Paytm's payment processing charges have fallen by around 35% since it moved its backend banking operations to private-sector banks.
The shift came after the RBI imposed restrictions on Paytm Payments Bank in January 2024, with the Delhi High Court recently ordering the bank's winding up.
Lower processing costs have also supported the company's profitability, alongside lower employee and ESOP expenses.
How Paytm's Move Away From Its Payments Bank Reduced Payment Processing Costs
The fintech firm's payment processing costs have declined since it shifted its backend banking operations from Paytm Payments Bank to private-sector lenders following RBI's regulatory action
Summary
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Paytm's payment processing charges have declined by around 35% since the company shifted its backend banking operations from Paytm Payments Bank Ltd (PPBL) to private-sector banks, according to a Moneycontrol review of the fintech firm's financial disclosures.
The migration followed the Reserve Bank of India's restrictions on PPBL in January 2024, forcing One97 Communications, which operates Paytm, to move its payment and banking operations to lenders such as Axis Bank, HDFC Bank, Yes Bank and State Bank of India. Last week, the Delhi High Court ordered the winding up of PPBL after an application filed by the RBI.
According to the report, the move has not only helped Paytm maintain its payment services but has also reduced the cost of processing digital transactions.
Processing Costs See Sharp Decline
According to the publication, Paytm's payment processing cost stood at around 0.18% of gross merchandise value (GMV) during most quarters when PPBL handled its backend operations.
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After the company shifted to private-sector banks in the fourth quarter of FY24, the processing cost dropped to around 0.12% of GMV, a decline of roughly 35%.
The trend continued over the following years. Payment processing charges stood at 0.23% of GMV in FY24, which fell to 0.15% in FY25 and further to 0.11% in FY26.
Private Banks and Cost Savings
Citing a banking executive familiar with the matter, the publication reported that large private-sector banks may have been able to offer lower payment processing charges because compliance and operational costs form a relatively smaller part of their overall business.
The report noted that PPBL's operating costs were largely linked to Paytm as its primary client, making its cost structure different from that of larger banks. However, during its earnings calls, Paytm has maintained that its commercial arrangements with partner banks remain similar to those it had with PPBL.
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The company has also said that changes in the mix of payment products and seasonal factors contributed to lower processing expenses. According to the report, reduced payment processing costs, along with lower employee and ESOP expenses, helped One97 Communications narrow losses in FY25 and achieve full-year profitability in FY26.