Jio, HDFC Bank Eyeing to Buy Paytm Wallets

Paytm, India’s leading digital payments platform, is looking for a buyer for its wallets business, which is housed under Paytm Payments Bank. According to a report by Hindu Businessline, Jio Financial Services (JFSL) and HDFC Bank are among the frontrunners to acquire the business, which has over 300 million users.

Why Paytm wants to sell its wallets business?

Paytm’s wallets business has been facing regulatory challenges from the Reserve Bank of India (RBI), which recently barred Paytm Payments Bank from accepting any deposits or credits to customer accounts. The RBI action came after it found that Paytm had violated the norms for payment banks, which are not allowed to hold more than Rs 1 lakh per customer in deposits.

The RBI also imposed restrictions on Paytm’s know-your-customer (KYC) process, which is mandatory for users to access the full range of services offered by the platform. Paytm has denied any wrongdoing and said that it is working with the RBI to resolve the issues.

Paytm has been in talks with JFSL since November last year, while it reached out to HDFC Bank just before the RBI ban, according to the report. Paytm is looking for a deal that would ensure the continuity of its wallets business and also help it focus on its other verticals, such as e-commerce, insurance, lending and wealth management.

What are the benefits for Jio and HDFC Bank?

Jio Financial Services, a subsidiary of Reliance Industries, owns Jio Payments Bank, which has been trying to make a mark in the digital payments space. Jio Payments Bank offers digital savings accounts, bill payments, debit cards and UPI services to its customers. It also has a network of 2,400 business correspondents and is implementing QR codes across its ecosystem.

By acquiring Paytm’s wallets business, Jio could gain access to a large user base and also leverage Paytm’s merchant network and partnerships. Jio could also integrate Paytm’s wallets with its own services, such as JioMart, JioPhone and JioFiber.

HDFC Bank, on the other hand, is one of the leading private sector banks in India, with a strong presence in both retail and corporate banking. HDFC Bank also has its own digital wallet, called PayZapp, which has around 14 million users. By buying Paytm’s wallets business, HDFC Bank could expand its customer base and also offer more products and services to them.

How will this affect the digital payments industry?

The digital payments industry in India is witnessing intense competition and consolidation among various players. The entry of global giants like WhatsApp, Google and Amazon has also increased the pressure on existing players like Paytm, PhonePe and MobiKwik.

If Paytm sells its wallets business to Jio or HDFC Bank, it could change the dynamics of the industry and create new opportunities and challenges for all stakeholders. It could also have implications for Paytm’s upcoming initial public offering (IPO), which is expected to value the company at around $25 billion.