Paytm Considering PhonePe, Google Pay Model to Sustain UPI

Paytm parent company One97 Communications, is in discussions with the National Payments Corporation of India (NPCI) to incorporate third-party payment apps for seamless UPI access. Beginning March 1, Paytm users might notice changes in their virtual payment addresses, as the company intends to team up with three or more banks.

Paytm Customers May soon Find Relief

On the horizon as the company actively explores innovative strategies to ensure seamless access to the Unified Payments Interface (UPI).

Insider sources reveal that Paytm is earnestly considering the integration of third-party payment apps (TPAPs) into its platform. This proactive approach underscores Paytm’s commitment to providing its customers with uninterrupted and reliable UPI services.

By tapping into the capabilities of TPAPs, Paytm aims to fortify its UPI infrastructure, thereby enhancing the overall user experience and alleviating potential disruptions.

Paytm Talks With NPCI

Preliminary talks regarding this initiative have initiated with the National Payments Corporation of India (NPCI), the regulatory body overseeing the UPI ecosystem within the nation, as per details from an ET report.

Currently, Paytm users who make UPI payments are assigned virtual payment addresses (VPAs) that terminate with “@paytm”. However, from March 1 onwards, there might be a shift to addresses linked with different banks.

Paytm aims to join forces with three or more banks to issue fresh VPAs to its user base, commencing next month. Notably, HDFC Bank, Axis Bank, and Yes Bank are under consideration to facilitate UPI payments for consumers and to manage the nodal accounts of Paytm merchants.

On January 31, the Reserve Bank of India issued a directive to Paytm Payments Bank, instructing them to discontinue all basic payment services, including UPI transactions, effective February 29. This move has significant implications for both merchants and consumers alike.

For merchants, the directive implies that banks may require them to undergo a fresh know-your-customer (KYC) verification process to continue accepting payments. However, for consumers who rely on Paytm for UPI transactions, there’s a silver lining.

Despite the halt in basic payment services by Paytm Payments Bank, users can still access UPI services through the platform. This continuity is made possible by a backend adjustment in virtual payment addresses (VPAs), ensuring uninterrupted service.

According to sources, Paytm’s transition into a third-party app integrating UPI through other banks is inevitable. This strategic shift positions Paytm in alignment with platforms like PhonePe, Google Pay, and Amazon Pay, reflecting the evolving landscape of digital payment solutions in India.

In the ever-expanding landscape of UPI, there are currently 22 third-party payment app providers (TPAPs) offering their services. Notably, banks such as Axis Bank, HDFC Bank, and ICICI Bank play a pivotal role in supporting multiple fintech companies through this channel. Often, these collaborations involve a fusion of brand names in the payment addresses, showcasing a strategic partnership between banks and fintech firms.

For instance, Google incorporates ‘ok’ as a prefix, derived from its renowned phrase ‘OkGoogle’, in its bank name. Similarly, PhonePe’s virtual payment address (VPA) issued via Yes Bank utilizes ‘ybl’, reflecting its affiliation with the bank. This practice highlights the innovative ways in which fintech companies leverage their partnerships with banks to enhance their service offerings on the UPI platform.

The process of backend adjustments for changing payment addresses for customers differs significantly from the front-end modifications required for merchants’ payment acceptance infrastructure. Unlike the complex front-end adjustments, backend changes can be executed remotely, streamlining the transition process for users.

However, while relying on third-party lenders for technology backend offers flexibility and convenience, it may also present challenges, particularly during periods of high payment volumes. Ensuring seamless performance and reliability becomes paramount in such scenarios, requiring robust infrastructure and efficient coordination between banks and fintech companies.

Also Read: RBI’s Paytm Ban: Protect Finances by March 1, 2024!

Source: Times Of India , Google

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