India’s fintech giant Paytm faces regulatory challenges
In the wake of the Reserve Bank of India’s (RBI) directive to Paytm Payments Bank Ltd (PPBL) to cease accepting deposits or top-ups in any customer accounts, wallets, FASTags, and other instruments after 29 February, Paytm, a leading fintech firm specializing in digital payments, reassured its merchants that its QR codes would continue to function as usual. This means that merchants can continue to accept payments beyond the specified date. Additionally, payment devices such as Paytm Soundbox and card machines will remain operational.
The directive sparked concerns about the functionality of Paytm’s QR codes. However, Paytm clarified that some merchants have repayment arrangements set up through the PPBL bank account, as the settlements were being processed there. To ensure uninterrupted service, Paytm announced that it would migrate their settlement account to another bank of their choice. This migration process, likened to mobile number portability, will occur at the back end and will not impact the merchants and customers on the front end.
To ensure that there is no disruption to merchants, Paytm is in talks with some leading banks and will partner with one of them. Over the past two years, Paytm has collaborated with multiple banking partners for a host of services. For services like Paytm QR, where Paytm Payments Bank acts as a back-end bank, these services will seamlessly transition to other partner banks. This means that there will be continued service available to its merchant partners.
Following an update by RBI during the Monetary Policy Committee regarding Paytm Payments Bank, the Deputy Governor emphasized that the opportunity for partnership with PPBL will be a prerogative of banks, paving the way for ongoing and possible collaboration between Paytm Payments Bank and other banking institutions.
On Monday, RBI Governor Shaktikanta Das, (pictured above), ruled out any review of the central bank’s action against PPBL, stating that its decisions are well thought out. He affirmed that the RBI is not against any fintech but its prime objective is to protect the interest of customers and depositors. He also mentioned that FAQs targeting the inconvenience or issues faced by the depositors and customers wallet users, FASTag holders will be issued for their benefit.
Merchants using Paytm QR code
In conclusion, despite the RBI’s directive, Paytm has taken steps to ensure that its services remain operational and that its merchants do not face any disruptions. The company’s proactive measures, including the planned migration of merchant settlement accounts and collaborations with other banks, demonstrate its commitment to maintaining service continuity and protecting the interests of its customers and merchants.
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