Paytm Secures Lifeline: Approved as UPI Third-Party App Provider

The National Payments Corporation of India (NPCI) has granted a critical lifeline to fintech giant Paytm. On Thursday, the NPCI approved Paytm’s application to participate in the Unified Payments Interface (UPI) as a Third-Party Application Provider (TPAP). This crucial decision allows Paytm to continue facilitating payments through its app, even after its banking unit, Paytm Payments Bank, ceases operations on March 15th as mandated by the Reserve Bank of India (RBI).

Maintaining User Access Through TPAP Model

The TPAP license ensures continuity for Paytm users. Following the closure of Paytm Payments Bank, customers can still leverage the Paytm app for UPI transactions. This approval prevents a major disruption for millions of users who rely on the platform for everyday transactions.

National Payments Corporation Grants Access Following Banking Unit Closure

Paytm’s path to this approval wasn’t without challenges. The company faced regulatory action from the RBI for non-compliance with certain banking norms. However, Paytm persevered and successfully navigated the regulatory hurdles.

Yes Bank to Support Operations

The NPCI’s statement clarifies the role of partner banks in supporting Paytm’s UPI operations. Axis Bank, HDFC Bank, State Bank of India, and Yes Bank will act as Paytm’s payment system provider banks. Furthermore, Yes Bank will assume the additional responsibility of merchant acquiring for both existing and new UPI merchants associated with Paytm.

The NPCI advises Paytm to expedite the migration of existing user accounts and mandates (if applicable) to the new partner banks. This proactive approach will minimize disruptions for users during the transition period.

Paytm holds the distinction of being India’s third-largest app for UPI transactions. According to data from the NPCI website, Paytm processed a significant volume of transactions in February 2024 – 1.41 billion transactions worth ₹1.65 trillion. While this represents a slight decrease from January 2024 figures (1.57 billion transactions worth ₹1.93 trillion), Paytm remains a dominant player in the Indian digital payments landscape.

RBI Intervention Leads to Positive Outcome

The NPCI’s approval follows the RBI’s directive to consider Paytm’s request for TPAP status. This collaborative approach between regulatory bodies and industry participants ensures the stability and growth of India’s digital payments ecosystem.

Paytm’s successful transition to the TPAP model offers a ray of hope for the company’s future. The ability to continue offering UPI services will be crucial for retaining its user base and maintaining its competitive edge in the ever-evolving Indian fintech market.