Paytm gets permission to add new UPI users after 8 months ban: Everything we know about it

Paytm has received approval from the National Payments Corporation of India (NPCI) to add new users to its Unified Payments Interface (UPI) platform after an 8-month ban. This approval came on October 22, 2024, following Paytm’s compliance with several regulatory guidelines. According to Paytm’s BSE filing, the company will have to strictly adhere to NPCI guidelines, including those relating to risk management, app branding and customer data. The approval comes as a relief to Paytm, which has been unable to onboard new UPI users since early 2024 due to regulatory issues.

Why was Paytm banned?

The root cause of Paytm’s inability to onboard new UPI users started in January 2024. The Reserve Bank of India (RBI) issued guidelines, citing non-compliance with certain operational guidelines as the reason. Specifically, the ban was imposed due to concerns over Paytm’s management of risk-related processes and its compliance with data protection regulations. Reports indicated that Paytm had issues with storing customer payment data and was not fully compliant with certain risk management practices required by regulatory authorities.

The move affected the company’s ability to expand its UPI user base, which was crucial in the growing digital payments industry. During the ban, Paytm had to focus on resolving these issues, working closely with regulators to meet the necessary standards.

How has the ban affected Paytm?

Paytm’s inability to grow its user base has led to a sharp decline in its market share in UPI transactions. Before the restriction, Paytm had a 13 percent share of UPI payments. However, in the absence of new users, its market share fell to 8 percent. During this period, competitors like Walmart-owned PhonePe and Google Pay have strengthened their hold on the UPI market. Together, these two players now process around 87% of UPI transactions in India, leaving Paytm with a much smaller slice of the pie.

What’s next for Paytm?

Now that the ban has been lifted, Paytm is expected to regain momentum in the UPI space. However, the approval comes with strict conditions and Paytm will have to closely follow NPCI guidelines such as ensuring better risk management, complying with customer data protection laws and working in a multi-bank setup to its UPI transactions.

The lifting of the ban is a critical moment for Paytm, which will be eager to regain lost ground in India’s growing digital payments landscape. While it may take time for Paytm to fully catch up with its competitors, the NPCI approval is a positive sign, providing the company with a new opportunity to once again expand its UPI user base.