Paytm Considers HDFC Bank as Third Merchant Acquiring Partner

One97 Communications Ltd, the parent company of Paytm, is likely to onboard HDFC Bank as its third partner to migrate merchants onto its fintech platform.

This move comes as Paytm Payments Bank was directed by the Reserve Bank of India (RBI) to cease certain services, including deposits, credit transactions, and FASTag recharges, starting from March 15.

Role of HDFC Bank as Payment Service Provider (PSP):

• HDFC Bank is expected to serve as the payment service provider for Paytm's UPI channel, facilitating transactions for merchants previously onboarded by Paytm Payments Bank.

• Currently, approximately 30 million merchants are active on the Paytm platform, highlighting the significant scale of operations.

Existing Partnerships with Axis Bank and Yes Bank:

• Axis Bank and Yes Bank have already commenced operations on the Paytm platform, serving as PSPs.

• Discussions are also ongoing with Canara Bank and Kotak Mahindra Bank, with Canara Bank anticipated to join the platform in the near future.

Involvement of State Bank of India (SBI):

• State Bank of India (SBI) is expected to become a PSP bank for Paytm's third-party application provider (TPAP) business, managing UPI consumer transactions.

• Paytm currently serves approximately 90 million UPI users on its platform.

TPAP Licence from NPCI:

• Paytm obtained the Third-Party Application Provider (TPAP) licence from the National Payments Corporation of India (NPCI) on March 14.

• This licence allows Paytm to operate UPI services under a multi-bank model, facilitating collaboration with multiple banks.

The objective of Partnerships:

• Paytm has been seeking partnerships with various banks to ensure a seamless transition for its merchants and to continue providing its offerings effectively.

• Despite regulatory restrictions imposed on Paytm Payments Bank by the RBI, businesses and UPI users are permitted to continue using Paytm handles, QR codes, and payment machines even after March 15.

RBI Restrictions on PPBL:

• The RBI imposed punitive restrictions on Paytm Payments Bank due to persistent non-compliance and supervisory concerns.

• These restrictions include the cessation of certain banking services and were extended until March 15 following an initial announcement earlier this year.

By presenting the information in a point-wise format, the key details and developments regarding Paytm's partnerships and regulatory challenges are highlighted concisely.