Paytm's UPI Market Share Hits Four-Year Low Amid RBI's Regulatory Woes, Shares Slump; Buy Or Not?

One97 Communications Ltd (OCL), the parent company of the popular Paytm app, has encountered a notable decline in its Unified Payments Interface (UPI) market share, plummeting to 9% in March, as per data disclosed by the National Payments Corporation of India (NPCI) and cited by Moneycontrol. This downturn marks the lowest level witnessed by Paytm in the past four years, signifying a significant setback for the digital payment giant.

The downward spiral began with a drop to 11% in February, down from the previous month, largely attributed to stringent regulatory restrictions imposed on its affiliate, Paytm Payments Bank Limited (PPBL), by the Reserve Bank of India (RBI). The regulatory hurdles have seemingly continued to impede Paytm's market standing, resulting in a gradual erosion of its UPI market share.

NPCI commenced disclosing UPI app transaction volume and value in April 2020, with the recent data reflecting Paytm's lowest market share since this disclosure initiative took effect. In February, Paytm witnessed a decline in its UPI market share to 11%, down from 11.8% in January.

Furthermore, the mobile payment behemoth has also experienced a decline in its transaction value market share, currently resting at 6.7%, marking its lowest point in recent years. This contrast comes on the back of Paytm maintaining a relatively stable market share of approximately 9% in transaction value throughout 2023.

PhonePe has emerged as the dominant player in the UPI market, boasting a volume market share exceeding 50% for the past two months. Similarly, Google Pay has secured the second position, witnessing a modest increase in its market share over the last year.

The narrative surrounding Paytm's market performance has evolved significantly over the years. In 2020 and 2021, Paytm retained a relatively stable market share of around 11-125 in transaction volume, which it marginally increased to 13% before encountering the recent decline. Notably, in 2018 and 2019, Paytm enjoyed a market share in UPI transactions, hovering around 40%.

An important moment for Paytm came on March 15, when it transitioned from operating as a payments bank app to functioning as a third-party application provider (TPAP), akin to competitors like PhonePe and Google Pay. This shift is believed to have contributed to the decline in its market share. To facilitate this transition seamlessly, Paytm has enlisted the support of Axis Bank, Yes Bank, SBI, and HDFC Bank as its payment service provider (PSP) partners for the TPAP service, replacing PPBL, which previously fulfilled this role.

The shares of Paytm were seen trading with cuts of more than 2% at Rs 396 per share as of 11:20 am on the National Stock Exchange (NSE). In the last one year, Paytm has lost nearly 40%.