Paytm's UPI transactions drop in February amid regulatory challenges

Overall UPI volumes of Paytm witnessed a marginal dip to 12.1 billion transactions compared to 12.2 billion transactions in January

National Payments Corporation of India (NPCI) data revealed a decline in Paytm's Unified Payments Interface (UPI) transactions, with the fintech giant reporting approximately 1.33 billion transactions in February, marking a 7.6 per cent decrease from 1.44 billion transactions in January.

The share of UPI payments processed by Paytm saw a reduction to less than 11 per cent in February, down from around 11.8 per cent in the previous month. This downward trend reflects a broader decline in Paytm's market share, which stood at 12.8 per cent in August last year.

Despite February being a shorter month, overall UPI volumes witnessed a marginal dip to 12.1 billion transactions compared to 12.2 billion transactions in January.

While Paytm experienced a drop in transaction volumes, competitors PhonePe and Google Pay recorded significant increases in transactions. PhonePe reported 6.1 billion transactions in February, while Google Pay recorded 4.7 billion UPI payments, marking respective jumps of 7.7 per cent and 7.9 per cent.

Regulatory actions against Paytm Payments Bank, initiated by the Reserve Bank of India (RBI) on January 31, have notably impacted Paytm's UPI payments business in February. The central bank's comprehensive audit report and subsequent compliance validation highlighted persistent non-compliance and supervisory concerns within the bank, leading to regulatory intervention.

As a result of RBI's directives, Paytm Payments Bank was directed to cease accepting deposits and credit transactions after February 29, a deadline later extended to March 15.

Furthermore, the Financial Intelligence Unit-India (FIU) imposed a penalty of Rs 5.49 crore on Paytm Payments Bank for alleged violations under the Prevention of Money Laundering Act (PMLA), prompting Paytm to enhance its monitoring systems and reporting mechanisms to comply with regulations. Paytm clarified that this penalty pertained to a business segment that was discontinued two years ago.

Despite these challenges, Paytm founder Vijay Shekhar Sharma remains optimistic about the company's future prospects. Sharma stepped down from his position as part-time non-executive chairman and board member of Paytm Payments Bank, following the crisis, however has continued to voice his confidence in overcoming regulatory setbacks.