The Rise and Fall of Paytm | Between the Lines with Palki Sharma
Summary
TLDRPaytm, once India's leading digital payment platform, faces a downfall in 2024 as the Reserve Bank of India bans its payments bank over serious regulatory violations. Founder Vijay Shekhar Sharma's journey from humble beginnings to a fintech giant is overshadowed by Paytm's rapid user growth, IPO failure, and subsequent unraveling due to non-compliance and security lapses, highlighting the consequences of disregarding regulatory standards.
Takeaways
- π² PTM, standing for 'Pay Through Mobile,' was a pioneer in India's digital payment system and became synonymous with mobile payments.
- π Founded by Vijay Shekhar Sharma, who rose from humble beginnings to become India's youngest billionaire, PTM had a significant impact on the fintech industry.
- π‘ PTM's initial success was in providing a platform for prepaid mobile and DTH recharges, which later expanded to include debit card and post-paid mobile payments.
- π‘ The introduction of the PTM wallet in 2014 was a game-changer, allowing users to pay bills and complete transactions with ease, which rapidly increased its user base.
- π Despite its rapid growth and popularity, PTM faced a significant setback in 2024 when the Reserve Bank of India barred it from banking activities due to regulatory violations.
- π PTM's growth was further fueled by India's demonetization in 2016, which pushed people towards digital payments, making PTM a household name.
- π PTM's IPO in November 2021 was the biggest in India's history, raising around $2.3 billion at a valuation of $20 billion, but it was also marked by a significant drop in share price on the first day of trading.
- π¨ PTM Payments Bank, a subsidiary of PTM, faced multiple regulatory issues, including non-compliance with KYC guidelines and cybersecurity concerns, leading to fines and restrictions.
- π¦ The RBI's ultimate decision to ban PTM from all banking activities in 2024 was a result of unresolved issues and a lack of serious corrective measures by the company.
- π The ban has led to a mass migration of PTM users and merchants to other platforms, and lending partners are distancing themselves from PTM, highlighting the consequences of regulatory non-compliance.
- π The story of PTM serves as a cautionary tale about the importance of adhering to regulations and the potential downfall of even the most successful companies if they take the rule book for granted.
Q & A
What does PTM stand for?
-PTM stands for 'pay through mobile.'
Who is the founder of PTM?
-The founder of PTM is Vijay Shekhar Sharma.
What significant event in 2016 contributed to PTM's rapid growth?
-The demonetization in India in 2016, which led people to turn to digital payments, significantly contributed to PTM's rapid growth.
What was the initial purpose of 197 Communications, the parent company of PTM?
-197 Communications initially offered digital goods and services.
When did PTM introduce its wallet system, and what was its impact?
-PTM introduced its wallet system in 2014, and it was an instant hit, leading to rapid growth in user base and popularity.
What were some of the services PTM expanded into after its initial launch?
-PTM expanded into services like mobile payments, electricity bill payments, Metro card fees, water bill payments, movie and flight tickets, gold, insurance, and remittances.
What major milestone did PTM achieve in November 2021?
-In November 2021, PTM launched its Initial Public Offering (IPO), which was the biggest IPO in India's history.
What issues led to the decline of PTM's payments bank?
-Issues like multiple regulatory violations, non-compliance with KYC guidelines, breaches in technology and cyber security, and concerns about money laundering led to the decline of PTM's payments bank.
What actions did the Reserve Bank of India (RBI) take against PTM's payments bank?
-The RBI barred PTM from banking activities, issued fines, and eventually banned PTM from all banking activities starting February 29, 2024.
What challenges is PTM facing as a result of the RBI's actions?
-PTM is facing challenges in securing its customers and lending partners, with many users migrating to other platforms and lending partners wanting to distance themselves from PTM.
Outlines
π± The Rise and Fall of Paytm: A Digital Payments Pioneer
This paragraph discusses the journey of Paytm, a digital payment system that became synonymous with mobile payments in India. Founded by Vijay Shekhar Sharma, who rose from humble beginnings to become India's youngest billionaire, Paytm started as a platform for prepaid mobile and DTH recharges. It expanded to include debit card and post-paid mobile payments, and its introduction of a wallet system in 2014 was a game-changer, gaining rapid user adoption. The 2016 demonetization in India further propelled Paytm's growth, making digital payments a necessity. By 2021, Paytm had 150 million active users and processed 1.2 billion transactions monthly, offering a wide range of services from ticket sales to insurance. The company's success attracted top investors like Alibaba, Ant Group, and SoftBank, leading to a record-breaking IPO in India in November 2021.
π Paytm's Downfall: Regulatory Challenges and Market Unraveling
The second paragraph delves into the challenges faced by Paytm, particularly focusing on its payments bank subsidiary, which has been barred from banking activities by the Reserve Bank of India due to serious regulatory violations. The company's IPO in 2021 was a failure, with shares dropping significantly below the initial offering price, leading to a loss of investor confidence. Paytm was criticized for being a 'cash guzzler' with concerns about its direction, scale, and profitability. The RBI's actions against Paytm payments bank, including fines and a halt on new account openings, highlight issues with KYC compliance, cybersecurity, and money laundering. The culmination of these issues has led to a significant migration of merchants and lending partners away from Paytm, painting a cautionary tale of a giant that fell due to disregard for regulatory compliance.
Mindmap
Keywords
π‘PTM
π‘Digital Payments
π‘Vijay Shekhar Sharma
π‘Demonetization
π‘IPO
π‘Regulatory Compliance
π‘KYC (Know Your Customer)
π‘RBI
π‘Fintech
π‘Investors
π‘Unicorn
Highlights
PTM, an acronym for 'Pay Through Mobile', pioneered India's digital payment system.
Paytm's tagline 'PTM Karo' became a popular slogan, making it India's most celebrated fintech unicorn.
The Reserve Bank of India barred Paytm from banking activities due to regulatory violations.
Vijay Shekhar Sharma, Paytm's founder, had humble beginnings and became India's youngest billionaire.
Sharma's early education was in a government school, and he taught himself English at the age of 15.
After selling his first venture, indiasite.net, for $1 million, Sharma continued his entrepreneurial journey.
In 2010, Sharma launched Paytm with an initial investment of $2 million to disrupt the market.
Paytm started as a prepaid mobile and DTH recharge platform, expanding to include debit card and post-paid mobile payments.
The introduction of Paytm's wallet system in 2014 was a breakthrough, quickly gaining popularity.
India's 2016 demonetization led to a surge in digital payments, propelling Paytm's growth.
By 2017, Paytm became a giant with over 100 million downloads and millions of merchants as clients.
Paytm's IPO in November 2021 was the biggest in India's history, raising around $2.3 billion at a $20 billion valuation.
The IPO share price started trading lower than the offered price, leading to a significant loss in investor wealth.
Paytm faced regulatory issues with its payments bank, including KYC non-compliance and cybersecurity lapses.
The RBI imposed fines and restrictions on Paytm for multiple violations, culminating in a complete ban on banking activities.
Paytm's growth was due to its innovative and user-friendly services, but it overlooked regulatory compliance.
The story of Paytm serves as a cautionary tale about the importance of adhering to rules and regulations.
Transcripts
tonight we'll talk about PTM if you're
in India I'm sure you've heard of it and
most of you may have also used it but do
you know what it means PTM is an acronym
the full form is pay through mobile
paytm it pioneered India's digital
payment system it was synonymous with
paying by phone the tagline is PTM Karo
ptmo almost like a slogan that's how
popular this company became India's most
celebrated unicorn a mammoth fintech
giant but not any more PTM is off to a
rough start in 2024 its payments bank
has been given the death sentence it
came from India Central Bank The Reserve
Bank of India it has barred PTM from
banking activities no transactions no
wallet topups nothing and it has left
many asking what happened what is the PM
Story how did this company grow so big
and why did it fall hello and welcome
I'm py Sharma and this is between the
lines
[Music]
this man is the founder of patm his name
is Vijay shakar Sharma once India's
youngest billionaire although he had
truly humble beginnings this is a rags
to riches story sharma's Early Education
was in a government school he says he
could not speak in English till the age
of 15 now if you're in India it can be
an impediment to growth so Vijay Shar
Sharma says that he taught himself he
went to the Delhi Technological
University after graduation he could
have taken a 10 to five job but he chose
not to he set up something called indias
site.net
it clicked he sold it for $1
million then he rode the.com wave that
too was a
success in the year 2000 he took a loan
of 8 lakh rupees around
$99,000 to set up a company called 197
Communications that's the parent company
of PTM now initially 197 Communications
offered digital goods and services it
was doing well but not well enough for
its founder he wanted more in 2010 he
launched PTM with an initial investment
of $2 million Sharma wanted to disrupt
the market to get everyone to pay by
phone PM started off as a prepaid mobile
and dth recharge platform in 2013
expanded adding debit card and post-paid
mobile payments the big breakthrough
came one year later in 2014 PTM
introduced the wallet system it was an
instant hit Indian railways and Uber
added it as a payment option you could
pay your electricity bill your Metro
card fees and your water bill through
this one
wallet it was revolutionary the user
base grew rapidly in 2014 they had
around 11 million users by 2015 around
100 million
so it was gaining popularity and how but
cash was still King in
India in 2016 that changed India
demonetized 51,000 Rupee notes people
were left with no option really they
turned to digital payments and PM made
the most of it demonetization made it a
household name and
necessity digital payments surged and
with this surge PTM grew bigger by 2017
it was a giant the first payment app
with over 100 million downloads millions
of merchants signed up for it they
became PM clients they were issued QR
codes these codes were linked to their
bank accounts you could scan the QR and
pay no haggling for cash no waiting for
change it was simple and a GameChanger
more and more people signed up your auto
drivers your repair shops every business
small and big was coming on board by
2021 patm had 150 million active users
every month the company processed 1.2
billion
transactions it continued expanding
adding other services like tickets for
movies or flights selling gold Insurance
even remittances patm was doing
everything its investors were happy
we're talking about Alibaba the ant
group and soft bank they were the top
investors in PM they decided to take the
company public and in November 2021 patm
launched its IPO in India IPO is initial
public offering when you offer shares in
your company to public and this was the
biggest IPO in India's history
then PM raised about 18,300 CR rupees
that's around $2.3 billion at the
valuation of 20 billion
US it's like the company had a Midas
Touch everything it touched turned to
gold as if nothing could go wrong yet
everything did when trading began in
2021 PM's IPO share price was
2,150 rupees that's the price of one
share that was offered on November 18 PM
was listed on the Bombay Stock Exchange
the share started trading at around
1,950 rupees so it was already lower by
9% by noon it was trading at 1,800
Rupees at the closing bell it was at
1560 rupees so it closed at almost 27%
less than the initial
offering it was almost like a crash
40,000 CR rupees of investor wealth was
wiped out in a day 40,000 crores it's
more than the market cap of several big
companies the IPO was a huge failure it
was also the start of PM's unraveling
the company was called a cash guzzler
experts and investors were concerned
they were worried about lack of
Direction They questioned its scale they
questioned the profitability doubts
started creeping in which brings us to
the latest Saga the Crux of the problem
was the PTM payments Bank a subsidiary
of PTM it came into existence in 2017
the same year it got a banking license
and within months it faced its first
hurdle the bank got a regulatory strike
it was accused of multiple violations
non-compliance of kyc guidelines that's
a mandatory process of verifying client
identity kyc know your customer plus day
and balances were
breached so in June 2018 the RBI cracked
down it halted the opening of new
accounts patri responded a compliance
report was submitted and by the end of
that year the ban was lifted in 2021
things unraveled further RBI hit PTM
with a fine of 1 CR rupees they said the
bank had submitted false information and
the troubles did not end there by the
end of 2021 RBI found more violations
lapses in technology cyber security
concerns moneya laundering accusations
and no separation between the bank and
the group's other
entities so the RBI issued a directive
it told patm to stop on boarding new
customers it also called for an audit by
an external firm that audit happened but
the RBI was still not happy they said
patm was not serious about making amends
and they weren't taking corrective
measures so in October 2023 the RBI
slapped another fine this time the
penalty was worth 5.3
crores so six years multiple warnings
and two fines but the company did not
fix the problems by 2024 the RBI had
enough the violations were so serious
they could no longer ignore them several
accounts lacked
kyc know your customer regulations it's
mandatory for all banks in some cases
one identity proof was linked to
thousands of accounts there were
concerns about fraud corruption and
money laundering in some of these
accounts transactions ran up to
crores this was above the regulatory
limit yet all of it was being allowed so
the RBI issued its latest ultimatum the
deadline is February 29th after that PTM
is banned from all banking activities
which leaves the company with two big
challenges securing its customers and
its lending Partners PTM users
especially its 40 million Merchants are
migrating to other platforms and the
lending Partners want nothing to do with
PTM the RBI ban has made PTM Untouchable
it's a cautionary tale of how Giants
bite the dust patm grew because it was
on top of the Curve easy to use and
offered opportunities for everyone it
was like we said revolutionary but it
made one big mistake it took the rule
book for granted and that proved to be
its undoing I guess that's the lesson
here the law catches up no matter how
big you
[Music]
are
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