One 97 Communications, which runs payment application Paytm, is focussing on the third-party payment app (TPAP) route to ensure that the Unified Payments Interface (UPI) remains open for its users, people aware of the matter told ET.

Discussions on this have started with the National Payments Corporation of India (NPCI), one of the persons said. NPCI runs the UPI ecosystem in the county.

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Currently, those using Paytm to make UPI payments have virtual payment addresses (VPAs) ending in @paytm.
After March 1, customers might find this changing to some other bank’s handle.

Paytm aims to use three or more banks to start issuing new VPAs to its customers from next month, said the people cited above. HDFC Bank, Axis Bank and Yes Bank are in contention for the consumer-facing UPI payments business of Paytm, just like they are looking to support the nodal accounts of its merchants.

The Reserve Bank of India ordered Paytm Payments Bank on January 31 to stop all basic payment services through various platforms and technology railroads, including UPI, from February 29.

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For merchant payments, the process might be slightly more complicated — the banks may insist on fresh know-your-customer (KYC) verification. But for consumers using Paytm for UPI, the service can continue with the VPA change in the backend, said the people cited above.“Since Paytm Payments Bank will stop offering payment services, the Paytm app will become a third-party app going forward, integrating UPI through other lenders,” said one of the people cited above.

Paytm will then join the likes of PhonePe, Google Pay, Amazon Pay and others. There are 22 TPAPs working on UPI. Banks like Axis Bank, HDFC Bank, ICICI Bank support multiple fintechs through the TPAP route. Typically, banks and fintechs use addresses that are a mix of both their brand names.

For instance, Google uses ‘ok’ as a prefix to the bank name, taken from the phrase ‘OkGoogle’. PhonePe’s VPA issued through Yes Bank uses ‘ybl’.

After Paytm Payments Bank was asked to stop offering basic banking services from March 1, ET reported February 3 that Paytm will cease to operate from that date.

Banks, FAQs

Paytm Payments Bank is also in talks to transfer the nodal accounts of Paytm merchants to other lenders. One of the persons cited above said that this will only happen after the regulator issues detailed FAQs (frequently asked questions) on the matter, as the RBI governor said on Thursday.

NPCI and Paytm did not respond to queries.

“Now that the regulator has said that it will come out with FAQs, we will wait for that,” said one of the persons. “Once the doubts become clear, we will be able to integrate with the services and continue business.”

ET reported February 8 that the new banks which will take on the settlements business of Paytm Payments Bank might seek fresh KYCs of the merchant base.

Competition steps up

While Paytm is struggling to keep its banking business afloat, competitors have started upping their game to grab any customers looking to switch.

PhonePe saw its user base climb 15-20% in the week after the RBI issued its notice, ET reported February 6.

The change of payment address for customers is a backend process that can be done remotely. That’s unlike changing the payment acceptance infrastructure for merchants, which might require front-end changes.

“This is more of an architecture issue where the settlement rails will need to move from one bank to a few others,” said one of the persons cited. “It will require close coordination between the banks, NPCI and Paytm.”

The disadvantage is that Paytm will have to depend on the technology backend of third-party lenders, which are prone to stress under intense payment volumes.

Multiple banks have been facing server challenges, with UPI stalling for a few hours on February 6.

Paytm founder Vijay Shekhar Sharma met RBI officials earlier this week but was unsuccessful in getting an extension or relaxation. He also met the finance minister to seek help, but was referred back to the RBI as it was a regulatory and compliance issue best handled by the central bank.


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