Indian fintech Paytm’s woes appear to be far from over. The company reported on Friday that revenues fell 36% and its first-quarter loss more than doubled as it continues to grapple with a regulatory crackdown that has severely curtailed the business of its payments banking subsidiary.
Paytm, once a leading player in India's startup ecosystem, reported losses of $100 million in the first quarter ended in June, while revenues fell to $179.5 million from $280 million a year earlier.
Paytm reported a loss of $42 million in the first quarter last year and a loss of $65.8 million in the fourth quarter.
The decline in revenue is a direct result of the Reserve Bank of India ordering the company to shut down most of its operations at Paytm Payments Bank earlier this year, a subsidiary that handles most of the mobile payments the company relies on. This is the first quarter in which the full impact of the RBI’s crackdown on Paytm’s business has been apparent.
India's central bank has banned Paytm's Payments Bank from offering several banking services, including accepting new deposits and credit transactions, citing “continuous violations of rules”.
The move has forced Paytm to partner with other banks in India to continue offering some of its core services.
Paytm's stock initially fell as much as 4.4%, but has now recovered and is up 2.2%, suggesting investors have already priced in the impact. Paytm warned of a decline in revenue in the last quarter.
Paytm pioneered mobile payments in India, bringing hundreds of millions of people to its wallet app and enabling many of them to make their first digital transactions. But the company’s fortunes have waned in recent years as competition from Walmart-backed PhonePe and Google Pay intensified.
PhonePe and Google Pay process more than 86% of all transactions on UPI, the government-backed interoperable payment network. UPI has become the most popular way for Indians to transact online, processing more than 11 billion transactions every month. The surge in popularity of UPI has undermined the relevance of wallet businesses and consumer dependence on card networks run by Visa and Mastercard.
Paytm, which relies heavily on providing services to merchants, including issuing credit, said parts of its business were recovering and it was “showing a path to recovery”.
“This also demonstrates the continued trust our merchant partners and consumers have in our platform, and we appreciate the trust our stakeholders have placed in us,” a company spokesperson said in a statement.
