Paytm app may face a permanent loss of integrated mobile wallet feature

RBI unlikely to issue new wallet licence due to previous track record: Sources

The Paytm application (app) could potentially face a permanent loss of its integrated mobile wallet feature, currently owned by Paytm Payments Bank (Paytm PB). With the recent crackdown on Paytm PB, sources say the Reserve Bank of India (RBI) is unlikely to grant a fresh wallet licence to Paytm, given its past track record.

“The Paytm app (One97 Communications) has to apply afresh to the RBI for a licence to operate a prepaid payment instrument (PPI) like a mobile wallet within the Paytm app, as PPI is a regulated entity. RBI checks the promoter’s credentials and past track record of the company before issuing a PPI licence. In the case of Paytm, that will not help obtain a wallet licence,” said an official source.

An email query sent to Paytm remained unanswered until the time of going to press.

Paytm was the first to launch a mobile wallet in 2014 and commands the largest market share for wallet-based transactions.

Business Standard reported on February 16 that of the 350 million wallet users of Paytm PB, 300 million have a zero balance, and 50 million have a balance in their wallets and have been active in the past year.

The RBI cancelled the mobile wallet licence of Paytm on July 25, 2017, at the request of the company.

“The entity has transferred its PPI business (Paytm wallet) to Paytm PB as permitted by RBI,” reads a notification on the RBI website.

While the wallet started with mobile recharges and bill payment options, it has been increasingly used for recharging FASTag for making toll payments.

Paytm PB is the third-largest issuer of FASTags in India after IDFC First Bank and ICICI Bank.

“Paytm claims over 60 per cent volume share in person-to-merchant wallet transactions. Of 50 million active wallets, 18 million of those would be towards FASTag. With the RBI guidelines, the wallet-related business would have to shift to other banks. Given 1.5-2 per cent merchant discount rate on FASTag and 15-18 basis points on the wallet, this can mean Rs 200-300 crore of revenue loss, perhaps matching what Paytm earlier quoted,” said Parijat Garg, a digital lending and financial technology consultant.

On Friday, RBI, issuing the frequently asked questions, clarified that people can continue to use money from the wallet “up to the balance available” even after March 15. However, they will not be able to top-up or transfer money into the wallet or receive any credits, other than cashbacks, or refunds into this wallet after March 15.

Earlier on January 31, the RBI had announced its decision to shut down most of Paytm PB’s operations, including deposits, fund transfers, and its popular digital wallets, citing “persistent non-compliance and continued material supervisory concerns”.

“People were initially afraid of keeping money in their wallets. Paytm started the concept of cashback, buy-one-get-one-free movie ticket, and discounts for recharges. It changed the behaviour of customers, and that’s why other players came into the market. Unfortunately, with this development, if they don’t have the wallet, consumers will move towards other alternatives,” an industry executive said.

Paytm wallet: A timeline

2009:

>>Vijay Shekhar Sharma starts Paytm as a prepaid mobile and direct-to-home recharge platform

2014

>>Paytm launches the digital wallet service after receiving Reserve Bank of India (RBI) licence for semi-closed wallet

2017

>>Paytm receives licence from RBI to launch Paytm Payments Bank. The wallet is transferred to the Payments Bank from Paytm

>>Paytm Payments Bank launches Paytm FASTag across India

2020

>>Paytm launches its initial public offering, one of the largest in India

2024

>>RBI asks Paytm Payments Bank to shut down most of its operations. Customers cannot top-up wallet after March 15