Paytm Payment Bank Shifts Bill Pay to Euronet Amid Regulatory Shifts

The Paytm Payment Bank Limited (PPBL) has shifted its bill payment services to Epay India, the digital payment unit of US-based payment services firm Euronext Worldwide. This shift marks a significant transition enabling the platform to offer comprehensive bill payment services through its application.

Following the Reserve Bank's directive for Paytm Payment Bank to cease its services, they needed to transition to another provider, with Euronet reportedly assuming control of the business.

Euronet's Integral Role in Indian Payment Technology

Euronet, an American payment technology company, has been instrumental in handling backend settlement systems for various digital payment modes in India. This partnership underscores the increasing reliance on digital payment infrastructure provided by global players.

This move follows PPBL's recent transitions, including the relocation of its retail point of sales business to RBL Bank and the settlement business for merchant payments to Axis Bank. Previously, the fintech firm leveraged the license of its associate entity, PPBL, to offer bill payment services.

Now onwards, the payments settled by PPBL will be done via Euronet. The backend engine for all major bill payments in India is powered by Bharat Billpay, a subsidiary of National Payments Corporation of India (NPCI).

However, the Reserve Bank of India (RBI) diktat on January 31 prohibited the partner entity from carrying out any banking services like fund transfers, Bharat Bill Payment Operating Units (BBPOU) and UPI facility post February 29, 2024. The deadline was later extended to March 15.

Michael Brown, CEO at Euronet Worldwide, said, “Paytm in India ran into a regulatory issue that impacted its ability to onboard new customers and operate its stored value wallet. Epay leveraged its regulatory licenses, network connections and infrastructure to help Paytm resolve this issue in a timely fashion, thereby minimizing customer interruption. Epay's traditional business with Paytm involves only the distribution of Google Play credit. So as I'm sure you can appreciate, we are pleased that Paytm decided to expand our partnership to include prepaid mobile airtime, satellite TV recharges and bill payments in addition to Google Play credit.

"...epay is more than just a content distribution business. It is a diverse dynamic business with growth opportunities in several new and existing markets, and we will continue to develop and promote new products and solutions that supplement our core offering while providing opportunities for continued growth into the future.”

Brown said this during the firm's earning call to discuss the financial results.

The History of Euronet in India

For more than ten years, the US-based company has been active in India through its subsidiary, Euronet Services India, providing a wide array of payment and transaction processing solutions. These comprehensive services cater to diverse stakeholders including financial institutions, retailers, service providers, and individual consumers. Among its offerings are ATM, POS, and card outsourcing services, card issuance, and merchant acquisition services. Additionally, the company provides software solutions, facilitates money transfers, and engages in the electronic distribution of prepaid mobile phone credits and other prepaid products.

In 2016, the company secured in-principle approval from RBI to function as an operating unit under the Bharat Bill Payment System (BBPS). This endorsement solidified its position in India's payment landscape, enabling it to expand its operations and enhance its service offerings to meet the evolving needs of the market.

Compliance Challenges and Regulatory Impact

The regulatory constraints imposed by the RBI on January 31 necessitated a shift. The mandate prohibited the partner entity from conducting banking services post-February 29, 2024. Although the deadline was extended to March 15, it prompted swift action from PPBL.

Data from Bharat Billpay reveals a substantial surge in bill payments settled by Euronet, indicating a more than fourfold increase from January to March. Bharat Bill Payment System (BBPS) is an RBI-mandated integrated bill payment platform that enables payment and collection of bills, including electricity, phone, DTH, water, gas insurance, loan repayments, FASTag recharge, education fees, credit card bill and municipal taxes, through multiple channels.

According to data shared by Bharat Billpay, in March, Euronet settled around 19 million consumer-facing bill payments, a more than fourfold rise from 4.6 million in January, buoyed by the pact with Paytm.

Bill payments on PPBL slumped to 2.7 million from 16 million in January, a decline of 83%.

Organizational Implications for Paytm

The challenges faced by PPBL have reverberated throughout its parent organization, Paytm, owned by One 97 Communications (OCL). The departure of several senior executives, including the resignation of Bhavesh Gupta, Chief Operating Officer, underscores the operational turbulence.

Financial Ramifications and Market Response

The financial implications of these transitions are significant. Shares of One97 Communications witnessed fluctuations, with a surge of 4.99% on May 9, 2024, attributed to the strategic partnership. However, the broader market sentiment remains cautious, as evidenced by the continuous decline in Paytm's stock value.

Another Setback for Fintech: Lending Sector Woes and Regulatory Scrutiny

In addition to operational challenges, Paytm's lending services faced another setback due to repayment defaults, leading to lenders such as Aditya Birla Finance, Piramal Finance, and Clix Capital terminating partnerships. The invocation of loan guarantees further exacerbates Paytm's financial predicament amidst regulatory scrutiny.

The partnership between PPBL and Euronet signifies a strategic pivot in the face of regulatory constraints, aiming to sustain bill payment services amid operational upheavals. As Paytm grapples with organizational restructuring and financial challenges, its ability to adapt to evolving market dynamics will determine its resilience in the competitive fintech landscape.

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