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Tag: NPCI

  • With Paytm Bank set to wind down, uncertainty clouds One97’s future

    With Paytm Bank set to wind down, uncertainty clouds One97’s future

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    The ides of March is upon us and Paytm’s future hangs in the balance. March 15 is the deadline for subsidiary Paytm Payments Bank (PPBL) to wind down its operations, taking with it a significant portion of parent One97 Communication’s (OCL) business.

    One97 insists that it will be business as usual post March 15. While the financial implication of PPBL may seem negligible to One97’s overall business, it needs to be seen in the context of the payments bank perhaps being the only profitable entity of OCL’s associates and JVs, in addition to being a critical component of the overall payments piece given that a significant portion of the transactions were routed through the bank.

    In this scenario, shutting down of the bank is bound to have business implications for the parent.

    Of OCL’s revenue base of ₹7,990 crore in FY23, the payments business accounted for ₹4,930 crore. PPBL suffered losses in FY22 but bounced to a net profit of ₹2 crore in FY23. In FY21, it was the most profitable arm of the holding company contributing ₹25 crore towards the net profit.

    As per One97 Communication’s annual report for FY23, revenue from the bank stood at about ₹2,277 crore, of which ₹783 crore was received by the parent as ‘services received as payment processing charges’ and ₹1,494 crore as ‘amount receivable from the payment gateway’. There are other payables and receivables apart from these as well.

    In terms of balance sheet impact, investors should brace for a markdown of ₹195.9 crore in OCL’s investments attributable to PPBL. Net worth attributable to shareholders at ₹254.3 crore may also suffer a mark down post March 15 if the payments bank is wound down after March 15.

    UPI payments

    Paytm secured the TPAP (third party application provider) licence from NPCI on Thursday which will help it continue its UPI-based operations that account for a bulk of the payments business and are key for its survival and growth. Other payment options include netbanking, debit and credit cards.

    Since the regulatory directive against subsidiary PPBL on January 31, parent OCL has made all efforts to severe ties with its arm to dispel allegations of inter-connectedness of business operations and lack of transparency between the two entities.

    This included Founder and Chairman Vijay Shekhar Sharma stepping down from the board of the bank and reconstitution of the bank board. However, Sharma continues to be the majority shareholder with 51 per cent stake whereas One97 holds the remaining 49 per cent in the bank. Also to be noted is that all communication so far has been from One97 and Paytm and not from the bank, which begs the question of how independent the bank really is?

    One97, since the beginning of February, has lost major ground–losing its privilege to offer banking services such as savings accounts, allow wallet payments, and issue FastTag or NCMC travel cards. The company has now shifted FasTag and NCMC operations from Paytm Payments Bank to other banks albeit at lower margins and higher expenses. It has also lost ground to competitors such as BharatPe and PhonePe in terms of merchant payments, new merchant acquisition, UPI transaction volumes and exiting human resource.

    These peers also have the advantage of Payment Aggregator (PA) licence, in the absence of which Paytm will for now be forced to only facilitate payments which in itself is not a profitable business.

    Paytm vs the bank

    The RBI, on its part, has been highlighting concerns with respect to compliance and governance, inter-connectedness of business and lapses in KYC/AML processes at the bank. Even as it took action against the payments bank (which falls under its supervisory jurisdiction), it intervened and asked NPCI to fast-track a TPAP licence for Paytm despite repeatedly highlighting governance issues, absence of appropriate demarcation between the two businesses and inadequate checks and balances.

    This willingness to ensure a licence for Paytm, even if it meant ensuring customer convenience, appears to contradict the regulator’s communication so far, especially if customer data protection and safety are the main considerations.

    Meanwhile, the central bank is expected to supersede the board of Paytm Bank post March 15 to ensure that all remaining balances are utilised and/or returned to customers before the bank’s licence is officially revoked.

    Whether Paytm can manage to regain its position as a top payments player and grow hereon is then dependent on whether merchants and customers continue to trust the brand and whether One97 is able to diversify its revenue streams going forward. While peers Google Pay and PhonePe already have a PA (Payment Aggregator) licence, it remains to be seen if and when the regulator would be comfortable enough to grant similar access to Paytm.

    This seems to be the end of the payments bank’s journey. But does that mark a new beginning for One97 Communication or has it dragged its parent along to the end, we will know in the next 6-9 months.

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  • Paytm advisory panel discussing terms of reference with company: Damodaran

    Paytm advisory panel discussing terms of reference with company: Damodaran

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    An advisory committee, set up by Paytm owner One97 Communications after the Reserve Bank’s action on its payments bank business, is at a stage of engagement with the company on matters related to the terms of reference for the panel, the panel’s head and former chairman of Sebi M Damodaran said.

    “We have been engaging with the group on matters relating to the Advisory Committee’s terms of reference,” Damodaran said on Sunday in response to a query about his engagement with Paytm.

    He said that the panel members are external advisors and at present Paytm is engaged in dealing with the RBI.

    On January 31, the RBI asked PPBL (Paytm Payments Bank Ltd) to stop further deposits, credit transactions, or top-ups in any customer accounts, prepaid instruments, wallets, FASTags, and National Common Mobility Cards, after February 29. Later, the central bank extended the deadline till March 15.

    Paytm on February 9 announced setting up of a group advisory committee headed by Damodaran. The committee was set up to advise the company on strengthening compliance and on regulatory matters.

    Meanwhile, the Reserve Bank on Friday asked the National Payments Corporation of India (NPCI) to examine the possibility of migrating Paytm Payments Bank customers using the UPI handle ‘@paytm’ to 4-5 other banks, in a bid to prevent any disruptions in the payment ecosystem.

    Damodaran was speaking at the release of his biography ‘The Turmeric Latte’ compiled by one of his former colleagues.

    During a panel discussion at the event, when he was asked about his views on the functioning of Sebi at present, Damodaran said the capital markets regulator has bandwidth problems with respect to the large amount of issues that it has to handle.

    “Sebi has a huge challenge. The bandwidth seems inadequate to tackle the large number of issues that they have to tackle. In the process, it sometimes feels like they are biting more than they can chew,” Damodaran said.

    The book, curated by former Tripura cadre IAS officer Dinesh Tyagi who last served as Managing Director of CSC E-Governance, has contributions from former colleagues of Damodaran including former mines secretary Sushil Kumar.

    The book also mentions about “threats” received by Damodaran, when he was the joint secretary in the information and broadcasting ministry, for some decisions taken by him.

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  • RBI, Govt support to fuel fintech firms growth: NPCI Chief Dilip Asbe

    RBI, Govt support to fuel fintech firms growth: NPCI Chief Dilip Asbe

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    With backing from the government and the Reserve Bank of India (RBI), the fintech companies in India can expand their global footprint said Dilip Asbe, MD and CEO of the National Payments Corporation of India (NPCI).

    Also read: Decoding fintech and its jargons

    “Creating an acquiring footprint, creating value-added services over that, I think it is very logical for fintechs in India. I would be really surprised if we lose that game. With the clear thinking of the government and RBI, Indian fintechs will go global, as simple as that,” he said at Razorpay’s annual event in Bengaluru.

    He noted that Indian fintech companies must spearhead the task of elucidating the country’s payment standards to the global market before exporting them.

    He also noted the need for investment, saying that payment startups are well-funded. He acknowledged the dilemma faced by fintechs regarding balancing focus between domestic and global markets, given India’s substantial market size.

    Asbe issued a caution to fintech founders regarding regulatory compliance, advising them to refrain from developing products that regulators have not explicitly authorised.

    He emphasised that if a particular activity or product has not been explicitly approved, the default stance should be to abstain from pursuing it.

    “Whatever is not written in regulation means a no…When we are part of managing other people’s money, we should be responsible. Compliance is good and risks become higher with size, if fintech founders are here to build long-term, I don’t see it without compliance,” said Asbe.

    Also read: Editorial. Paytm Bank fiasco raises fintech regulation concerns

    NPCI has also been pushing the lever on international expansion of UPI payments. The domestic service is currently live in countries including the United Arab Emirates (UAE) and Mauritius.

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  • As RuPay on UPI faces some roadblocks, NPCI explores corrective options

    As RuPay on UPI faces some roadblocks, NPCI explores corrective options

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    The National Payments Corporation of India (NPCI) is exploring ways to encourage payments made via RuPay credit cards linked to UPI (Unified Payments Interface), a medium that has been facing some roadblocks due to slower-than-expected adoption.

    The government introduced UPI payments via RuPay credit cards in September last year. While allowing the linkage of RuPay credit cards on UPI has increased the acceptance infrastructure for such cards multi-fold, the biggest drawback is the inability of merchants and banks to differentiate between card on UPI and regular UPI transactions being made via QR codes.

    “It was launched in a hurry and it is still a problem because when you go to a small merchant and pay by credit card, they are used to zero MDR. But if a credit card is used they get less money,” a senior payments industry official told businessline.

    “Even in the case of bigger merchants, banks have tie-ups for fixed retailer rates but these have gone up because of RuPay and UPI. While these merchants have higher margins, they are also now questioning banks,” they added.

    Even as UPI transactions continue to be free, UPI transactions made via linked credit cards attract the same interchange and merchant discount rate (MDR) as any other credit card transaction.

    Some sections of the industry also believe that the effective MDR on card UPI transactions is higher than card PoS (point-of-sale) transactions due to the additional layer of intermediaries such as PineLabs which absorb part of the cost for pure card transactions.

    UPI vs card on UPI

    The lack of prior classification between the transaction type has led several merchants, especially large offline merchants, to accept such UPI payments without realising the extra charge they attract. As a result, certain payment gateways and banks, at the behest of the merchants, stopped accepting payments via RuPay on UPI.

    In response, the NPCI has now gone live with a mechanism, which once integrated by payment gateways and intermediaries, will allow merchants and banks to identify and classify the two types of transactions and accordingly assess the charge.

    “NPCI has built the system, it is already live. It includes a return parameter, so if it is a credit card on UPI transaction, it alerts the system that it needs to be treated as a credit card transaction and not UPI,” a source said adding that the update is received both at the merchant and bank end.

    NPCI introduced this on an ad hoc basis and the functionality has been live for the past month or so and should be adopted by most payment intermediaries over the next 15-20 days, sources said.

    “It was done as an afterthought, so this has left a little sour note. We lost some money which we could have avoided if we had been able to inform the merchants in advance,” said the head of a payments platform that had to pay additional money to banks once credit card on UPI was introduced. He added that it would’ve been smoother if the NPCI had tested the ecosystem before introducing the feature rather than correcting it after launch.

    However, fearing lower adoption of or merchant discrimination against RuPay UPI transactions, and to encourage increased adoption, the NPCI is also exploring a fee income-based incentive model where payment gateways may compensate merchants for the higher charges on such transactions compared with the zero charge on regular UPI transactions, a source said.

    NPCI has been pushing the issuance and adoption of cards on the RuPay network to reduce the reliance on foreign players such as Visa and Mastercard, and for easy linkages with other products in NPCI’s suite including UPI.

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  • 25% of new credit card issues happen on RuPay network: NPCI Rai

    25% of new credit card issues happen on RuPay network: NPCI Rai

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    About 25 per cent of all new credit card issuances are happening on the RuPay network, according to Praveena Rai, COO, NPCI (National Payments Corporation of India).

    “Cards in force are growing fast, driven by the innovative product suite. Volume growth is multiplying; it’s more than doubling,” Rai said on the sidelines of the launch of the SBI Paytm credit card on the RuPay network.

    Even though 52 per cent of customers on the UPI network are credit active, only 3–10 per cent use credit cards. The NPCI said that of the over 30 crore UPI users, 2.5–3.0 crore are credit card holders.

    Huge opportunity

    This provides NPCI with a huge opportunity to grow its credit card portfolio and market share now that the RuPay network has been integrated with UPI, Rai said, adding “there are a number of programmes already launched on RuPay and there are many in the pipeline,” including more tie-ups for co-branded cards.

    NPCI’s RuPay has a 35 per cent market share in the debit card market in terms of volume, 30 per cent in terms of the value of card spends, and 69 per cent in terms of cards in force. The thrust on credit cards began about 3–4 years ago with a focus on technology and innovation, local market requirements, product differentiation, and building brand value.

    “We told ourselves that unless we are building the stature of RuPay on the credit side, we can’t lay claim to the fact that RuPay is India’s indigenous card network, and for that, we really changed gears on credit,” Rai said at the event.

    The credit card portfolio has seen a spike since the linking of the RuPay network to UPI, she said, adding that this card will “emerge as a keystone credit solution” as it offers the convenience of acceptance of credit cards across all UPI points with card benefits such as rewards and cashbacks.

    “What NPCI has done phenomenally well with UPI and QR is incredible. RuPay credit card riding is the game changer here,” said Nalin Bansal, Chief of Corporate and Fintech Relationships and Key Initiatives at NPCI.

    The SBI Paytm card, originally launched in November 2020, will be issued instantaneously and will not require tokenisation at merchant touch points as the UPI ID will become the de facto token.

    Under the RuPay launch, it will offer benefits up to ₹75,000 with a complimentary Paytm First and OTT platform membership, flight ticket discounts, rewards, savings, and cash backs.

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  • 99.9% of UPI transactions are bank account-to-account: NPCI

    99.9% of UPI transactions are bank account-to-account: NPCI

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    After it introduced interchange of up to 1.1 per cent on UPI transactions above ₹2,000 made through prepaid instruments, cards or wallets, the National Payments Corporation of India (NPCI) clarified on Wednesday that 99.9 per cent of UPI transactions are done directly from bank account-to-account, and will not be impacted by the new norms.

    “Traditionally, the most preferred method of UPI transactions is linking the bank account in any UPI-enabled app for making payments which contributes over 99.9 per cent of total UPI transactions. These bank account-to-account transactions continue to remain free for customers and merchants,” said NPCI in a release.

    Following the inclusion of Prepaid Payment Instruments (PPI Wallets) in the interoperable UPI ecosystem, NPCI last week introduced an interchange fee on merchant transactions, with effect from April 1.

    The charge will be levied on transactions of over ₹2,000 made to online merchants, large merchants and small offline merchants. Further, PPI issuers will need to pay 15 bps as a “wallet loading service charge” to the remitter bank for loading over ₹2,000 in the prepaid wallet. NPCI will review the interchange pricing by September 30.

    The norms had raised concerns regarding additional charges on UPI transactions in some sections of the market, who feared that this might make transactions costlier for merchants and customers alike.

    “The interchange charges introduced are only applicable for the PPI merchant transactions and there is no charge to customers, and it is further clarified that there are no charges for the bank account to bank account based UPI payments (normal UPI payments),” said NPCI on Wednesday. 

    With this addition to UPI, customers will have the choice of using any bank account, RuPay Credit card, and prepaid wallets on UPI-enabled apps, it added.

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