Introduction
- The Reserve Bank of India (RBI) has instructed the National Payment Council of India (NPCI) to evaluate One97 Communications’ (OCL) plea to become a Third-Party Application Provider (TPAP) for its Paytm application’s Unified Payments Interface (UPI) operations.
Understanding TPAP
- Role: TPAPs facilitate UPI-based transactions by providing compliant applications to end-users, ensuring adherence to security protocols and regulatory standards.
- Infrastructure: They leverage NPCI’s UPI framework and collaborate with payment service providers (PSPs) and banks to enable seamless transactions.
Implications of TPAP Approval
- Operational Continuity: TPAP approval is vital for Paytm to sustain UPI-based transactions, ensuring uninterrupted service for customers.
- Migration Process: If approved, Paytm’s ‘@paytm’ handles will transition seamlessly to designated banks to prevent service disruptions, with OCL prohibited from adding new users until successful migration.
- Risk Mitigation: RBI mandates certification of multiple banks as PSPs to manage high-volume UPI transactions, minimizing risk and enhancing system resilience.
Recent Developments
- PPBL Closure: Following RBI’s directive to shut Paytm Payments Bank (PPBL) operations by March 15, 2024, Paytm’s existing TPAP registration for UPI transactions faces uncertainty.
- RBI Intervention: In response to PPBL’s impending closure, RBI has tasked NPCI with evaluating OCL’s request to maintain TPAP status, crucial for Paytm’s UPI operations continuity.
Current Landscape
- Presently, 22 NPCI-approved third-party UPI apps, including Google Pay, PhonePe, and Whatsapp, facilitate peer-to-peer transactions via UPI IDs.
- RBI’s directive underscores the regulatory focus on maintaining stability and security in India’s digital payments ecosystem.
