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March 15, 2024

Paytm Secures Approval to Sustain UPI Services via State Bank of India and Three Other Partners

In a significant development, the National Payments Corporation of India (NPCI) has granted authorization to One97 Communications (OCL), the parent company of Paytm, to continue operating as a third-party application provider (TPAP) on the Unified Payments Interface (UPI). This decision allows Paytm to sustain its UPI services through collaboration with four prominent banks, including the State Bank of India (SBI), Axis Bank, HDFC Bank, and YES Bank, acting as payment service providers (PSPs).

This approval comes at a crucial juncture, just before the impending enforcement of Reserve Bank of India’s (RBI) restrictions on Paytm Payments Bank. Consequently, Paytm users can proceed with their UPI transactions seamlessly within the app. Under the approved arrangement, Paytm will function as a TPAP under a multi-bank model, with the “@Paytm” handle being redirected to YES Bank.

NPCI has outlined that YES Bank will serve as the merchant acquiring bank for both existing and new UPI merchants associated with OCL. Notably, ‘@paytm’ functions as a virtual payment address (VPA) for Paytm’s clientele, serving as a unique identifier for conducting UPI transactions.

Furthermore, NPCI has advised Paytm to expedite the migration of all existing handles and mandates to the new PSP banks. This directive aligns with the RBI’s earlier recommendation to ensure a smooth transition process without adding new users until existing ones are satisfactorily migrated.

Under the TPAP framework, a PSP bank facilitates the onboarding and registration of customers on UPI, linking their bank accounts to their respective UPI identifications. Presently, there are 24 operational TPAPs in India, including prominent entities like Amazon Pay, PhonePe, and Google Pay, contributing to the robustness of the UPI ecosystem.

Various banks, including Axis Bank, HDFC Bank, SBI, and ICICI Bank, support fintech companies through the TPAP route, thereby enhancing the accessibility and reach of digital payment solutions. For instance, PhonePe users have their VPAs issued through financial institutions such as YES Bank, ICICI Bank, and Axis Bank, with their UPI handles ending in @ybl, @ibl, or @axl, respectively.

In terms of transaction processing, Paytm Payments Bank app ranks as the third-largest entity following PhonePe and Google Pay. Despite a slight decline in transaction volume and value recorded last month, Paytm processed a substantial 1,405.7 million transactions worth approximately ~1.65 trillion in February 2024, as per NPCI data. This marks a marginal decrease from the 1,569.63 million transactions valued at ~1.92 trillion processed in January.

In essence, the approval granted by NPCI ensures the continuity of UPI services for Paytm users, underscoring the resilience of digital payment platforms amidst evolving regulatory landscapes.

Jhumpa Lahiri

Jhumpa Lahiri

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