Paytm Likely to Secure Third-Party App License for Continued UPI Services

Preeti Bali / 2:18 pm / March 13, 2024

Paytm, formerly known as One 97 Communications, is poised to receive a third-party application provider (TPAP) license from the National Payments Corporation of India (NPCI) by March 15th, according to three confidential sources. This crucial license will ensure that Paytm users can continue making payments through India’s widely used Unified Payments Interface (UPI) despite the impending closure of its banking arm, Paytm Payments Bank.

Maintaining UPI Functionality After Banking Arm Closure

The Reserve Bank of India (RBI) revoked the license of Paytm Payments Bank due to compliance issues, forcing the bank to cease operations by March 15th. However, the TPAP license from NPCI will allow Paytm to maintain its functionality as a UPI payment platform. UPI, a real-time payment system, facilitates seamless money transfers between bank accounts.

License Approval Imminent

Sources familiar with the situation indicate that the NPCI is nearing the completion of its review process for Paytm’s TPAP license application. “Approval for the license is expected to occur before March 15th,” stated one source. “Most of the necessary checks have already been conducted.” Another source confirmed the imminent approval but cautioned that integrating Paytm with new partner banks for processing UPI transactions might take over a month.

Maintaining Confidentiality

All sources involved requested anonymity as they are not authorized to publicly discuss the matter. Neither NPCI nor Paytm responded to requests for comment at the time of publication.

Earlier reports from Reuters suggested that Paytm is in talks with prominent banks such as Axis Bank, HDFC Bank, State Bank of India, and Yes Bank to potentially handle UPI transactions. While Paytm currently holds the third-largest position in India’s UPI payment app market, its transaction volume has dipped in recent months. According to NPCI data, Paytm processed 1.41 billion transactions worth Rs 1.65 trillion ($19.94 billion) in February, down from 1.57 billion transactions valued at Rs 1.93 trillion in January. Industry experts attribute this decline to the recent negative publicity surrounding Paytm’s banking license revocation. However, sources anticipate a rebound in transaction volume once the TPAP license is secured.

Market Dominance and Regulatory Action

PhonePe and Google Pay currently reign supreme as the top two UPI payment apps in India. The RBI, according to sources, is unlikely to grant any extension to Paytm Payments Bank’s March 15th closure deadline. This means the bank will no longer be able to accept new deposits into accounts or wallets after the designated date.

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