Paytm Wins Key Payments Approval It Needs to Stay in Business

Sankalp Phartiyal and Preeti Singh
·2 min read

(Bloomberg) -- Paytm has won approval to become a consumer digital-payments platform, helping the beleaguered fintech continue a bulk of its business even as its banking affiliate is getting wound down.

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Lenders Axis Bank Ltd., HDFC Bank Ltd., State Bank of India Ltd. and Yes Bank Ltd. will power peer-to-peer or UPI payments on Paytm, the National Payments Corporation of India said Thursday. State-backed Unified Payments Interface is a pioneering system that allows users to make instant money transfers by linking banks with fintech apps such as Paytm.

Until now, Paytm has operated under a license connected to its affiliate Paytm Payments Bank, which it doesn’t control but which has run its digital wallets and payments traffic. But that bank has to cease its business after Friday following regulatory orders that it stop accepting new deposits, citing a continued breach of rules. The regulator’s surprise move caught Paytm off-balance and sent its stock cratering.

Paytm, run by billionaire founder Vijay Shekhar Sharma, has pledged no disruption to its users even as the curbs on Paytm Payments Bank kick in. Hundreds of millions of consumers and merchants in India use Paytm to transfer money and make purchases.

With Paytm Payments Bank out of the picture, Paytm has been courting other banks to take over the tasks handled by its former main partner. A deal last month helped the Ant Group-backed company replace Paytm bank with Axis Bank Ltd. as the backbone for its merchant payments settlement business.

With the four new bank partnerships, Paytm will essentially become a payments platform like Walmart Inc.-owned rival PhonePe and Google’s GPay that lean on other banks’ networks.

Yes Bank will also act as the “merchant acquiring bank for existing and new UPI merchants” for Paytm, the NPCI said.

In February, UPI processed transactions worth 18.28 trillion rupees ($221 billion). It’s helped hundreds of millions of Indians who don’t use credit cards to make digital payments. Companies don’t make any money on UPI transactions, but it provides them with a massive catchment of consumers to whom they can cross-sell services such as insurance and mutual funds.

Paytm has already cut back business ties with Paytm Payments Bank, with Sharma resigning from the bank’s board and also stepping down as a part-time non-executive chairman. He continues to lead fintech Paytm.

After March 15, Paytm Payments Bank is all but dead unless the curbs on it are lifted. Regulators have also considered canceling its operating license altogether, which would virtually guarantee its demise.

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