India’s Paytm has secured a vital license it needed to survive and maintain the continuity of many key features of its namesake payments app, a day before the company’s banking unit is scheduled to shut down due to regulatory restrictions.
The National Payments Corporation of India, the company that built the eponymous UPI rail in the country, has approved Paytm’s application to join the payments ecosystem as a third-party app provider. The license won’t restore many of the perks Paytm enjoyed in the past, but it will allow the Noida-based company to operate similarly to Walmart’s PhonePe and Alphabet’s Google Pay.
The third-party app provider license will allow Paytm to offer payments through the UPI network even as Paytm parent company 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, a subsidiary of the financial services firm that processed the majority of its transactions.
The move sent shockwaves through the industry and also meant that Paytm had to secure a third-party app provider license to continue many of the features of the Paytm app. The RBI order also wiped billions from Paytm’s market cap, cutting the company’s valuation by more than half.
Axis, HDFC, State Bank of India and Yes Bank will act as payment system providers on the Paytm app, NPCI said on Thursday. The company has also been advised by the NPCI to complete the migration of all existing handles and orders to new PSP banks at the earliest.
“YES Bank will also act as a merchant acquiring bank for existing and new UPI merchants for OCL. The handle ‘@Paytm’ will be redirected to YES Bank,” NPCI said in a statement.
RBI set up NPCI, which partnered with the country’s lenders to roll out UPI in an effort to make retail payments faster, more accessible and cost-effective. People in India can transact with everyone else in the country just by using their virtual payment address.
The RBI had advised the NPCI to quickly issue the third-party application provider permit, or TPAP, to Paytm to help ease disruptions for its customers.
