Paytm May Adopt Third-Party Route to Retain UPI Access for Users

Facing a regulatory hurdle, One 97 Communications, the parent company of payment app Paytm, is exploring the third-party app (TPAP) route to ensure continued access to the Unified Payments Interface (UPI) for its users.

Currently, Paytm users have virtual payment addresses (VPAs) ending in "@paytm." This might change after March 1st, with new VPAs issued by partner banks like HDFC Bank, Axis Bank, and Yes Bank. This aligns with the Reserve Bank of India's (RBI) directive for Paytm Payments Bank to halt payment services by February 29th.

However, starting from March 1, customers may observe a transition to VPAs associated with other banks. Paytm intends to collaborate with three or more banks to issue new VPAs to its customers, with HDFC Bank, Axis Bank, and Yes Bank being potential contenders for handling consumer-facing UPI payments, as well as supporting the nodal accounts of Paytm's merchants, Economic Times reported.

Following the Reserve Bank of India's directive on January 31 instructing Paytm Payments Bank to halt all basic payment services, including UPI, by February 29, Paytm is expected to transform into a third-party app for payment services.

For merchant payments, the transition may involve additional steps such as fresh know-your-customer (KYC) verification. However, for consumers using Paytm for UPI transactions, the service can continue seamlessly with the VPA change taking place in the backend.

By embracing the TPAP model, Paytm will join the ranks of leading payment apps such as PhonePe, Google Pay, and Amazon Pay. Currently, there are 22 TPAPs operating on UPI, with banks like Axis Bank, HDFC Bank, and ICICI Bank supporting multiple fintech firms through this route.

Typically, TPAPs use addresses that combine elements of both their brand names and the partnering banks. For instance, Google Pay employs the prefix 'ok' derived from 'OkGoogle,' while PhonePe's VPA, facilitated through Yes Bank, features 'ybl.'