Paytm UPI: Transactions decline to continue till new customers added

Paytm will continue to see a decline in the volume of transactions processed on the Unified Payments Interface (UPI) for the next few weeks as it cannot add new users until the existing ones are migrated to a new handle, people in the know said.

The Reserve Bank of India had mandated Paytm to shift existing users to a new handle after the Paytm Payments Bank was asked to stop transactions after 15 March.

The volume of Paytm PB transactions on UPI saw a dip by 10.4 per cent to 1.40 billion in February from 1.56 billion in January this year. On 31 January 2024, the banking regulator asked Paytm PB to stop operations from 1 March, which was later extended to 16 March.

Since January 2023, Paytm PB’s UPI platform saw its average daily transactions grow from 38.42 million in January 2023 to a high of 50.63 million in January 2024. However, the volume of average daily transactions dipped in February this year to 48.47 million.

The average daily UPI transactions across companies have grown too, during the same time. In January, the NPCI recorded a daily average transaction volume of 393.65 million. This grew to 417.33 million in February 2024. Transaction volumes fluctuated in March this year. It reached a high of 454.62 million on 1 March, and a low of 418.41 million on 20 March.

“It is important to note that people keep switching between multiple apps for UPI. The app preference of customers for UPI transactions keeps changing, which may also affect Paytm's market share. Until Paytm can start onboarding new customers now, its market share in terms of transaction volumes will record a decline,” an industry source said on the reason for the decline in Paytm’s volumes.

Paytm PB had a 15 per cent market share on UPI transactions, after PhonePe and Google Pay.

In February, the Reserve Bank of India (RBI) directed One97 Communications (OCL), the company that operates brand Paytm, to not add new users until all its existing users are ‘migrated satisfactorily’ to a new handle or a virtual payment address (VPA).

Last week, the Noida-based company received approval from the National Payments Corporation of India (NPCI) to function as a third-party application provider (TPAP), which enabled its existing users to continue UPI transactions on the app.

With this development, Paytm is required to migrate all of its existing handles and mandates to a set of new Payment Service Provider (PSP) banks to ensure UPI transactions continue smoothly on its platform.

Four banks — State Bank of India (SBI), Axis Bank, HDFC Bank, and YES Bank — will act as PSP banks to Paytm as the company continues its operations as a TPAP under a multi-bank model.

The person quoted above added that the process to migrate all existing users to a new handle from these PSPs may take over three months.

“The migration may take three months or more. The company can do it earlier too out of desperation, but they will have to be careful to ensure they have their users' consent before they enforce any mandate on their customers,” the source added.

Currently, YES Bank and Axis Bank have gone live as PSPs for the Paytm app.

YES Bank has gone live as a PSP bank with a closed group of users with the @ptyes handle. Similarly, Axis Bank is live with a closed group of users with the @ptaxis handle. State Bank of India (SBI) and HDFC Bank will gradually go live as PSPs. They have handles such as @ptsbi and @pthdfc, respectively.

Last month, the RBI had advised NPCI to consider the request of OCL to become a TPAP for continued UPI operation of the app.

A Paytm spokesperson declined to comment on the matter.