Shares of One97 Communications, parent of Paytm, lost more than half of their value between Jan. 31 and Feb. 14 as news broke that the government was gearing up to suspend the Indian payment provider's banking license over allegations of "persistent non-compliance and continued material supervisory concerns". The share price recovered slightly - but only briefly - on Feb. 7 after media reports that CEO Vijay Shekhar Sharma had met with India's finance minister and the country's central bank. Media reported that lax customer identity checks had led to money laundering, fraud and other misuse on the platform while at the same time, the entity's banking division wasn't properly shielded from the business risk of other parts of the company. Paytm has denied this. Since 2017, the company has been penalized and put on notice by regulators repeatedly, however.
Confusion around what the government's decision means for users is rife in the country. Paytm was told to not accept new deposits into accounts or digital wallets starting from March 1 while the BBC reports that any outgoing transactions could still be made after that date and that Paytm could still act as an intermediary payment provider between non-Paytm accounts. On its website, the company is touting that its payment app is still working "and will keep working beyond Feb. 29, 2024" - showing confidence that it can resolve the issue at hand.
Paytm is a pioneer of digital payments in India. Founded in 2010, it offers mobile payments between accounts, to physical vendors and in the form of bill payments. In a country where card payments hadn't caught on yet, the service quickly rose to prominence and - backed by investments from Softbank and others - accomplished 100 million registered user in 2015 and India's biggest IPO at the time in 2021. It has more recently branched out into payment terminals, e-commerce payments, microloans and buy-now-pay-later schemes, acquiring its banking license in 2017.
