One 97 Communications may opt for third-party payment app to run Paytm UPI platform: Report

Embattled One 97 Communications, which runs the Paytm brand, may opt for the third-party payment app (TPAP) route so that its Unified Payments Interface (UPI) platform Paytm can run smoothly and remain open for its users. The company officials have approached the National Payments Corporation of India (NPCI), which runs the UPI functions in India, to discuss the details about the same, the Economic Times reported.

Last month, the Reserve Bank of India (RBI) imposed curbs on Paytm Payments Bank (PPBL) from accepting new deposits after February 29. Paytm wallet, which offers services such as FASTag, falls under Paytm Payments Bank. Paytm had previously announced that FASTags and wallets would need to be transferred to alternative banks, and the company is currently in discussions with third-party banks.

In layman's language, all UPI handles within the Paytm application utilise PPBL as their PSP bank. If PPBL stops its banking operations after February 29, it will no longer be able to function as a PSP nor act as a settlement bank for any UPI transactions on the platform. Consequently, this implies that the Paytm app would be incapable of facilitating UPI transactions.

Currently, Paytm users who make UPI payments have virtual payment addresses (VPAs) that end with @paytm. From March 1, customers will have to migrate to other banks and they may see that the VPAs will be replaced with the handle of a different bank.

As per the report, Paytm is trying to engage three or more banks to start issuing new VPAs to its customers from next month. HDFC Bank, Axis Bank and Yes Bank are being considered in contention for the consumer-facing UPI payments business of Paytm.

The sources quoted in the copy said that though the merchant payments migration could be a complicated process as the banks may insist on fresh know-your-customer (KYC) verification. But for consumers using Paytm for UPI, the service can continue with the VPA change in the backend.

“Since Paytm Payments Bank will stop offering payment services, the Paytm app will become a third-party app going forward, integrating UPI through other lenders,” a source told ET.

With this, Paytm will in the same league as PhonePe, Google Pay, Amazon Pay and others. There are 22 TPAPs working on UPI. Banks, such as Axis Bank, HDFC Bank, ICICI Bank, support multiple fintechs through the TPAP route. Typically, banks and fintechs use addresses that are a mix of both their brand names.

Paytm's UPI function is powered by Paytm Payments Bank Limited (PPBL), which is the exclusive PSP bank on the Paytm platform. A PSP bank is responsible for connecting the UPI app with the banking channel. Only banks are eligible to act as PSPs. 

The majority of Paytm's transactions and approximately 75 per cent of its gross merchandise value (GMV) are conducted through the widely used UPI function on its app. At present, One 97 Communications Limited does not have any affiliation with other commercial banks for its UPI app.

On Friday, it was reported that the Reserve Bank of India (RBI) will be approaching the National Highways Authority of India and the National Payments Corporation of India (NPCI) in the next couple of days to finalise the procedure of migration of merchants and consumers from Paytm to other mediums. 

Also read: Vijay Shekhar Sharma considered quitting Paytm Payments Bank board to avoid RBI impasse