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India’s digital payment giant Paytm is facing a setback as it grapples with a regulatory crackdown. In response, the company is mobilizing its sales team to reassure merchants who rely on its app for accepting digital payments. This move comes as retail giants Walmart and Google are targeting the same vendors with their competing offerings.
Once a predominantly cash-driven economy, Paytm revolutionized India’s digital payments market, which is projected to reach a value of $10 trillion by 2026. With backing from SoftBank, billionaire investor Warren Buffett, and China’s Alibaba, Paytm boasts 100 million monthly users and facilitated $61 billion worth of merchant payments between October and December.
However, following a directive from India’s central bank, many merchants are now hesitant to deal with Paytm. The banking unit powering the popular payments app has been instructed to cease most operations from March 1 due to “persistent non-compliance.” In response, approximately 2,000 shops in Telangana state have put up signs rejecting Paytm and insisting on cash-only transactions. Some have even covered up the Paytm QR code used for payments.
To address these concerns, Paytm is dispatching its sales staff directly to various merchants, ranging from roadside snack sellers to large retail outlets, to encourage them to use Paytm’s partner banks. More than 40 shopkeepers and several company sales staff have confirmed this approach. Each salesperson in Chennai, for example, is tasked with visiting at least 10 shops daily to engage with merchants.
Paytm reassures customers that its app continues to be operational, and it is actively onboarding more merchants. The company pledges that there will be no disruptions for vendors who can smoothly transition to other partner banks. However, migrating approximately 15% of Paytm’s 40 million merchants remains a significant challenge, especially since many shopkeepers in India lack technological expertise.
Paytm’s stock has plummeted by 39% since the regulatory crackdown, resulting in a loss of $2.3 billion in value. This decline has created an opportunity for larger competitors such as Walmart and Google. Paytm’s app downloads dropped by 20% last week, while rival apps like Walmart’s PhonePe and Google Pay experienced an average growth of 52%. PhonePe, in particular, saw a remarkable 76% increase in downloads.
Google Pay has been actively encouraging Paytm users to migrate their mobile numbers for bank transfers, while PhonePe has taken out front-page advertisements targeting merchants. Both companies are capitalizing on their payment offerings and introducing devices similar to Paytm’s Soundbox, which has been instrumental in the company’s success with around 7 million Indian merchants. Counterpoint Research estimates that PhonePe’s SmartSpeaker and Google’s Soundpod have around 3 million such devices in India.
Despite the challenges, Paytm remains determined to address merchant concerns and maintain its position as a dominant player in India’s digital payments industry. With competition intensifying, Paytm faces an uphill battle to regain trust and retain its merchant base.
Paytm, India’s leading digital payment platform, has recently initiated a crackdown on merchants engaging in unethical practices. This move has left many merchants feeling apprehensive about the future of their businesses. However, amidst the crackdown, global giants like Walmart and Google are eyeing the same vendors to expand their own digital payment services. This development highlights the growing competition in the Indian digital payment market and the potential opportunities for merchants to explore alternative platforms. Additionally, it emphasizes the need for greater transparency and ethical practices within the industry.
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