India's central bank RBI has directed Paytm, the company that revolutionized digital payments in the country, to cease all services offered by its banking division, also known as the wallet service, due to "persistent non-compliance" with its regulations. This division enables Swift payments through the Paytm app, which has a user base of over 330 million.
Meanwhile Axis Bank, a leader in the merchant acquiring space, is in discussions with Paytm regarding partnerships across business lines. The bank, which has previously collaborated with Paytm, is now exploring new areas for cooperation following RBI's action against Paytm Payments Bank in Jan. While talking to reporters, Axis Bank MD & CEO Amitabh Chaudhry has stated that any collaboration will require RBI's approval.
Paytm will need to tie up with a bank in place of Paytm Payments Bank, which has been barred by RBI from most activities after Feb 29, if it were to operate as a UPI app like PhonePe or Google Pay. Axis Bank has emerged as a diversified player in the payments space after its acquisition of Citibank's card business and fintech company Freecharge.
Besides backend support for UPI, there are number of areas where Paytm Payments Bank is seeking support including Fastag, transit card and wallet. "The conversations are focused on individual business aspects, with no strategic discussions", said Arjun Chowdhry, who heads affluent banking, cards, and payments at Axis Bank. He did not specify which line of business the bank was in talks over.
On the bank's merchant acquiring business, Chowdhry noted that merchant payments on UPI have surpassed credit card transactions and are growing at a faster pace, attracting interest from various players. "We continue to invest in merchant acquiring, both in point-of-sale and QR," he said. He also mentioned that Axis Bank plans to start replacing Citibank-branded cards with Axis Bank cards from the first half of FY25 and aims to complete the process in the next fiscal year. "It will be done in a way that ensures no disruption to the cardholder; the numbers will be retained along with standing instructions," he added.