Troubled Indian Fintech Paytm Wins Reprieve With Axis Deal

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Struggling fintech firm Paytm agreed on a new banking partnership with Axis Bank Ltd., giving India’s answer to PayPal a better shot at staying in business after a raft of regulatory concerns.

Lender Axis will step in to replace affiliate Paytm Payments Bank as the backbone for Paytm’s merchant payments settlement business, the company said Friday. Paytm Payments Bank, until recently Paytm’s key partner, is facing regulatory action that threatens much of its operations.

The pact is a victory for Paytm’s billionaire founder Vijay Shekhar Sharma, who is trying to stabilize his business after the surprise curbs by regulators shocked the company and India’s fintech industry. Axis, one of India’s top banks, gains payments volume by riding on the ubiquitous Paytm QR codes and card machines by a brand name that’s synonymous with digital transactions in the country.

Paytm has seen its shares lose more than 50% of their value since regulators late last month ordered Paytm Payments Bank to halt its key operations, citing non-compliance. The restrictions were a blow to Paytm’s reputation and prompted analysts to speculate that digital payments customers may defect to rivals such as Walmart Inc.-owned PhonePe.

Read more: Macquarie Says Paytm Faces Serious Risk of Customer Exodus

Axis Bank will become Paytm’s so-called nodal account, used for clearing merchant transactions. The partnership will likely boost the confidence of merchants on the Paytm platform as they will continue to receive settlements without disruptions.

Paytm still likely needs further partners, including to help run peer-to-peer transactions.

Earlier Friday, India’s banking regulator gave Paytm Payments Bank until March 15 before it needs to wind down much of its business. The Paytm banking affiliate has operated functions such as payments and digital wallets for the broader Paytm empire.

Paytm Payments Bank is 49% owned by Paytm, whose official name is One97 Communications Ltd. Sharma personally owns the remaining 51%. The Reserve Bank of India suspended much of the tightly regulated payments bank’s business partly because of its questionable dealings with the broader fintech company.

--With assistance from Anup Roy.

(Updates with detail on Paytm’s structure in eighth paragraph)

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