It can also focus on technology and product development like it did with Soundbox — a desi way of reducing fraud and confirming merchant payments.
With Paytm Payments Bank staring at an uncertain future, it all comes down to the Paytm app for founder Vijay Shekhar Sharma. On Google Play Store, Paytm has more than 500 million downloads. Ten crore people use the app monthly along with around 4 crore merchants.
If the banking business switches off from March 1, Paytm will be left with an envious distribution heft. Plug-in financial services, payments through UPI, credit, wealth management, and insurance distribution — Paytm has a super app on its hands!
The end of the payments bank era: With Paytm, perhaps the Reserve Bank of India wants to draw the curtains on one of its ill-fated experiments: Payment Banks. The concept simply failed to catch on. Fino Payments Bank wants to graduate to a small finance lender. The telcos Airtel, Idea, and Jio have too much going on in their core business to focus on banking. And IndiaPost? Well, it will continue to exist.
In an era of open banking and open payments, it is best to differentiate a bank and a payment platform. The experiment with Paytm showed that fintechs are good at distribution and innovation. Let core banking be with the traditional lenders while fintechs build intuitive apps.
Like a banker said: “The payment bank experiment was doomed to fail from the start. Initially, there was excitement, but later large corporations realised there is no money to be made in this business.”
Also read | CDSL reviews Paytm Money’s KYC process
Opportunity for fintech Paytm: For the longest time, Paytm operated in the zone where it wanted to build everything in-house. Be it commerce, insurance, mutual funds — everything was to be built from scratch. But now it will have to focus on partnerships, and that might be a good thing.
Players like PhonePe built an entire financial services platform through partnerships. Paytm will have to focus on that. Let us look at the various businesses of the fintech startup to understand how it can get back on track.
UPI: Work as a third-party application on three or more lenders.
Merchant payments: Move nodal accounts to other lenders, and focus on merchant acquisition. Something that Paytm was doing for card payments over the last two years anyway. From nowhere in the card-based offline payments landscape, Paytm has now emerged as one of the top players.
Credit: The payment bank licence prohibited Paytm from entering into credit, so it had to work with lenders to give out loans. Now Paytm can double down on this business, build it responsibly, and abide by the digital lending guidelines of the central bank.
Insurance: Leverage the insurance broking licence and build insurance products that can be embedded with other financial services.
Broking: It is anyway one of the largest direct mutual fund distributors in the country; it can now focus on stock trading too. Interestingly, Paytm Money reported a net profit of Rs 42.8 crore in FY23.
“Paytm was always designed as a platform for customer satisfaction. Now, without the regulatory restrictions of being a bank, they can actually focus on building a super app,” said a founder of a fintech startup that competes with Paytm.
Read Our Detailed Coverage On The Paytm Crisis
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Juspay, Zoho, Decentro secure RBI nod for payment aggregator business: Two fintech startups Juspay and Decentro received the final licence to operate as payment aggregators on February 6.
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