Paytm gets nod to be third-party UPI provider, shares jump 5%

Vijay Shekhar Sharma, founder and CEO of Paytm / Photo credit: Tech in Asia

One97 Communications, the parent firm of Indian fintech giant Paytm, has gained approval from the National Payments Corporation of India (NPCI) to become a third-party service provider on the country’s Unified Payments Interface (UPI) infrastructure. The news sent Paytm’s shares up by 5%.

This clears the way for the company to launch UPI services backed by several financial institutions, including Axis Bank, HDFC Bank, State Bank of India, and Yes Bank.

Previously, Paytm had offered such services through an exclusive partnership with Paytm Payments Bank, which is 51% owned by Paytm founder Vijay Shekhar Sharma, with the remaining stake held by One97 Communications.

Paytm this month terminated intercompany agreements with its affiliate bank in an effort to simplify its corporate structure, among other benefits.

Aside from supporting Paytm, Yes Bank will also act as the merchant acquiring bank for current and new UPI merchants linked with One 97 Communications. The existing “@Paytm” handle on the fintech firm’s platform will now direct transactions to Yes Bank.

This development follows the Reserve Bank of India’s order for Paytm Payments Bank to stop its services starting March 15 due to compliance issues regarding know-your-customer processes as well as money-laundering concerns. The bank later faced a probe by the Enforcement Directorate, the Indian government agency that investigates economic crimes and financial fraud.

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