India’s Paytm secured a vital license it needed to survive and maintain continuity of several core functions of its eponymous payments app, a day before the company’s banking unit ceases operations due to regulatory clampdown.
The National Payments Corporation of India, the company that built the UPI railway of the same name in the country, has approved Paytm’s application to participate in the payments ecosystem as a third-party app provider. The license will not restore several of the benefits that Paytm enjoyed earlier, but 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 over the UPI network even as the banking unit of Paytm parent company One97 Communications, 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 company that processed most of its transactions.
The move sent shockwaves through the industry and also meant that Paytm needed to license the third-party app provider to continue many of the operations of the Paytm app. The RBI order also wiped billions off Paytm’s market capitalization, reducing the company’s valuation by more than half.
Axis, HDFC, State Bank of India and Yes Bank will act as payment system providers for the Paytm app, NPCI said on Thursday. NPCI has also recommended the company to complete the migration of all existing identifiers and mandates to new PSP banks at the earliest.
“YES Bank will also act as a merchant acquiring bank for new and existing UPI merchants for OCL. The handle ‘@Paytm’ will be redirected to YES Bank,” NPCI said in a statement.
The RBI created NPCI, which collaborated with the country’s lenders to build UPI in a bid to make retail payments faster, more accessible and cost-effective. People in India can transact with everyone else in the country simply by using their virtual payment address.
The RBI had advised NPCI to quickly issue the third-party application provider, or TPAP, license to Paytm to help mitigate disruptions for its customers.