India’s Paytm has secured a crucial license needed to survive and maintain the continuity of several core features of its eponymous payments app, just a day before the company’s banking arm is scheduled to cease operations due to regulatory restrictions.
The National Payments Corporation of India, which built the eponymous UPI railway in the country, approved Paytm’s application to participate in the payments ecosystem as a third-party app provider. The license will not restore many of the benefits that Paytm enjoyed previously, but will allow the Noida-based company to operate in a manner similar to Walmart’s PhonePe and Alphabet’s Google Pay.
The third-party app provider license will enable Paytm to offer payment services over the UPI network, even as Paytm Payments Bank, the banking arm of Paytm’s parent company One97 Communications, plans to cease operations on Friday.
The Reserve Bank of India in late January ordered Paytm to cease operations of Paytm Payments Bank, an affiliate of the financial services firm that handles most of its transactions.
The move sent shockwaves across the industry and meant that Paytm needed to obtain permission from third-party app providers to continue many operations of the Paytm app. The RBI order also wiped billions of dollars off Paytm’s market capitalization, cutting the company’s valuation by more than half.
NPCI on Thursday said Axis, HDFC, State Bank of India and Yes Bank will be the payment system providers for the Paytm app. NPCI also advised the company to complete the migration of all existing processing procedures and authorizations to the new PSP Bank at the earliest.
“YES Bank will also act as merchant acquiring bank for OCL’s existing and new UPI merchants. The ‘@Paytm’ handle should be redirected to YES Bank,” NPCI said in a statement.
The Reserve Bank of India set up NPCI to work with the country’s lenders to set up UPI in an attempt to make retail payments faster, more convenient and more cost-effective. Individuals in India can transact with others in the country simply using their virtual payment addresses.
The Reserve Bank of India advised NPCI to quickly issue a Third-Party Application Provider License (TPAP) to Paytm to help mitigate disruption to its customers.
