Paytm,an Indian digital payments company, secures a significant legal victory following a notable investor withdrawal.
Paytm Regains Control Over Part of Its Business with RBI's Approval
In a significant development, digital payments giant Paytm has received "in-principle" approval from the Reserve Bank of India (RBI) to operate as an online payment aggregator. This approval marks a crucial step forward for Paytm, clearing one regulatory hurdle and allowing the company to handle transactions directly for merchants across cards, net banking, and UPI.
According to the National Payments Corporation of India (NPCI), Paytm held approximately 7% share of UPI volumes in June. This approval, however, will give Paytm more independence in shaping its online merchant services without relying heavily on external partners like Axis, HDFC, SBI, and Yes Bank.
The RBI's approval is conditional on the completion of a system audit, including a cybersecurity review, within six months. Failure to complete the system audit within the given timeframe could result in the loss of the license.
Paytm's share price has climbed over 13% this year, reflecting the optimism surrounding the company's future prospects. The approval comes a week after Ant Group, a Chinese investor, sold its remaining 5.8% stake in Paytm, following an earlier, larger exit last year.
As of mid-2025, PhonePe is the market leader in India's UPI ecosystem, holding the largest share by volume of transactions, followed by Google Pay in second place, and Paytm in third. PhonePe commands around 46% market share with approximately 8.9 billion UPI transactions in July 2025, processing about ₹12.2 trillion in value. Google Pay holds about 35.5% market share with roughly 6.9 billion transactions and ₹8.9 trillion in value. Paytm trails with around 7% market share, processing about 1.36 billion transactions worth ₹1.43 trillion in the same period.
The competition in the fintech industry remains intense, with newer UPI third-party apps like Navi and Super Money growing but still holding relatively minor shares compared to the big three. Compliance and trust are as important in the business as speed and scale.
The denial of Paytm's application to become a payment aggregator by the RBI in November 2022 prevented the company from onboarding new online merchants, potentially affecting its reach. The denial was due to rules around foreign investment from countries sharing a land border.
Paytm's focus on expanding its user base and merchant partnerships, while third in the market, remains a key strategy for the company. PhonePe's leadership is supported by its extensive merchant network and wide user base, while Google Pay maintains significant transaction volumes partly due to its integration with Google ecosystem services.
In summary, PhonePe leads India’s UPI market in transaction share and value as of mid-2025, Google Pay holds a strong second position, and Paytm continues as the prominent third player, collectively dominating India's rapidly growing UPI payments landscape. The total monthly UPI transactions hit a record 19.46 billion in July 2025, with a total value surpassing ₹25 trillion, indicating rapid adoption and expansion of digital payments.
In the wake of RBI's approval, Paytm can leverage technology to shape its online merchant services, increasing its independence in the competitive fintech industry. This development in Paytm's business strategy, following the approval, could potentially impact its position in the finance sector, as it moves away from relying heavily on external partners.
