Paytm Considers TPAP Status for UPI Functionality
One97 Communications, the parent company of Paytm, is considering operating the digital payments app as a third-party payment app (TPAP) to ensure uninterrupted access to the Unified Payments Interface (UPI) for its users. This move comes in response to regulatory directives from the Reserve Bank of India (RBI).
Changes in Virtual Payment Addresses
If Paytm claims TPAP status, it will result in changes to virtual payment addresses (VPAs) for its users. Currently, Paytm UPI users have VPAs ending in @paytm, but starting from March 1, these VPAs may be associated with other banks. To facilitate this transition, Paytm is in talks with several banks to issue new VPAs to its customers.
Strategic Alignment with Other TPAPs
This move will bring Paytm in line with other TPAPs operating on the UPI platform, such as PhonePe, Google Pay, and Amazon Pay. Competitors like PhonePe have seen an increase in their user base following the RBI’s notice to Paytm.
Regulatory Challenges and Scrutiny
The transition to a third-party payment app status presents challenges related to coordination among banks, the National Payments Corporation of India (NPCI), and Paytm. Concerns also arise regarding Paytm’s reliance on third-party lenders’ technology infrastructure and potential stress during high payment volumes.
The RBI’s scrutiny of Paytm is driven by concerns about irregularities in know-your-customer (KYC) norms, compliance issues, and questionable transactions. Despite efforts by CEO Vijay Shekhar Sharma, no extension or relaxation of regulatory directives has been granted.
Impact on Crypto Investors
The TPAP status could provide relief for crypto investors who relied on Paytm Payments Bank for making investments. It ensures successful UPI payments, eliminating the need to explore other digital payment options.
Concerns About Paytm’s Future Viability
While Paytm Payments Bank led UPI transactions in December 2023, the RBI’s directives to halt certain transactions after February 29 have raised concerns about the bank’s future viability.
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