The National Payments Corporation of India (NPCI) has granted approval to One97 Communications Limited (OCL), Paytm's parent entity, to participate in UPI services as a Third-Party Application Provider (TPAP) under multi-bank model.
The much-awaited license would allow Paytm to continue offering Unified Payments Interface (UPI) services to its app users, after its banking unit Paytm Payment bank Limited (PPBL) ceases operations post March 15 following regulatory action.
Under the new model, Paytm will now provide the payment service in partnership with four new banks--Axis Bank, HDFC Bank, State Bank of India, Yes Bank--who will act as its Payment System Provider (PSP).
A PSP is a bank that helps the UPI app to connect with the banking channel. Only banks can act as PSPs.
Moneycontrol had reported that the NPCI, which runs UPI payments, is working with all the banks to expedite the TPAP process by March 15.
Previously, the fintech was powering this service via PPBL, which held the TPAP license. Since Paytm had a bank of its own, it did not need to be a separate TPAP license, unlike its rival apps such as Google Pay, PhonePe, Cred and Amazon Pay.
Further, Yes Bank will act as the merchant acquiring bank for Paytm's existing and new UPI merchants.
With this, the @Paytm handle would also be redirected to Yes Bank. "This will enable existing users and merchants to continue to do UPI transactions and AutoPay mandates in a seamless and uninterrupted manner," NPCI said in a statement.
The NPCI has advised Paytm to complete migration for all existing handles and mandates, wherever required, to new PSP banks at the earliest.
Paytm, the third-largest app for UPI payments in the country, processed 1.41 billion monthly transactions worth Rs 1.65 lakh crore in February down from 1.57 billion transactions valued at 1.93 trillion in January, according to data available on the NPCI website.
For Paytm, the vast majority of transactions and around 75 percent of gross merchandise value (GMV) come out of its customers using the popular UPI for transactions on its app.
(This is a developing story)
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