RBI crackdown on Paytm spooks retailers; Walmart, Google swoop in

Bengaluru/Mumbai/Chennai: Hit by a regulatory crackdown, India's Paytm is mobilizing its sales team to reassure the merchants who use its app to accept digital payments just as Walmart and Google are targeting those same vendors with their rival offerings.

Cash was once king in India, but Paytm is credited with revolutionising India's digital payments market which is set to be worth Rs 8,30,60,150 crore by 2026. Backed by SoftBank, and earlier by billionaire investor Warren Buffett and China's Alibaba, it has 100 million monthly users and clocked Rs 5,06,647 crore worth of merchant payments between October and December.

But many merchants are now refusing to deal with Paytm after Reserve Bank of India (RBI) last week asked its banking unit - which mainly powers the popular payments app - to cease most operations from March 1 for "persistent non-compliance".

Paytm sending salespeople door-to-door to assuage concerns

In Telangana, around 2,000 shops have put signs saying "No Paytm, Pay Cash", and some have even covered up the Paytm QR code which customers scan for payments, said Mohammed Salahuddin, a member of a local retailers association.

"I have decided to avoid using Paytm. Customers have to give cash," he said.

To counter such concerns, the company is sending sales staff directly to customers ranging from roadside snack sellers to big retail outlets to ask them to use Paytm's partner banks so that they can continue to receive payments, more than 40 shopkeepers and several company sales staff said.

"We are receiving a lot of calls from merchants," said a Paytm team leader in Chennai, adding that each salesperson there is tasked with visiting at least 10 shops daily.

In a statement to Reuters, Paytm said customers continued to use its app, adding it is onboarding more merchants and "there will be no disruptions" for vendors who "can seamlessly be transitioned" to other partner banks.

However, with about 15 per cent of Paytm's 40 million merchants needing to be migrated, the company last week said it would be a "large exercise".

Very few shopkeepers in India are also tech savvy, which adds to the challenge.

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Rivals cash in

Paytm has dominated digital payments in India but since the crackdown its stock has plunged 39 per cent, wiping Rs 19,103 crore off its value. That has potentially created an opportunity for bigger rivals including Walmart and Google.

Paytm app downloads fell 20 per cent last week, versus the previous week, data from market intelligence firm Sensor Tower shows, while rival apps including Walmart's PhonePe and Google Pay recorded an average 52 per cent growth. PhonePe in particular registered a 76 per cent downloads growth.

A Reuters reporter on Sunday received a push notification from Google Pay to migrate his Paytm-linked mobile number for bank transfers, and an industry source said many merchants were rushing to register with Google. Google said in a statement that it was supporting vendors and users.

PhonePe, which offers many services similar to Paytm's, took out front-page newspaper advertisements targeting merchants, saying: "Business runs best when it runs on PhonePe".

PhonePe, in a statement, said it was seeing a surge in demand for their payment offerings, including its speakers: tiny devices that help digitally challenged retailers and eases payment tracking.

The speakers - which give audio alerts to vendors when payments are received - were pioneered by Paytm with its Soundbox that is used by about 7 million Indian merchants.

Neil Shah, director at Counterpoint Research, estimates Paytm's rivals - PhonePe's SmartSpeaker and Google's Soundpod - have around 3 million such devices in India.

"This is where PhonePe and Google can now hit," he said. "The Soundbox and service from Paytm has been a major stickiness factor for Paytm which contributed to its success."

—Reuters