By Dhanya Skariachan, Dhwani Pandya and Praveen Paramasivam
BENGALURU/MUMBAI/CHENNAI, India (Reuters) – Hit by tough regulatory crackdowns, Indian e-commerce giant Paytm is mobilizing its sales team to reassure merchants who use its app to accept digital payments, even as Walmart and Google target those same merchants with rival offerings.
Once cash was king in India, but Paytm is being seen as a disruptor in India’s digital payments market, which is expected to reach $10 trillion by 2026. Backed by SoftBank and previously by billionaire investor Warren Buffett and China’s Alibaba, the service has 100 million monthly users and recorded $61 billion in merchant payments between October and December.
But many merchants are now refusing to do business with Paytm after India’s central bank last week asked its banking arm – which is primarily behind the popular payments app – to shut down most of its operations from March 1 due to “persistent non-compliance”.
In the southern state of Telangana, around 2,000 shops have put up signs saying “No Paytm, pay cash,” and some have even covered the Paytm QR code that customers scan to pay, said Mohammed Salahuddin, a member of a local retail association.
“I have decided to stop using Paytm. Customers have to pay in cash,” he said.
To address such concerns, the company is sending sales staff directly to customers – from street food vendors to large retail stores – and asking them to use Paytm’s partner banks so they can continue to receive payments, more than 40 shop owners and several sales staff at the company said.
“We are getting a lot of calls from merchants,” said a Paytm team leader in Chennai, adding that each seller there is tasked with visiting at least 10 stores every day.
In a statement to Reuters, Paytm said customers were continuing to use the app. The company is currently onboarding more merchants and there will be “no disruption” for merchants, who can “seamlessly transition to other partner banks.”
However, with around 15% of Paytm’s 40 million merchants to be migrated, the company said last week that it would be a “major exercise”.
Moreover, very few shop owners in India are tech-savvy, which adds to the challenge.
Rivals cash in
Paytm dominated digital payments in India, but since the crackdown, its share price has fallen 39 percent, wiping out $2.3 billion in value, potentially creating an opportunity for larger rivals like Walmart and Google.
Paytm app downloads fell 20% last week compared to the previous week, data from market research firm Sensor Tower shows, while rival apps like Walmart’s PhonePe and Google Pay saw an average growth of 52%. PhonePe, in particular, saw a 76% download growth.
A Reuters reporter received a push notification from Google Pay on Sunday asking him to migrate his mobile number linked to Paytm for bank transfers. An industry source said many merchants were rushing to sign up with Google. Google said in a statement that it was supporting merchants and users.
PhonePe, which offers many similar services to Paytm, took out front-page advertisements targeting merchants in newspapers, saying, “Business is best when it is done through PhonePe.”
PhonePe said in a statement that the company is seeing a significant surge in demand for its payment offerings, including its speakers: tiny devices that help retailers with digital deficits and simplify payment tracking.
The speakers, which notify merchants when payments are received through acoustic signals, were developed by Paytm with its Soundbox, which is used by around 7 million Indian merchants.
Neil Shah, director at Counterpoint Research, estimates that Paytm’s competitors – PhonePe’s SmartSpeaker and Google’s Soundpod – have around 3 million such devices in India.
“This is where PhonePe and Google can now strike,” he said. “Paytm’s sound box and service have been a key retention factor for Paytm, contributing to its success.”
(Additional reporting by Rishika Sadam in Hyderabad, Munsif Vengattil, Euan Rocha and Nandan Mandayam in Bengaluru; Editing by Aditya Kalra and Miral Fahmy)
