Paytm is expected to transfer a significant portion of its merchant accounts to Yes Bank

Paytm set to shift many merchant accounts to Yes Bank

One97 Communications Ltd., the parent company of Paytm, seems to have taken a strategic step by signing a probable deal to shift its merchant accounts to Yes Bank, as per sources familiar with the matter. Simultaneously, Paytm has reportedly applied for a third-party application provider license from the National Payment Corporation of India (NPCI) in collaboration with Yes Bank and Axis Bank, aiming to navigate the evolving regulatory landscape.

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The deal is said to be on the verge of finalization, with all required documents submitted, anticipating approval from NPCI shortly. Once approved, Yes Bank and Axis Bank are poised to become the primary payment service providers for Paytm’s UPI (Unified Payments Interface) channel.

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Yes Bank, a prominent player in UPI transactions, has exhibited robust performance, processing 34,198 crores in pay and 40,443 crores in receipt transactions in January. Axis Bank, another significant participant, recorded 31,831 crores in pay and 16,961 crores in receipt transactions during the same period.

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Previously, Yes Bank held the exclusive position as the sole bank supporting UPI transactions for market leader Phonepe. However, after the bank underwent a reconstruction process in March 2020, other banks were integrated into the payments app.

Paytm, confronted with regulatory restrictions on Paytm Payments Bank, seems to be strategically diversifying its banking partners. The company aims to mitigate the impact of regulatory measures and ensure a seamless transition for its merchant accounts.

Sources suggest that Paytm is looking to partner with multiple banks to secure its merchant base and explore revenue opportunities through diverse banking collaborations. The move aligns with the Reserve Bank of India’s (RBI) directive to NPCI, emphasizing alternative arrangements using Paytm Payments Bank’s UPI services.

Paytm’s collaboration with Yes Bank and Axis Bank appears to be a part of its broader strategy to strengthen ties with multiple banks and navigate through regulatory challenges effectively.

In response to RBI’s stringent measures on Paytm Payments Bank, including restrictions on accepting further credits into customer accounts and wallets after March 15, Paytm seems to be proactively realigning its banking partnerships. This includes shifting its nodal account to Axis Bank earlier this month.

The regulatory landscape has prompted Paytm to explore partnerships with Axis Bank, HDFC Bank, State Bank of India, and Yes Bank for processing UPI transactions. The RBI’s directive to NPCI to facilitate Paytm’s request to become a third-party application provider underscores the changing dynamics in the digital payment ecosystem.

While Paytm Payments Bank, One97 Communications Ltd., and NPCI refrained from responding to queries, Axis Bank and Yes Bank remained silent at the time of publishing this report.

The strategic move to collaborate with Yes Bank and Axis Bank not only addresses the immediate challenges posed by regulatory restrictions but also positions Paytm for future growth and resilience in the dynamic digital payments landscape. As the third-largest UPI payments app in India, processing 1.6 billion monthly transactions, Paytm continues to play a pivotal role in shaping the digital payments ecosystem.

In summary, Paytm’s partnership with Yes Bank and Axis Bank signifies a strategic response to regulatory changes, ensuring continuity in its UPI services and setting the stage for sustained growth in collaboration with multiple banking partners. The evolving scenario emphasizes the need for adaptability and strategic alliances in the rapidly evolving digital payments landscape.

Read about Yes Bank…

Yes Bank, a major player in India’s banking sector, has emerged as a key contributor to the UPI transaction space. Notably, it processed a significant volume of pay and receipt transactions in January, underscoring its substantial presence in digital payments. Paytm, a leading player in the Indian digital payment landscape, is reportedly considering Yes Bank to handle the majority of its merchant accounts. This strategic move aligns with the dynamic shifts in the financial industry and positions Yes Bank as a crucial partner for large-scale digital platforms. The bank’s active involvement in facilitating UPI transactions highlights its commitment to technological advancements and its pivotal role in shaping the future of digital finance.