Paytm is one of India’s largest digital payment platforms with over 300 million users. However, it has faced some issues recently regarding its payments business. The Reserve Bank of India (RBI) placed restrictions on Paytm’s banking arm – Paytm Payments Bank (PPBL) last year. This affected how Paytm could process transactions made through the Unified Payments Interface (UPI) system.
UPI is a system that allows people to transfer money between bank accounts instantly using just a mobile number. Many digital payment apps like Google Pay, PhonePe etc. use UPI to power their transactions. For this, they need to partner with a bank to facilitate the transfer of funds between users.
So far, Paytm was able to use its own payments bank PPBL for this purpose. But with the RBI restrictions, it needed to find another banking partner. According to a report in Moneycontrol, Paytm has now chosen Axis Bank for this role. Both Paytm and Axis Bank will apply to the National Payments Corporation of India (NPCI) this week to get approval as a Third Party Application Provider (TPAP).
Being a TPAP allows a company to use another bank’s infrastructure to process UPI payments made through their platform. This is similar to how other apps like Google Pay work. They partner with multiple major banks like ICICI, HDFC etc. to ensure smooth transactions.
If approved by NPCI, Axis Bank will take over the role played by PPBL so far. It will help transfer funds between Paytm users whenever they make or receive UPI payments. This will allow Paytm to continue operating its large UPI business without disruption. The company has over 90 million active UPI users on its app today.
Paytm is also in talks with other banks like Yes Bank, HDFC Bank, ICICI Bank and Canara Bank for additional TPAP partnerships. However, none of these discussions have been finalized yet. Partnering with multiple major banks is a smart move considering the volume of transactions Paytm handles. It will help minimize risks in case any one bank faces issues in future.
Overall, this development is positive for Paytm and its users. By signing up Axis Bank as its banking partner, Paytm will be able to ensure its UPI payments services run smoothly. It aims to submit the TPAP application along with Axis Bank to NPCI this week itself. An expedited approval from NPCI will make sure customers do not face disruptions while using Paytm for UPI. This collaboration seems aimed at stabilizing Paytm’s payments business following the RBI restrictions on its bank.
