Top tech and startup news of the day

Happy Monday! The top brass at Paytm held meetings with senior executives at One 97 Communications and Paytm Payments Bank to chart their future course. Details of this and more in today’s ETtech Morning Dispatch.

Also in this letter:

■ Byju’s-Messi deal on hold

■ Social media firms ping govt on deepfake issue

■ Binance’s plea rejected

Paytm to staff: focus on moving biz to other banks

Paytm Payments Bank

The top management at Paytm had two separate meetings with the senior executives at One 97 Communications and Paytm Payments Bank. The aim was to address concerns among employees and plan the way forward.

Driving the news: According to people who attended the meeting, conversations were around assuring the employees that the central bank’s concerns would be addressed. The company is still trying to find answers from the banking regulator and its nod to move banking services from Paytm Payments Bank to third-party lenders.

Tell me more: Cross-functional teams have been set up to build the backend architecture to support the transition from the payments bank to other banks. This will require support from the National Payments Corporation of India and the RBI. But the task can only start once the regulator gives the go-ahead.

Paytms business snapshot_Feb 2024_Graphic_ETTECH_1

Background: The entire crisis unfolded after the RBI asked Paytm Payments Bank to stop offering basic banking services from March 1. Now the latter is talking to Yes Bank, Axis Bank, and HDFC Bank to move the settlements business for Unified Payments Interface-based transactions.

Quote, unquote: “Senior management of Paytm and its affiliates keep meeting their respective teams for operational matters. We work in an agile work environment and have always had teams that cut across functions to achieve business objectives. As communicated to the exchanges earlier, Paytm is working to expand third-party bank partnerships for the distribution of payments and financial services.”

On ED radar: The Directorate of Enforcement (ED) has investigated Paytm since 2021 over alleged money laundering and illegal betting, said people with knowledge of the matter, sources told ET.

But ED hasn’t booked Paytm in any of the money laundering cases. However, in the past few years, its offices have been searched, documents sought, merchant accounts frozen and executives questioned by the agency.

Paytm ED Print GFX

KYC lapses: “Both the agencies have demonstrated to the government how in many cases of national importance payment gateways were misused, which could pose a threat to the financial security,” said a senior government official. “Specifically on Paytm, many KYC-related lapses were found, which has led to freezing of lakhs of accounts and wallets as they were found to be suspicious in nature.”

Read our detailed coverage

Paytm crisis brings 30% market share cap plan back in focus

Paytm shares plunge 5 today, down 37 from 52-week high

The Reserve Bank of India’s (RBI) move against Paytm Payments Bank has rekindled discussions on the proposal for a ceiling of 30% market share by volume for unified payments interface (UPI) apps. The trouble at Paytm, which is the third largest such app, is likely to benefit the other two big players — PhonePe and Google Pay.

Why it matters: The proposal for a market share cap had been floated to ‘de-risk’ from one or two platforms becoming too critical for payment volumes. After several rounds of discussions and petitions by major companies operating such apps, the National Payments Corporation of India, in 2022, postponed implementing the plan till December 31, 2024.

Numbers speak: As per the latest available data sourced from NPCI, as of December 2023, PhonePe had a 46% share in UPI volumes, followed by Google Pay with 36% and Paytm Payments Bank with 13%.

UPI market share by volume_Feb 2024_Graphic_ETTECH

Tilting scales:
Walmart-owned PhonePe is considering a new campaign to corner more users and merchants, sources told us. This is to further double down on gaining users and merchants.

Yes, but: NPCI is likely to take RBI approval before allowing any migration of merchants or banking partners with regard to Paytm UPI usage. This may drive users to open new virtual IDs and tilt concentration further towards the top two players.

Byju’s pauses deal with footballer Lionel Messi

Lionel Messi Texas

Byju’s deal with footballer Lionel Messi as its global brand ambassador for an ‘education for all’ campaign has been put on hold, sources told ET. The three-year deal was signed in November 2022 when Messi was roped in for an estimated $5-7 million per year.

Driving the news: “Byju’s paid Messi for the first year; it is yet to be decided whether the deal will be terminated before full term, or whether Byju’s plans to revive the contract in due course. This is on account of the liquidity crisis and other matters of serious concern within the company,” one of the sources told ET.

Byju’s had not renewed its endorsement contract with actor Shah Rukh Khan after it ended in mid-2023, which industry executives said was a mutual decision as Khan, too, did not want to be associated with the platform given its constant regulatory scrutiny.

Byju Messi deal

January salaries paid: Meanwhile, founder and chief executive Byju Raveendran told employees that Byju’s has credited January salaries as of Sunday. “I have been moving mountains for months to make payroll, and this time, the struggle was even bigger to ensure that you receive what you rightfully deserve,” he said in an email.

Also read | Byju’s wants BCCI dispute in arbitration; NCLT defers matter to February 7

Raveendran also said the support from employees helped strengthen the fight against the odds. “To be clear, this fight is only against a few vested interests trying to sabotage the company by impeding the rights issue. Nothing has galvanised our team more than their effort to destabilise our company.”

Unending duress: After a group of key shareholders at Byju’s issued a notice for an EGM to address ‘persistent issues’ including a change of management, the edtech firm defended its current management structure in a communication to employees.

The management also acknowledged a delay in January salaries, attributing it to an “artificially induced crisis” by certain investors. “Unfortunately, the company and our employees are paying the price for a stand-off triggered by some investors,” a media statement from the firm said.

Firms say instead of a blanket ban, axe deepfakes with ‘ill intent’

Deepfakes video

Social media companies have proposed that the government introduces proposals only to ban or take down content that was released with “criminal or ill intent” instead of imposing a blanket ban on “deepfakes” across the internet, sources told ET.

Ongoing negotiations: Over the last two months, the IT ministry has met senior executives from these firms several times to arrive at a workable solution to the deepfake issue.

Though initially, the government believed that all such content ought to be taken down until proper regulations were in place, social media and internet intermediaries argued only content with “ill or criminal intent” should be taken down or removed.

Deepfake Print GFX

Not all deepfake is bad:
“Deepfake in itself is not bad. It could lead to new kinds of innovation, for apps and services. The technology has to be regulated. The government intends that if the content is ‘misleading’ it should be barred or taken down. So, if the content has only entertainment value, it is harmless and therefore need not be removed just because it is deepfake,” an official told ET.

Amendment in IT rules? Senior IT ministry officials have said that though there are provisions in the IT Rules to tackle deepfakes, an amendment could also be brought in specifically targeting such content if they are not controlled by the platforms.

Centre wants Binance to comply with PMLA rules to resume operations


The government has rejected Binance’s plea to be allowed to resume operations in India in the interim since it is not yet ready to comply with the PMLA (Prevention of Money Laundering Act) guidelines.

What happened? Sources told ET that Binance was ready to pay taxes and any other penalties that it was liable for as of January 12, when the operations of the exchange were barred in India. However, the world’s largest cryptocurrency exchange said it would “take some time for it to set up the processes to follow the PMLA and FIU rules.”

Binance print GFX

No exceptions: According to a senior official, the government has told the exchange it could not “make exceptions” of these kinds for any firm and thus Binance must show complete compliance with regulations before any further discussion on these issues.

“Compliance with PMLA is paramount. They have been explicitly told that any discussion on resumption of their services in India is only after the government is satisfied with their responses on the notices sent by the FIU (financial intelligence unit),” the official said.

Catch-up quick: Websites and mobile apps of nine offshore cryptocurrency platforms such as Binance, Kucoin, Huobi, OKX,, Bittrex, Bitstamp, MEXC Global, and Bitfinex were blocked by the government earlier this month as they failed to respond to show-cause notices sent by the FIU.

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