India’s Paytm has secured a vital license it needed to survive and maintain continuity of several core features of its eponymous payments app, a day before the firm’s banking unit is scheduled to cease operations because of regulatory clampdown.
The National Payments Corporation of India, the firm that built the eponymous UPI rail in the country, approved Paytm’s application to participate in the payments ecosystem as a third-party application provider. The license won’t restore several of the perks Paytm enjoyed before, but will allow the Noida-headquartered firm to operate similarly as Walmart’s PhonePe and Alphabet’s Google Pay.
The third-party application provider license will enable Paytm to offer payments through the UPI network even as Paytm’s parent firm One97 Communications’ banking unit — Paytm Payments Bank — is scheduled to cease operations on Friday.
The Reserve Bank of India ordered Paytm in late January to cease operations at Paytm Payments Bank, an affiliate of the financial services firm that processed a majority of its transactions.
The move created shockwaves through the industry, and also meant that Paytm needed to secure the third-party application provider license to continue many of the Paytm app’s operations. The RBI’s order also wiped billions off Paytm’s market cap, cutting the firm’s valuation by more than a half.
Axis, HDFC, State Bank of India and Yes Bank will serve as payment system provider to the Paytm app, NPCI said Thursday. The company has also been advised by NPCI to complete migration for all existing handles and mandates to new PSP banks at the earliest.
“YES Bank shall also be acting as merchant acquiring bank for existing and new UPI merchants for OCL. ‘@Paytm’ handle shall be redirected to YES Bank,” NPCI said in a statement.
The RBI set up NPCI, which collaborated with the country’s lenders to build UPI in an attempt to make retail payments faster, more accessible and cost-efficient. Individuals in India can transact with everybody else in the country by just using their virtual payment address.
The RBI had advised NPCI to swiftly issue the third-party application provider license, or TPAP, to Paytm to help mitigate disruptions for its customers.