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| Edited By: DNA Web Team |Source: DNA Web Desk |Updated: Nov 27, 2022, 09:41 AM IST
Paytm Payments Services (PPSL) informed the stock exchanges on November 26 that the Reserve Bank of India (RBI) had declined to issue them with a licence to act as a payment aggregator.
For permission to offer payment aggregator (PA) services to online retailers, the subsidiary of the fintech company applied.
As a result, Paytm is the only significant player in payment gateways to encounter a regulator rejection. The regulator has given the go-ahead in principle to incumbents including Razorpay, Pine Labs, Cashfree, and CCAvenues, while BillDesk and PayU are still awaiting a response.
Paytm meanwhile responded that its application is "not rejected". A spokesperson for the company said, “The RBI has not rejected our application, but has simply asked us to reapply in 120 days. We are taking all the necessary steps and are hopeful of getting the required approvals soon.”
According to the central bank, PPSL has 120 calendar days to resubmit their PA application. Other actions include not onboarding new online merchants and obtaining the proper approval for Paytm's previous downward investment into PPSL in order to comply with the government's foreign direct investment (FDI) requirements.
The company noted that no other “material observations” were made by the RBI, in its letter.
“This has no material impact on our business and revenues since the communication from RBI is applicable only to onboarding of new online merchants. We can continue to on board new offline merchants and offer them payment services including all-in-one QR, Soundbox, card machines,” the statement said.
The business also stated that PPSL can continue to conduct business with current online merchants, whose access to the services will not be impacted.
The company has 100 million KYC customers, and, according to the Paytm Payments Bank website, it is gaining 0.4 million new users each month.
This setback for Paytm comes as the market for payments is becoming more competitive, with more offline firms seeking an online partner to provide omnichannel payment services to retailers and established players expanding their product lines. While it waits for the RBI to approve the licence, Paytm's rival PhonePe is also developing its own payment gateway.
The regulator has also dealt Paytm a second blow since ordering it to stop onboarding new clients for Paytm Payments Bank in March. Paytm Payments Bank management has received the RBI-mandated IT auditors report and the central bank's assessment on it, the business stated on November 7. The ban has not yet been lifted.
A payment aggregator accepts payment instruments from clients and then offers payment services to businesses and e-commerce websites. They do this by collecting customer payments into a pot and then, after a set period of time, transferring them to retailers.
In addition to enabling bank transfers for businesses without them having to open accounts with the bank directly, the services also include facilitating integrated payment methods including transactions of cash and checks, as well as online and offline contact points.
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