Can Paytm keep its talent amid regulatory headwinds?
Paytm faces turbulent times after the Reserve Bank of India (RBI) barred its payments bank subsidiary from onboarding new customers last week.
However, the regulatory crackdown does not appear to have led to any rush for the exits by employees so far. Recruiters say Paytm remains a coveted employer brand able to attract top talent.
Executive search firm EMA Partners India says it has not seen any rush for the exits by senior Paytm employees due to the RBI's restrictions on the fintech firm's payments bank.
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"We continue to see high traction for leadership roles at Paytm across engineering, business and product streams. We haven’t seen cases of senior Paytm employees reaching out for jobs because of the recent directives to Paytm Payments Bank," said Reet Bhambhani, Senior Partner at EMA Partners India.
Reet said Paytm remains a top employer brand in India, attracting top talent from the country's premier colleges.
Paytm Founder and CEO Vijay Shekhar Sharma earlier assured employees that there would be no layoffs and reaffirmed their importance to Paytm. “Our offline payment offerings like Paytm QR, Soundbox, and Card Machine will continue to empower India’s merchants”, added Sharma.
The apparent stability comes despite several regulatory headwinds for Paytm triggered by RBI's bar on payments bank to not onboard new customers. The central bank ordered a comprehensive audit of its IT systems.
Customers can only withdraw their account balances until the audit is completed. The RBI cited "material supervisory concerns" and "certain other irregularities" for its crackdown without clearly stating the issues facing the company.
Meanwhile, the Employees Provident Fund Organisation (EPFO) has directed its officers to stop accepting any claims associated with Paytm Payments Bank accounts from February 23.
Though RBI's clarification that its action is only against the payments bank and not the main Paytm app, the crackdown has resulted in a chaos with some merchants shifting to other service providers. “The app is not impacted by our action,” Deputy Governor J. Swaminathan said.
Interestingly, Paytm faces a double whammy with the early exit of major investor SoftBank, who offloaded 13.5% of their shares between November 2022 and January 2024. This move, eerily prescient as Paytm now faces intensifying regulatory scrutiny, raises concerns about the fintech giant's future and might ripple through the entire Indian fintech landscape.
However, industry experts caution that the era of unfettered growth for fintech firms is over. Companies like Paytm must prioritise robust risk management and regulatory compliance alongside innovation.
For now, Paytm employees appear to be taking the setbacks in their stride, confident in the company's long-term growth prospects. But, experts warn that further regulatory tightening could test employee loyalty.
"There's bound to be some level of perceived risk," said Reet, “as technologies and innovative businesses evolve in new domains that are regulated”. "But we expect things to settle down eventually."
The company remains a top choice for talents, she concluded.
In a recent blog post, the company expressed gratitude to merchants and users for their unwavering support. The fintech firm also established a group advisory committee, chaired by former SEBI Chairman M. Damodaran to enhance compliance and regulatory measures.
While Paytm pivots towards non-banking businesses like e-commerce, concerns simmer within the fintech industry. Many fear stricter regulations, like those impacting Paytm, could stifle innovation across the board. Smaller companies, they argue, may struggle to comply, creating an uneven playing field and potentially hindering the growth of promising startups.
The coming months will be crucial for the fintech major with over 33,000 employees onboard. Can it address regulatory concerns without stifling innovation? Can it retain its talent amidst the uncertainty?
Reuters earlier reported that the Enforcement Directorate had initiated an investigation into Paytm, suspecting violations of foreign exchange rules. Paytm vehemently denied these allegations.
The answers to these questions will determine if the home-grown fintech giant can survive tough times and come out stronger. But it won't be easy, especially since the company's banking, which brings in 60% of its revenue, faces uncertainty.
