Paytm users may take up to 6 months to shift to other service providers

It could take three to six months to migrate all existing Paytm customers to another payments service provider, according to people in the know. The digital payments major, on the other hand, it has been learnt, is looking to apply for a third-party application provider (TPAP) licence from the National Payments Corporation of India (NPCI).

A TPAP license will ensure that Paytm users can continue to make digital payments via the Unified Payments Interface (UPI). This comes amid concerns that the Reserve Bank of India (RBI) may revoke its payments banking licence, with Paytm Payments Bank being barred from accepting deposits and credit transactions from March 15.

“It depends on how the RBI is thinking about the entire process. The shift does not happen overnight or over a period of a few days. The process of migrating all Paytm customers to another payment service provider (PSP) may take anywhere between three months and six months, given the large number of customer base that Paytm has,” said a person in the know.

Another person close to this development explained that the company was expecting its virtual payment address (VPA) ending in @paytm to remain functional beyond March 15. A VPA is a unique identifier that customers can use to send and receive money on UPI.

“As the company partners with PSPs while taking the TPAP route, it is anticipated that the existing VPA will remain functional for some time after March 15,” the person said.

Paytm, according to the sources, is in talks with Axis Bank, HDFC Bank, and State Bank of India (SBI) for UPI services partnership.

Neither the RBI nor Paytm responded to queries from Business Standard until press time, and the NPCI declined to comment.

Currently, Paytm users can make UPI payments with their VPAs ending in @paytm, thanks to the payments bank licence issued to Paytm Payments Bank in 2017.
This licence enabled it to become a PSP. A PSP bank, either through its own application or a TPAP, onboards and registers customers on UPI, linking customers’ bank accounts to their respective UPI IDs. A TPAP, on the other hand, is a service provider that participates in UPI through a PSP bank, according to the NPCI website. The NPCI runs the UPI ecosystem in India.

There are currently 22 TPAPs operational in the country, including Amazon Pay, PhonePe, and Google Pay. Multiple banks, such as Axis Bank, HDFC Bank, SBI, and ICICI Bank, support fintech companies via the TPAP route.

For instance, customers using PhonePe to transact on UPI have their VPAs issued through financial institutions, such as Yes Bank, ICICI Bank, and Axis Bank. Their UPI handles end in @ybl, @ibl, or @axl, respectively.

As of January 2024, Paytm Payments Bank was the third-largest platform for UPI payments, after PhonePe and Google Pay. The platform processed 1,570 million transactions amounting to Rs 1,92,614 crore during the month.

Last week, Paytm shifted its nodal account to Axis Bank from Paytm Payments Bank to ensure continuity and seamless merchant settlements.

On the same day, the central bank extended the deadline for restrictions on deposit and credit transactions of Paytm Payments Bank Limited (PPBL) to March 15, stating that customers and merchants might require “a little more time to make alternative arrangements”. The earlier deadline was February 29.

The RBI clarified in a list of Frequently Asked Questions (FAQs) that merchants can accept payments using a Paytm QR code, soundbox, or point of sale (PoS) terminal even after March 15, if the receipt or transfer of funds are linked to any banks other than PPBL. However, merchants cannot transact after March 15 if the QR code, PoS, and sound box are linked to Paytm Payments Bank.

PLAN B

Fintech planning to apply for third-party application provider (TPAP) licence.

TPAP is a service provider that participates in UPI through a Payment Service Provider (PSP) bank.