After Axis Bank, HDFC and Yes Bank submit TPAP application for Paytm UPI business

All three banks have been in discussions with NPCI, the entity overseeing and regulating UPI, over the past few days

One97 Communications, which runs the Paytm brand, and private sector lenders HDFC Bank and Yes Bank have jointly applied to be a third-party application provider (TPAP) with the National Payments Corporation of India (NPCI) on February 22 for running the mobile payments platform Unified Payments Interface (UPI).

Early this week, Moneycontrol reported that Axis Bank and Paytm had submitted a joint application with NPCI to be a TPAP.

All three banks have been in discussions with NPCI, the entity overseeing and regulating UPI, over the past few days. NPCI is expected to expedite the process to ensure that customers do not encounter any difficulties using the Paytm app for UPI payments.

On February 23, RBI said customers and merchants having ‘@paytm’ handles are to be migrated seamlessly from PPBL to a set of newly identified banks to avoid any disruption.

Paytm, Axis Bank, HDFC Bank, Yes Bank and NPCI did not respond to Moneycontrol queries on the partnership to be a TPAP player.

Paytm is also in discussions with ICICI Bank and Canara Bank for TPAP partnership, but those discussions have not concluded yet.

For UPI to run seamlessly, migration has to happen and the UPI platform is too big a clog in India’s digital payments ecosystem to leave banks and NPCI guessing on how to move forward.

Since RBI imposed crippling restrictions on PPBL, an associate company of One97, the latter has been forced to seek bank partnerships to sustain its UPI business. The central bank has directed PPBL to halt all banking services, except for the withdrawal of the remaining funds in the accounts. It is believed that the payment service provider (PSP) services will also be affected.

Until now, PPBL has functioned as the PSP bank for One97. Paytm boasts an estimated 90 million UPI users on its platform. Major UPI apps like PhonePe, Google Pay, Cred, and Amazon Pay are TPAPs, having similar PSP bank partnerships to facilitate UPI transactions. However, Paytm did not require a bank partnership due to PPBL being a bank itself. In fact, for UPI payments, the Paytm app operated more like the mobile banking interface of PPBL.

Once approved by the NPCI, Paytm will also function as a TPAP, similar to its competitors. Third-party apps are heavily dependent on PSP banks when it comes to the speed of the payments or even ensuring that payment failures are kept to a minimum. Players like PhonePe and Google Pay typically have at least three bank partnerships to minimise risk.

PPBL has been the largest beneficiary bank in the UPI ecosystem over the last three years with over 20 percent market share in inbound credit transactions. Despite its scale, it was consistently among the banks with the lowest transaction failures.