Reserve Bank of India bans Paytm payments bank onboarding

Indian regulators have forced the country’s payments giant to pause the onboarding of new customers during an IT audit. This is the second time Paytm has faced such a ban in five years.

Why should we care?
Paytm’s woes are part of a larger regulatory wave facing payments giants across Asia. Much like WeChat Pay’s conflicts with China’s central bank, Paytm’s struggles have complicated the company’s path to a more sustainable regulatory standing. Paytm is eligible to upgrade from its status as a “payments bank” to that of a “small finance bank” in May, which would let it accept deposits of more than INR 200,000 ($2,612.6). The RBI’s onboarding ban suggests it may reject Paytm’s application for such a license. Paytm will have a steep uphill battle to profitability without that added depth; its most recent quarterly net margin was -53.5%. Much like Tencent, Paytm is now facing a stock selloff, having tumbled more than 20% in the last two days of trading. This volatility may further discourage Indian fintechs from entering the public market, making for an intentionally private and under-the-radar fintech landscape in the country. Tensions between India and China complicate Paytm’s financial standing as well; Ant Group and Alibaba own 31% of Paytm. Paytm may be used as a pawn in India’s standoff with its neighbor, affecting investors on both sides of India and China’s disputed border.