Paytm gets nod for user migration to PSP bank handles: Here's how it can affect you

Paytm recently said that the National Payments Corporation of India (NPCI) has allowed One97 Communications (OCL) to kick-start the migration of users to a new payment service provider (PSP) the bank handles. For this, four major banks — State Bank of India (SBI), Axis Bank, HDFC Bank, and YES Bank — will act as PSPs to Paytm.

Paytm is working on streamlining user account shifts to four operational banks on the TPAP. They are transitioning '@paytm' handle users to these PSP banks for a seamless UPI payment experience.

On March 14, 2024, the National Payments Corporation of India (NPCI) granted approval for a third-party application provider (TPAP) permit to Paytm in association with distinguished financial institutions including SBI, Axis Bank, Yes Bank, and HDFC Bank. This authorisation ensures the uninterrupted processing of UPI transactions for Paytm’s clientele.

Previously, UPI transactions via Paytm were facilitated by the Paytm Payments Bank Ltd (PPBL). However, following directives from the Reserve Bank of India effective after March 15, PPBL is restricted from accepting any form of deposits or conducting credit transactions and account top-ups for its customers.

"One 97 Communications Limited (OCL) that owns the brand Paytm, India's leading payments and financial services company and the pioneer of QR, soundbox and mobile payments, has received go ahead, yesterday from the National Payment Corporation of India (NPCI) to start the user migration to new Payment System Provider (PSP) bank handles immediately," Paytm said in the release.

So what's next?

This step will help Paytm to migrate users from its Paytm Payment Bank to accounts with Axis Bank, HDFC Bank, SBI and YES Bank to ensure uninterupted UPI payments for both users and merchants.

Users with @paytm handles will be the first to be migrated.

Users will be required to provide consent when integrating a new UPI ID from any of the four designated bank handles with their Paytm accounts.

Additionally, Paytm may request users to transition from their '@paytm' UPI handle to another specified handle as part of this update.

What will change

UPI users with the @Paytm UPI handle will have new virtual payment addresses or VPAs with partner PSP banks.

Paytm added it had started to transition ‘@paytm’ handles users to the four PSP banks. Paytm operates as a TPAP under a multi-bank model.

A PSP bank onboards and registers customers on UPI via its application or a TPAP. It connects customers' bank accounts to their UPI IDs.

TPAPs are service providers that engage in UPI via a PSP bank, as per the NPCI, the governing body of the UPI system in India.

How will it affect customers, Paytm users

Paytm users can link their existing bank accounts to Paytm. This would allow them to make UPI payments directly from their bank accounts using the Paytm app.

Paytm will offer users the option to create VPAs linked to four different banks: State Bank of India (SBI), Axis Bank, HDFC Bank, and YES Bank.

For example, your new VPA could be yourname@sbi or yourname@axis, depending on the bank you choose.

Once a Paytm user has been migrated, the current UPI ID with ‘@paytm’ of these users will change to a new UPI ID, which could have these four IDs -- @ptsbi, @pthdfc, @ptaxis and @ptyes.

TPAPs at work

There are 24 TPAPs operational in the country, including Amazon Pay, PhonePe, and Google Pay. Multiple banks, such as Axis Bank, HDFC Bank, SBI, and ICICI Bank, support fintech companies via the TPAP route. Paytm Payments Bank app ranks third in processing UPI transactions by volume and value, following PhonePe and Google Pay.