Paytm’s existential crisis: Where does the fintech major go from here?
November 8, 2016. The day the Narendra Modi government announced the demonetisation of Rs 500 and Rs 1,000 notes would be one India’s erstwhile fintech poster boy Vijay Shekhar Sharma, 46, would not forget in a hurry. That move bolstered the digital payments business of Paytm, Sharma’s fintech brand, like no other and the company, backed by SoftBank and Alibaba, went on a growth and expansion spree. But a few years later, as Paytm went beyond payments into financial services and marketing riding on the massive customer base he was acquiring, One 97 Communications Ltd (OCL), the company that owns Paytm, began running into problems.
The first big hit was when OCL was listed in November 2021, and the stock, which had an IPO price of Rs 2,150, tanked the same day as investors failed to get clarity on the various lines of business. The OCL stock has never recovered since. Cut to February, 2024. The biggest body blow Paytm received was when the Reserve Bank of India imposed severe restrictions on Paytm Payments Bank Ltd (PPBL), which ran the Paytm wallet, owing to a series of violations, particularly on the KYC front. The RBI action has effectively rendered PPBL ineffective and hit revenues of OCL’s payments business, estimated to contribute a substantial chunk to its total revenues.
RBI’s action has forced Sharma to ramp up its other business lines—financial services and marketing. In our cover story, Anand Adhikari delves into the problems currently being faced by Sharma’s OCL and examines the options he has before him. For now, Sharma calls the RBI blow “more of a big speed bump”, but how his firm navigates this bump will test his tenacity and leadership chops. Paytm’s hopes of a full-scale banking licence have all but vanished, and the firm is looking at onboarding more partners for its loan distribution business to offset the revenue loss. But with Paytm facing a trust deficit, banking and credit card partners will be looking at it very carefully before making any commitments; it will also face challenges from other regulators as it looks to scale up. Profitability is a distant dream. It’s nothing short of an existential crisis for one of India’s most storied start-ups, and the big question is: where does Paytm go from here?
Knowing Sharma’s go getting nature, the Paytm story may have just got more interesting as the ambitious entrepreneur attempts to find his way out of this quagmire. This issue also brings you a detailed package on portfolio management services which have gained enormous traction over the past few years as India sees a burgeoning number of the super rich. Not surprising then that the demand for bespoke investment services has boomed, and the total assets under management in the sector has more than doubled in the past five years and stands at over Rs 32 lakh crore.
