Paytm Will Reapply To Be A 'Payment Aggregator': Will It Affect End Users?

Paytm, a leading digital financial service provider in India has confirmed it will resubmit its application to operate as a Payment Aggregator. The Reserve Bank of India (RBI) has asked the company to pause onboarding online merchants until the approval process is completed. Let's see how Paytm Payments Services Limited (PPSL), a wholly-owned subsidiary of Paytm, will respond, and if merchants and end-users could be adversely affected.

RBI Turns Down Paytm's Application, Asks To Reapply

Paytm has indicated that the RBI turned down its application seeking a license to operate as a payment aggregator within India. Paytm made the disclosure in its regulatory filing, and even tweeted about the same.

Update: Our 100% subsidiary, Paytm Payments Services Limited will be resubmitting application to RBI for authorization to provide payment aggregator services for online merchants. This has no material impact on our business and revenues.
More details: https://t.co/TXh2ABvdBH

— Paytm (@Paytm) November 25, 2022

RBI has asked PPSL to re-submit its Payment Aggregator (PA) services application within 120 calendar days. Incidentally, One97 Communications (OCL), which owns the Paytm brand, started the process way back in 2020. The fintech company even submitted the required documents again in September 2021.

It appears RBI needs OCL to secure approvals for its investments in PPSL. RBI's guidelines for Payment Aggregators forbid a single entity from providing an e-commerce marketplace along with payment aggregator services.

RBI mandates payment aggregator services must be separated from the e-commerce marketplace business. Hence, OCL proposed transferring its payment aggregator services business to PPSL in December 2020.

Speaking about the development, a Paytm spokesperson said, "The RBI has not rejected our application, but has simply asked us to reapply in 120 days. We are taking all the necessary steps and are hopeful of getting the required approvals soon."

Will The Reapplication Process Negatively Impact End Users?

Paytm categorically stated that RBI has not noted any other "material observations". The company further stressed that "the communication from RBI is applicable only to onboarding of new online merchants."

Essentially, RBI has asked PPSL to take the following steps and resubmit the PA application within 120 calendar days:

• Seek necessary approval for past downward investment from the Company into PPSL, to comply with FDI Guidelines
• Not onboard new online merchants

Simply put, Paytm can continue its current business as usual. PPSL need not stop doing business with existing online merchants as well.

Moreover, the fintech company can continue to welcome new merchants in the offline market. Paytm can also offer them its bouquet of payment services, which include the All-in-One QR, Soundbox, Card Machines, and other services. This clearly means end users can continue to transact using their Paytm accounts, which will remain fully operational with all the existing features and benefits.