India’s fintech firm, Paytm, has received approval to pivot its operations towards a consumer digital payments platform, following regulatory orders to wind down its banking affiliate, Paytm Payments Bank. This development marks a transition for the company, ensuring continuity in its core business amidst regulatory challenges.
The National Payments Corporation of India (NPCI) announced yesterday (Thursday) that Paytm has been granted approval to operate as a consumer digital payments platform, with support from prominent lenders including Axis Bank, HDFC Bank, State Bank of India, and Yes Bank. These banking partners will facilitate peer-to-peer transactions and Unified Payments Interface (UPI) payments, leveraging India’s pioneering instant money transfer system.
Previously, Paytm operated under a license linked to its affiliate, Paytm Payments Bank, which managed its digital wallets and payments traffic. However, regulatory orders mandated the cessation of Paytm Payments Bank’s operations due to continued breaches of rules, prompting Paytm to seek alternative arrangements to sustain its business.
Bank Partnerships Emerge amid Paytm Payments Bank Closure
To mitigate the impact of Paytm Payments Bank’s closure, Paytm has forged partnerships with other banks to fulfill its operational requirements. Last month, a deal with Axis Bank replaced Paytm Payments Bank as the backbone for its merchant payments settlement business.
The significance of UPI in India’s digital payments ecosystem cannot be understated, with transactions worth 18.3 trillion rupees processed in February alone. While companies do not directly profit from UPI transactions, they leverage the platform to access a vast pool of consumers for cross-selling services such as insurance and mutual funds.