Competitors Google Pay, PhonePe and BHIM go all out for Paytm user base

Over a fortnight since the Reserve Bank of India (RBI) imposed restrictions on Paytm Payments Bank (Paytm PB), the veil of confusion regarding what will work and what won’t with the digital payments platform has lifted, with the regulator releasing a list of frequently asked questions (FAQs) last week.

However, competition to woo merchants is heating up.
 

Players such as Google Pay, PhonePe, and even banks like HDFC and State Bank of India (SBI) are said to be deploying several thousand ‘feet on the street’ or salesforce to attract merchants, including kirana stores and retailers, to adopt their technology, products, and services.
 

According to industry sources, 5-7 million, or 25 per cent, of the merchant base at Paytm is in the process of migrating to platforms such as Google Pay, PhonePe, and the BHIM application (app), due to the crisis at the Noida-based financial technology giant.
 

This is expected to increase further.
 

In Kolkata’s most popular market, New Market, formerly known as Sir Stuart Hogg Market, a prominent retailer said that SBI had been “aggressively” pushing its point-of-sale (PoS) machines since the Paytm crisis occurred.   

New Market houses retail outlets selling everything from party props to garments, cosmetics, and savouries, making it a magnet for banks and digital payment providers.

It’s not just Kolkata, though.

Paytm competitors are trying to win over merchants in other parts of the country as well.

A vendor in Delhi said, “Last week, a PhonePe sales executive visited my shop, saying that Paytm’s services will not be available soon, advising me to switch.” However, he doesn’t plan to switch as the Paytm app, as well as the soundbox, keeps displaying messages that Paytm services will continue as usual.

Pune-based mobile phone retailer, Satish Salunke, who has a Paytm soundbox linked to Paytm PB, also said that sales executives from PhonePe had approached him for a new quick-response (QR) code.

“After RBI restrictions and FAQs released last week, I will have to set up an account, transfer balances, and procure new machines. I have been trying to get clarity on account transfer, but the Paytm helpline is always busy.”

“If there is continued inconvenience, one has no other option but to shift services to other players,” he added.

The FAQs by RBI have brought in a sense of clarity. The regulator has extended the deadline for restrictions on deposit and credit transactions of Paytm PB to March 15.

It has also clarified that merchants can accept payments using a Paytm QR code, soundbox, or PoS terminal even after March 15 if the receipt of a transfer of funds is linked to any banks other than Paytm PB. Merchants, however, cannot transact after March 15 if the QR code, PoS, and soundbox are linked to Paytm PB.

Merchants said that the clarifications helped decision-making.

A Mumbai-based pharmacist said, “We were contemplating a shift when restrictions were placed on the payments bank in January. But since the regulator has come out with guidelines, things are clearer. I am also not getting any new QR codes, or soundboxes, or other payment devices since I already have too many now.”

A Dadar-based ice cream vendor said, “I have my bank account linked to Paytm soundbox. It will continue to function as usual is what I have learnt since it is not linked to the Paytm business account. Other market players are approaching us with new QR codes and soundboxes, but we don’t need them as of now.”

But not every merchant is on the same page.

“There is a lot of anxiety and panic in the merchant community,” said a person familiar with the matter. “Trust has taken a severe beating for the merchants, and regaining that is going to be a huge challenge in front of Paytm.”

In the past few quarters, Paytm, it may be mentioned, has seen strong growth in its merchant subscription as the company scaled the deployment of soundboxes and PoS terminals.

On a year-on-year basis, merchant subscriptions for the company have risen 84 per cent, from 5.8 million in the third quarter (Q3) of 2022-23 to 10.6 million in Q3 of 2023-24 (FY24). Sequentially, the company has added 1.4 million merchant subscriptions in Q3FY24 alone.

For merchants who had their Paytm business account linked to their soundboxes, it will be a cumbersome process to set up systems for accepting payments again since they will have to change to another bank account or wallet. The process would further involve the procurement of new QR codes, soundboxes, or PoS machines.

Ripple effect

25% of merchant base at Paytm migrating to platforms such as Google Pay, PhonePe, and BHIM app
 

Merchants say they are being approached by Google Pay, PhonePe, and banks like HDFC and SBI 
 

They say things became clearer after RBI’s clarifications
 

For some, setting up new systems to accept payments will be cumbersome