Paytm Secures Lifeline License to Keep Operations Afloat

Paytm, facing the imminent closure of its banking division, secured a crucial license allowing it to continue operating as a third-party payments app.

Just one day before its banking division is supposed to close down due to a regulatory crackdown, Paytm, an Indian company, has obtained a crucial license it needed to stay in business and keep some essential elements of its namesake payments app running.

They can now join the payments ecosystem as a third-party app provider thanks to approval from the National Payments Corporation of India, the company responsible for building the country’s eponymous UPI rail. The Noida-based company will be able to function similarly to Walmart’s PhonePe and Alphabet’s Google Pay with this license, although it won’t bring back all of their previous benefits.

With the third-party application provider license, they can continue to accept UPI payments even though Paytm Payments Bank, a division of parent company One97 Communications, is set to close its doors on Friday.

An affiliate of the financial services firm that handled most of Paytm’s transactions, Paytm Payments Bank, was ordered to discontinue operations by the Reserve Bank of India in late January.

In addition to sending shockwaves through the sector, the decision necessitated that they obtain the license of a third-party application provider so that the their app could keep running. The market capitalization of Paytm was also reduced by billions of rupees, or over half, due to the RBI’s ruling.

The Paytm app will be able to process payments through Axis, HDFC, State Bank of India, and Yes Bank, according to NPCI’s announcement on Thursday. At the earliest opportunity, the company should migrate all current handles and mandates to new PSP banks, as instructed by NPCI.

For OCL, YES Bank will also serve as the merchant acquisition bank for current and prospective UPI merchants. The ‘@Paytm’ handle will now lead to YES Bank, according to NPCI’s announcement.

As part of its effort to streamline, simplify, and quicken retail payments, the RBI established NPCI, which worked with the country’s lenders to develop UPI. Anyone in India can use their virtual payment address to make transactions with anyone else in the country.

To lessen the impact on its users, the RBI has urged NPCI to grant Paytm the third-party application provider license (TPAP) as soon as possible.