquiring operations and contribute to increased competition in India’s digital payments market. Their approach to expanding into the cross-border payments space, which offers higher revenue potential, will be one to watch,” said Ranadurjay Talukdar, partner and payments sector leader, EY India.

 

In its first quarter 2025-26 earnings call, Paytm founder Vijay Shekhar Sharma had said he expected another 4-5 times growth left in the country in terms of digital payments.

 

“Lately, we augmented our management team on online merchants because we already have had them on boarded for a long time. And by focusing on more farming (them), we hope to get even more growth,” he had said.