India's three-way payment channel: 'Alipay India', collapses

The financial furore surrounding Paytm

Recently, Paytm, known as "India's Paypal", suffered a series of stock market plunges, approaching record lows. A number of international media outlets, including Bloomberg, reported that the company's stock fell sharply after the government suspended some of its operations due to regulatory violations. As of 5 February, the stock was near all-time lows, with the company's market value evaporating by about $2.5 billion in just three trading days.

Most of Paypal India's operations are suspended.

Founded in 2010, Paytm is India's largest payment platform. With more than 300 million registered users, accounting for more than half of India's internet users, and more than 20 million merchants, Paytm has evolved into a full-service financial services platform covering digital payments, insurance and credit. However, the company is yet to turn a profit. As of now, its market capitalisation has fallen by about $80% from its IPO price at the end of 2021.Last November, Warren Buffett's Berkshire Hathaway exited the company altogether, with the US media calculating an investment loss of $40%.

CNN and Reuters, among others, reported that the Reserve Bank of India found multiple regulatory violations last week while reviewing Paytm Payments Bank. The RBI found that tens of thousands of accounts had been created without proper identification documents, raising concerns that they could be used for money laundering, sources said.

The Indian regulator has ordered the suspension of most of its operations. India's anti-fraud agency has begun an expanded investigation into Paytm's violations of foreign exchange laws after the RBI demanded the cessation of certain services.

In response to the RBI investigation, Paytm went into "fire-fighting" mode, trying to calm investors and more than 300 million users. The company promised to "take immediate steps" and "comply with regulatory guidelines", held a conference call and released a statement to Bloomberg, said its CEO is not under investigation for money laundering.

However, these efforts failed to stop the crisis from spreading.The crisis faced by Paytm is still escalating. Brijinkumar, head of research at Ventura Securities India, said Paytm's brand image has been severely damaged and the suspension of credit operations could lead to a collapse in profitability. He added: "Getting back on track will take time. The fate of the stock is unpredictable amidst intense scrutiny by regulators and intervention by investigative agencies, and we need a white horse rider to save its fortunes."

India's largest bank, State Bank of India, announced on Saturday that it will offer services to merchants and retailers through its payments subsidiary SBI Payment to resolve the uncertainty surrounding Paytm. Business Line reported on Monday that Paytm was in exploratory talks with HDFC Bank and Jio Financial Services for a possible sale of related businesses to resolve the crisis.

What is the future of Paytm? According to a report in the Economic Times of India on 6 June, sources have speculated that Jio Financial Services, owned by India's richest man, Ambani, may acquire Paytm's payments bank.Paytm has issued a statement terming the rumours as "baseless".

Indian media reports that the official position on the Paytm affair remains unclear. The Hindustan Times reported on 5 May that the Indian National Congress party, whose founder is a staunch supporter of Indian Prime Minister Narendra Modi, has questioned the Enforcement Directorate's investigation into Paytm. Congress leader Supriya Shrinate asked, "What is the position of the central government on this issue? Why is the Enforcement Directorate silent?"

Source | Global Times

Audit | Sasha Yang

Editor | Lai Ka Chai

Proofreader | Cui Jin Yue