Paytm, the Indian digital payment company, emerges victorious in a significant regulatory dispute following a major investor's departure.
In a significant move for the Indian fintech industry, the Reserve Bank of India (RBI) has granted Paytm an "in-principle" approval to operate as an online payment aggregator. This approval marks a significant step in clearing a regulatory cloud for the digital payments giant.
With this new license, Paytm can now handle transactions directly for merchants across cards, net banking, and UPI, offering more independence in shaping its online merchant services without relying heavily on external partners.
However, the approval comes with conditions. Paytm must complete a system audit, including a cybersecurity review, within six months. Failure to meet this deadline will result in the loss of the license.
Despite this approval, Paytm's position in the UPI market remains much smaller compared to the top two players, PhonePe and Google Pay. As of July 2025, PhonePe leads the market with approximately 46% market share by transaction volume, processing around 8.93 billion transactions worth ₹12.20 trillion. Google Pay holds the second position with roughly 36%, handling 6.92 billion transactions valued at ₹8.91 trillion. Paytm ranks third, with about 7% market share, processing 1.36 billion transactions worth ₹1.43 trillion.
The combined market share of PhonePe and Google Pay accounts for over 81% of UPI transactions by volume, indicating a duopoly with Paytm trailing significantly behind. The UPI ecosystem in India continues to grow rapidly, with a record 19.46 billion transactions in July 2025 valued at ₹25.08 trillion overall.
The competition in the fintech industry is intense, and profits can be fleeting. Paytm's share price has climbed over 13% this year, but its position in India's hyper-competitive UPI space remains behind PhonePe and Google Pay, which together handle over 80% of transactions.
Despite the denial of its application for a payment aggregator license by the RBI in November 2022, due to rules around foreign investment from countries sharing a land border, Paytm has made a comeback. This approval regains control over a part of its business it had to outsource to partner banks like Axis, HDFC, SBI, and Yes Bank after earlier restrictions.
It's important to note that the RBI's approval pertains only to online payments; offline services like Paytm's sound boxes remain unaffected for now. The approval also comes a week after Ant Group, a Chinese investor, sold its remaining 5.8% stake in Paytm, following an earlier, larger exit last year.
Sources:
- Livemint
- The Economic Times
- Business Today
- The Times of India
- The Financial Express
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