Paytm shifts offline merchant business to subsidiary post-RBI’s PA license
In a significant development, Paytm parent One 97 Communications has completed the transfer of its offline merchants’ payment business to its wholly-owned subsidiary, Paytm Payments Services Limited (PPSL). This move comes after PPSL received the Reserve Bank of India’s (RBI) license to operate as a Payment Aggregator (PA). The development is a crucial step forward for Paytm, as it paves the way for the company to resume the onboarding of new merchants, a process that had been under an RBI freeze since November 2022.
The transfer of the offline merchant business to PPSL is a strategic decision, aimed at ensuring compliance with the RBI’s guidelines for payment aggregators. As a licensed payment aggregator, PPSL will be responsible for managing the payment processing for Paytm’s offline merchants, including those in the retail, hospitality, and other sectors. This move is expected to enhance the efficiency and security of payment transactions, while also providing a more streamlined experience for merchants and customers alike.
The RBI’s guidelines for payment aggregators, introduced in 2020, aim to regulate the payment aggregation sector and ensure that companies operating in this space adhere to strict security and compliance standards. The guidelines require payment aggregators to obtain a license from the RBI, which involves meeting certain eligibility criteria and complying with specific requirements related to capital adequacy, risk management, and customer protection.
Paytm’s decision to transfer its offline merchant business to PPSL is a testament to the company’s commitment to complying with regulatory requirements and maintaining the highest standards of security and governance. By obtaining the RBI’s license to operate as a payment aggregator, PPSL has demonstrated its ability to meet the regulator’s stringent requirements, which is a significant achievement for the company.
The impact of this development on Paytm’s business is expected to be significant. With the transfer of the offline merchant business to PPSL, Paytm will be able to resume the onboarding of new merchants, which had been put on hold since November 2022. This is likely to lead to an increase in the company’s merchant base, which in turn will drive growth in transaction volumes and revenue.
Moreover, the RBI’s approval of PPSL’s payment aggregator license is a vote of confidence in Paytm’s ability to operate a secure and compliant payment platform. This is expected to enhance the company’s credibility and reputation in the market, which will be critical in attracting new merchants and customers.
In addition to the benefits for Paytm, the development is also expected to have a positive impact on the broader digital payments ecosystem in India. The growth of digital payments in India has been rapid in recent years, driven by factors such as increasing smartphone penetration, improving internet connectivity, and government initiatives to promote digital payments.
However, the sector has also faced challenges related to security, fraud, and regulatory compliance. The RBI’s guidelines for payment aggregators and the licensing of companies such as PPSL are aimed at addressing these challenges and promoting a more secure and compliant digital payments ecosystem.
In conclusion, the transfer of Paytm’s offline merchant business to PPSL is a significant development that marks an important milestone in the company’s journey. With the RBI’s approval of PPSL’s payment aggregator license, Paytm will be able to resume the onboarding of new merchants, which is expected to drive growth in transaction volumes and revenue. The development is also expected to enhance Paytm’s credibility and reputation in the market, which will be critical in attracting new merchants and customers.
As the digital payments sector in India continues to evolve, it is likely that we will see more companies following in Paytm’s footsteps and obtaining licenses to operate as payment aggregators. This will promote a more secure and compliant digital payments ecosystem, which will be beneficial for all stakeholders, including merchants, customers, and regulators.
About the Author
