Troubled Paytm to onboard HDFC Bank as its third merchant acquiring partner: Report

Vijay Shekhar Sharma-led Paytm's parent company, One97 Communications Ltd, is likely to onboard India's largest private sector bank, HDFC Bank, as its third partner.

According to media reports, the partnership aims to migrate merchants previously onboarded by Paytm Payments Bank Limited (PPBL) onto the Paytm platform. The RBI's mandate came after imposing restrictions on PPBL, prohibiting it from offering banking services like deposits, credit transactions, and FASTag recharges from March 15.

Partnership with other banks

The report follows the troubled fintech giant's partnership with Axis Bank and Yes Bank, which have already commenced operations on the Paytm platform, facilitating services for an estimated 30 million merchants. The integration of these banks is crucial in ensuring that merchant services remain uninterrupted, adhering to the RBI's guidelines.

Notably, Reports say that the company is also in discussions with Canara Bank and Kotak Mahindra Bank, with Canara Bank expected to join the initiative shortly.

Furthermore, HDFC Bank and the State Bank of India (SBI) are poised to become payment service provider (PSP) banks for Paytm's UPI consumer business, which serves around 90 million users.

The expansion is part of Paytm's strategy to operate under a multi-bank model for its UPI services following the acquisition of the TPAP license from the National Payments Corporation of India (NPCI) on March 14.

Seamless migration and operational continuity

It's worth mentioning that the seamless migration of merchant services to new banking partners is crucial for maintaining the integrity of India's UPI system, where Paytm holds an 11% market share.

The RBI's decision to allow merchants and UPI users to continue using their Paytm handles, QR codes, and point-of-sale (PoS) machines aims to prevent any disruption in payments. Yes Bank has taken a significant role in this transition, including the migration of existing @paytm handles to ensure operational continuity.