Reset, reposition, revive – perhaps these three words in this order can best describe the year for Paytm. Few Indian fintech firms have staged as dramatic a reversal as did the Vijay Shekhar Sharma-led startup in 2025.
From being whipped by the Reserve Bank of India with a crippling restriction on Paytm Payments Bank (PPBL), prohibiting fresh deposits and addition of new users, the company swung to a profit of INR 122.5 Cr in the first quarter of FY26 from a net loss exceeding INR 800 Cr just a year back. The topline and the EBITDA margin too improved sequentially during the year.
The regulatory action had not only battered its wallet ecosystem and deposit base, but also blurred its vision, making profitability increasingly elusive and even questioning its sustainability. Instead of running into the wreck, Paytm went for a strategic reset in 2025. Rather than trying to rebuild the payments bank, Paytm pivoted to regulatory clarity and regained monetisation strength through UPI payments, merchant acceptance devices, subscription revenue, and credit distribution under a default loss guarantee (DLG) model.
What played behind the turnaround in Paytm? A slew of measures – from focus on tested revenue drivers and scaling back of non-core verticals to reducing workforce costs by 10% by cutting down headcounts.
But, profitability alone does not confirm a sustainable revival. With the UPI turf simmering by the day, regulatory uncertainty escalating, and a lending landscape turning increasingly competitive, there is an inevitable doubt: Has Paytm’s revival translated into a structural momentum, or is it merely a cyclical rebound?
The RBI whip on Payments Bank forced Paytm to confront a hard truth: its payments ecosystem had to function independently of its banking arm.
Paytm repositioned itself as a pure payments and merchant services platform, accelerating a transition that was already underway. This also meant that Sharma and his team had a task at hand to ensure continuity of the core revenue generating payments business with tie-ups with banks and focus on what is necessary.
A crucial pillar has been the UPI business, which was resilient, despite softening in the overall business in the ecosystem. Prioritising strategic repositioning, including transition to third-party application provider (TPAP) status parallel to partnerships with Axis Bank, HDFC Bank and SBI, helped stabilise the fintech major’s monthly transacting users (MTU) from 7 Cr to 7.2 Cr in the last two quarters of FY25.
By the middle of calendar year 2025, Paytm began growing its business even in the face of domination of PhonePe and Google Pay. Merchant payments became the centrepiece of revenue, particularly through device-centric monetisation.
Paytm’s monthly UPI market share hovered on 5.5% to 6.9% in January-February 2025, and reached 7.48% by October with a transaction volume of 1.5 Bn per month.
Paytm deployed QR codes, soundbox units, and all-in-one point-of-sale (POS) devices across a rapidly expanding network. These generated predictable subscription revenue and higher payment-processing margins, reducing the dependence on UPI.
In contrast to 2024, Paytm had a better year from a regulatory standpoint as well, which solidified its payments foundation. It received the RBI green light to operate as a payment aggregator for offline and cross-border payment services. The approval allows international travellers to pay Indian merchants using Paytm and enhances merchant monetisation opportunities beyond India.
By leaning into merchant services and broadening its payments licence footprint, Paytm converted what had seemed to be a debilitating setback into an opportunity to fortify its payments infrastructure. It kept payments at the heart of its value proposition – even without a fully operational payments bank.
While payments provided a stabilised base, the lending business emerged as Paytm’s primary growth driver in 2025. This is quite a feat after Paytm had to shut its postpaid loans business in 2024, primarily small-ticket-size loans.
It revived the lending segment in 2025 by leaning on DLG, a structured risk-sharing model with RBI-authorised lenders – that positioned Paytm as a distribution partner, rather than a principal lender. Under this, Paytm earned a higher commission from banks and NBFCs for loans backed by DLG, and in the long run, this has become a crutch for the company’s bottomline.
In the second quarter of FY26, the segment surged 63% on-year to INR 611 Cr, reflecting higher disbursement volume and higher commissions from its partners.
The company’s measured stance is laudable in this regard. The management resisted wholesale expansion of disbursements in favour of asset quality and partner economics – a strategy shaped by past regulatory scrutiny of digital lending practices.
Scaling down non-core operations was a core priority and this is why Paytm distanced itself away from areas like gaming and even made a quiet exit from ONDC-backed food delivery business. With these ‘distractions’ out of the way, 2026 will be an interesting year for Paytm.
Especially if Vijay Shekhar Sharma’s calls to turn Paytm into an AI-first company ring loud.
Few may remember that the year actually began with concerns around Paytm’s high employee costs which were dragging its bottomline down. It was evident that Paytm would have to take some steps and it began by reducing its employee count by approximately 4,600 in FY25, bringing down annual employee expenses by roughly INR 651 Cr year-on-year.
It was a shift away from labour-intensive functions tied to scaled marketing, sales for non-core offerings, and other roles, and AI was playing a key role here.
But the company’s ambition goes beyond operational savings. Sharma has envisioned AI as a revenue driver as well, and wants to leverage Paytm’s vast merchant base to cross-sell AI-powered infrastructure and products — including digital assistants, predictive analytics, and smart payment devices to improve merchant productivity.
Paytm is currently testing these tools internally before launching them commercially. The goal is to expand into AI-led ecommerce and cloud services by FY27, effectively making AI as a backend tool for a customer-facing business vertical.
The AI push and related downsizing was backed by corporate restructuring aimed at simplifying the Paytm group and aligning its operational entities under clearer ownership.
Various subsidiaries like Paytm Financial Services, Paytm Insuretech, and others were absorbed by the parent company. This internal consolidation was strategic – by centralising financial and tech entities, Paytm could eliminate overlapping roles, unify product roadmaps, and strengthen its core payments and financial services unit economics.
In a parallel, Paytm also shifted its offline merchant payments business into its payments services subsidiary, effectively folding legacy sales and distribution units into a tighter operational framework. It reduces governance layers and heightens focus on revenue-producing core functions.
Across 2025, Paytm’s actions reflected a consistent strategic thesis – double down on monetisable core strengths, prune distractions, and simplify structures for efficient execution. Paytm’s 2025 turnaround marks a clear departure from the company’s earlier, more expansive playbook.
The fintech giant has emerged leaner, more focussed, and visibly aligned to regulatory realities, with payments and credit distribution now operating within clearly defined guardrails. The return to profitability, improvement in margins, and stabilisation of user and merchant metrics suggest that the rebound seems to be a strategic pullout from loss-making experiments to prioritising predictable, subscription-led revenues and capital-light lending.
“I do believe that in India, there are about 200 Mn consumers that matter, and we definitely will aim for 200 to 250 Mn customers on our platform,” CEO Sharma said at the turn of FY25, referring to Paytm’s roadmap for 2026.
Payments and lending are verticals that are sensitive to competitive intensity, spending and credit cycles, partner risk appetites, and regulatory scrutiny. But even so, at the end of 2025, Paytm is sharper and leaner and well set up for 2026, despite these potential headwinds.