On February 23, One97 Communications, the parent company of the Paytm brand, partnered with private sector banks Axis, HDFC Bank and Yes Bank Team up for Paytm UPI by submitting an application to become a third-party application provider (TPAP) with the National Payments Corporation of India (NPCI). This collaborative effort is aimed at facilitating the operation of the Unified Payments Interface (UPI) mobile payments platform.
The RBI announced plans for the seamless migration of customers and merchants using ‘@paytm’ handles from Paytm Payments Bank Limited (PPBL) to a select group of newly identified banks. This proactive measure is aimed at preventing any potential disruptions in services, ensuring a smooth transition for all stakeholders involved.
In the wake of today’s pivotal announcement by the Reserve Bank of India (RBI), the stock price of Paytm witnessed a remarkable surge, reaching the upper circuit of 5% on the National Stock Exchange (NSE). The attached snapshot captures this momentous event, showcasing the rapid movement in Paytm’s stock price as investors react to the news.
In recent days, all three banks have engaged in discussions with the National Payments Corporation of India (NPCI), the regulatory body overseeing the Unified Payments Interface (UPI). These discussions aim to streamline the process of integrating the Paytm app for UPI payments seamlessly. NPCI is anticipated to fast-track the approval process, prioritizing a smooth transition to ensure uninterrupted service for customers utilizing the Paytm app for UPI transactions.
Additionally, Paytm is in ongoing discussions with ICICI Bank and Canara Bank regarding potential TPAP partnerships, although final agreements have yet to be reached. For UPI to function seamlessly, migration is imperative. The UPI platform stands as a pivotal component within India’s digital payments ecosystem. Leaving banks and NPCI guessing about the path forward could potentially disrupt this critical infrastructure.
RBI’s Move Regarding Paytm:
Following RBI’s stringent restrictions on PPBL, an affiliate of One97, the company has been compelled to pursue bank partnerships to maintain its UPI operations. The central bank’s directive has mandated PPBL to cease all banking services, with the exception of facilitating withdrawals from existing accounts. There are concerns that this move may also impact the provision of payment service provider (PSP) services. Click Here To Read In Detail.
The Reserve Bank of India (RBI) has instructed the National Payments Corp. of India (NPCI) to establish alternative arrangements for customers utilizing the Unified Payments Interface (UPI) of Paytm Payments Bank Ltd., as stated in a press release on Friday. NPCI has been tasked with evaluating the request from the parent company One97 Communications Ltd. to assume the role of a third-party application provider for its UPI channel. Click here to read RBI press release.
Up until this point, PPBL has served as the PSP bank for One97. With approximately 90 million UPI users on its platform, Paytm has been a significant player in the digital payments landscape. Other major UPI apps like PhonePe, Google Pay, Cred, and Amazon Pay operate as TPAPs, relying on similar PSP bank partnerships to enable UPI transactions. However, Paytm stood apart as it didn’t necessitate a separate bank partnership, courtesy of PPBL’s banking status. Consequently, the Paytm app functioned akin to PPBL’s mobile banking interface for UPI transactions.
Upon NPCI approval, Paytm will operate as a TPAP, aligning with its competitors in the industry. Third-party apps rely significantly on PSP banks to ensure the speed and reliability of payments, aiming to minimize payment failures. Players such as PhonePe and Google Pay typically maintain multiple bank partnerships, a strategic approach to mitigate risks and enhance operational efficiency.
Over the past three years, PPBL has emerged as a dominant force in the UPI ecosystem, securing a market share exceeding 20% in inbound credit transactions. Despite its considerable scale, PPBL maintained a commendable track record, consistently ranking among the banks with the lowest transaction failure rates.
In conclusion, the recent directives and actions from the Reserve Bank of India regarding Paytm underscore the regulatory oversight and attention given to the digital payments landscape in India. With directives aimed at ensuring seamless transitions and alternative arrangements for customers, it’s evident that regulatory bodies are actively involved in safeguarding the interests of users and maintaining the stability of payment systems. As Paytm navigates through these changes and seeks to adapt to new regulatory requirements, the broader implications for the digital payments ecosystem remain significant, highlighting the ongoing evolution and scrutiny within the industry.
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