How Yes Bank plans to onboard Paytm merchants after NPCI yes for 3rd-party app licence

Paytm on Thursday evening won the nod to become a consumer digital-payments platform, helping the fintech continue a bulk of its business even as its banking affiliate is getting wound down.

Axis Bank, HDFC Bank, State Bank of India and Yes Bank will power peer-to-peer or UPI payments on Paytm, the National Payments Corporation of India.

Unified Payments Interface is a system that allows users to make instant money transfers by linking banks with fintech apps such as Paytm.

In Paytm's case, YES Bank will be acting as the merchant acquiring bank for existing and new UPI merchants for One97 Communications Ltd (OCL). The @Paytm handle shall be redirected to YES Bank. OCL provides payment services under the Paytm brand.

Yes Bank will reportedly wrap up complete merchants' KYC in a week. An NDTV Profit post said the bank will have the first right of refusal for onboarding Paytm's merchants. Yes Bank will onboard all merchants after KYC, a plan for which is already in place. The KYC will be digitally done via Yes Pay, the post added.

Until now, Paytm has operated under a license connected to its affiliate Paytm Payments Bank, which it doesn’t control but which has run its digital wallets and payments traffic. But that bank has to cease its business after Friday following RBI orders that it stop accepting new deposits, citing a continued breach of rules.

Paytm had pledged no disruption to its users even as the curbs on Paytm Payments Bank kick in. With Paytm Payments Bank out of the picture, Paytm has been courting other banks to take over the tasks handled by its former main partner.

A deal last month helped the Ant Group-backed company replace Paytm bank with Axis Bank Ltd. as the backbone for its merchant payments settlement business.

With the four new bank partnerships, Paytm will essentially become a payments platform like Walmart Inc.-owned rival PhonePe and Google’s GPay that lean on other banks’ networks.