News sources noted that Paytm had previously partnered with Axis Bank, Yes Bank, and HDFC Bank for TPAP partnerships.
Introduction:
India’s largest lender, State Bank of India (SBI), has forged a strategic partnership with One97 Communications, the parent company of Paytm, to facilitate consumer UPI payments.
The collaboration comes amidst regulatory shifts impacting Paytm’s UPI operations and underscores the company’s efforts to comply with regulatory requirements while maintaining its market presence.
Background on Paytm’s UPI Operations:
Paytm’s UPI services were initially powered by Paytm Payments Bank Limited (PPBL).
However, regulatory actions by the Reserve Bank of India (RBI) prompted Paytm to seek partnerships with traditional banks to continue operating as a third-party application provider (TPAP), similar to its competitors PhonePe and Google Pay.
Expansion of Bank Partnerships:
In response to RBI’s directives, Paytm has collaborated with various banking partners, including Axis Bank, Yes Bank, and HDFC Bank, to secure TPAP partnerships.
NPCI mandates that UPI players have at least three bank partners, necessitating Paytm’s expansion of its banking network to ensure regulatory compliance and operational continuity.
Regulatory Compliance and Migration Process:
The RBI’s directive on migrating ‘@paytm’ handles from PPBL to other banks aims to prevent disruptions in service and ensure seamless transition for customers and merchants.
Paytm is actively engaging with Axis, Canara, Yes, and Kotak Mahindra Bank to facilitate the migration of merchant accounts from payments banks, aligning with regulatory guidelines.
Importance of Bank Partnerships:
Third-party UPI applications rely heavily on payment service provider (PSP) banks to ensure the efficiency and reliability of transactions.
Establishing partnerships with multiple banks mitigates operational risks and enhances payment processing capabilities, a strategy employed by industry leaders like PhonePe and Google Pay.
PPBL’s Role in UPI Ecosystem:
Paytm Payments Bank Limited (PPBL) has been a significant player in the UPI ecosystem, commanding a substantial market share in inbound credit transactions.
Despite its prominence, PPBL’s transition underscores the evolving regulatory landscape and the imperative for UPI players to adapt to regulatory changes while maintaining operational integrity.
Conclusion:
The partnership between SBI and Paytm reflects the evolving dynamics of India’s digital payments ecosystem amidst regulatory changes.
As Paytm navigates the transition from payments bank to TPAP model, strategic collaborations with established banking partners like SBI are pivotal in ensuring compliance, operational continuity, and sustained market competitiveness in the rapidly evolving fintech landscape.
