Vijay Shekhar Sharma Knows a Cosmetic Surgery Won’t End Paytm’s Woes

For a man who had everything and has lost much within months, Vijay Shekhar Sharma seems oddly relaxed. The 46-year-old founder of what was until recently India’s biggest fintech firm is back at the drawing board. After the Reserve Bank of India (RBI) shut down its banking arm—Paytm Payments Bank Limited (PPBL), the company had to give up a chunk of its core. But Sharma is not sour. “We should have understood better, we had responsibilities which we should have fulfilled better,” he admits, speaking before at a conclave earlier this month.  

When an audience member asks how he has handled the scathing criticism he and his company have faced after the RBI’s action, Sharma seeks refuge in a Bollywood cliche: “Haar Kar Jeetne Wale Ko Baazigar Kehte Hain.” Sharma makes it clear he is not down and out, that he is willing to take accountability for what went wrong and move on.   

“[The] ambition is to build a $100 billion company,” he says, and adds that Paytm’s game “won’t be over” until the company has made a mark on foreign lands. His remarks come as Paytm plans shutdowns of multiple ventures that the company believes are not part of its core.  

Willing To Let Go   

In June, reports surfaced that Paytm was considering the sale of its events and ticketing business—Paytm Insider—to food delivery giant Zomato. Earlier this year, the company let go of 3,500 employees. Multiple top-level executives of its unified payments interface (UPI), merchants and consumer payments verticals have quit the company, including Bhavesh Gupta, the chief operating officer (COO) and president.  

The company says it is achieving “significant cost efficiencies through [artificial intelligence] AI-led capabilities, a leaner organisation structure and pruning of non-core businesses.”  

Driven By Distribution 

At the heart of Paytm’s overhaul plan is a shift from a products-based model to a distribution-led model. This shift has been made compulsory by the shutting down of the company’s payments bank arm as a payments bank licence allowed Paytm to build its own products and roll them out to consumers.  

Without the licence, the company has had to forge partnerships with traditional banks and focus instead on distribution.  

Experts tracking the space say that while the company may have lost its grip on the product side, its distribution game may still be strong enough to keep the company competitive. Vivek Mandhata, managing director and partner at consultancy firm BCG, says although the company’s product suite has become limited, business will continue to do well on the distribution side.  

His optimism is because Paytm has managed to keep its user base. “The good news is that the consumer and merchant base has remained good despite a drop. They now have a rope to show that the company can regain some investor confidence.  The question is how it will impact its [Paytm’s] economics because they no longer play as involved a role as they used to in some of the products such as lending,” says Mandhata.  

Paytm has also decided that even in the insurance business, it wants to stick to distribution. It withdrew its application for a general insurance licence last month which the company says is in alignment with its focus on insurance distribution across the health, life, motor, shops and gadgets segments.          

Lending To The Little Guy 

Another aspect of Paytm’s overhaul plans is loans. Even though revenue from financial services dropped in the fourth quarter of the 2024 fiscal, Sharma says the credit business is key for Paytm going forward. He is bullish about the opportunity that lies ahead in the form of millions of small businesses and vendors who are yet to be brought into the formal fold of the economy.   

“If mobile phone payment is a revolution, then its dividend is credit. It brought small vendors into the formal economy fold. Rich become richer because they have access to credit while small businesses remain small because they do not,” according to Sharma. And in the loans segment, Paytm just wants to be a distributor collecting distribution fees. 

In its earnings presentation for the last quarter, Paytm said it would be putting a higher focus on a distribution-led model for its loans, insurance and equity products both on the consumer and merchant loans front. 

Will Paytm Ever Be Great Again?  

All the rejig makes experts believe that Paytm will surely survive the demise of its payments bank. “Paytm has been an innovation house. They will continue to innovate on the payments side with different use cases to woo customers,” says BCG’s Mandhata.  

But other experts point out that the fintech market has changed and PhonePe and Google Pay have taken such strong positions that it will be difficult for Paytm to once again emerge as a leader of the market.  

“Paytm is unlikely to become the monopoly player it once was. The space has undergone a tremendous transformation—a lot of new aspects in digital payments and fintech, policy, governance, data, security have emerged, and the sector is evolving,” says Ankur Bisen, senior partner at Technopak Advisors.  

As things stand, Sharma knows what he wants for his company, and more importantly, what he does not. If he does indeed manage to script a turnaround, it will be one of the most-watched comebacks in the Indian business landscape. And everyone loves a good comeback story—especially the retail investor.