NPCI grants approval to Sharma's Paytm to become a third-party UPI app

The National Payments Corporation of India (NPCI) has granted One97 Communications Limited (OCL), the parent entity of Paytm, the approval to operate as a Third-Party Application Provider (TPAP) for Unified Payments Interface (UPI) services. 

The pivotal move comes just in time as Paytm Payment Bank Limited (PPBL) faces regulatory restrictions from the Reserve Bank of India (RBI), necessitating a shift in Paytm's operational model for UPI services.

Partnering with leading Indian banks

Under the new arrangement, Paytm will collaborate with four major banks—Axis Bank, HDFC Bank, State Bank of India, and Yes Bank—as its Payment System Providers (PSPs). 

These banks will facilitate the connection between Paytm's UPI app and the banking network, ensuring a seamless transaction process for users and merchants alike. Notably, Yes Bank will also serve as the merchant acquiring bank, centralizing Paytm's UPI transactions under the "@Paytm" handle.

Ensuring seamless transition and operations

The NPCI's directive includes a swift migration of all existing UPI handles and autopay mandates to the new PSP banks, aiming for minimal disruption to Paytm's vast user base.

The transition is critical for maintaining the continuity of UPI transactions and services for both users and merchants, reinforcing Paytm's commitment to providing uninterrupted payment solutions.

Paytm's response to regulatory challenges

The approval by NPCI is a significant development for Paytm. It follows the RBI's series of regulatory actions against PPBL, including restrictions on its banking operations due to non-compliance issues. 

In response, Paytm has undertaken strategic measures, including the discontinuation of inter-company agreements with PPBL and a reconstitution of its board of directors, to ensure compliance and the independent operation of its banking unit.

Market impact and future prospects

The development marks a crucial step for Paytm in maintaining its position as a leading player in India's digital payments landscape, especially given recent challenges. 

The company's ability to adapt and secure the TPAP license underlines its resilience and commitment to innovation. As Paytm joins the ranks of other TPAP license holders like Google Pay and PhonePe, it opens new avenues for growth and strengthens its ecosystem of financial services, promising a brighter future for its users, merchants, and stakeholders.