Yes Bank is considering acquiring the merchant accounts of Paytm Payments Bank

Yes Bank’s CEO Prashant Kumar expressed the bank’s openness to acquiring merchants from Paytm Payments Bank Ltd (PPBL). However, he emphasized that this would entail thorough verification for KYC compliance and due diligence, as it presents a lucrative opportunity for the bank.

“Paytm boasts a sizable merchant customer base, presenting a promising opportunity for Yes Bank. We’re inclined towards acquiring these merchant accounts, subject to stringent KYC verification and due diligence,” Kumar stated during a press conference in Bengaluru.

For banks, the opportunity to cross-sell services like lending offers potential long-term benefits. Kumar also emphasized that if the bank succeeds in acquiring these merchants, they will conduct a thorough KYC compliance process.

“The regulator’s stance is clear: we cannot transfer risks from one entity to another. If compliance or any other risks within Paytm (and PPBL) have led to regulatory action, we must ensure that these risks are addressed and resolved rather than shifted to other entities,” added Kumar.

According to data from BSE filings, Paytm has over 30 million merchants on its platform. Approximately 20% of these, or around 6 million, utilize PPBL as their settlement savings account, which will only be active for withdrawing the balance or transferring it to other bank accounts.

The remaining merchants are onboarded by One97 Communications, Paytm’s parent company, through PPBL, providing them with Paytm QR codes and handles. These merchants use different commercial bank accounts for settlements.

The total merchant Gross Merchandise Value (GMV) processed through Paytm’s platform in July and August last year was around Rs 3 lakh crore ($36.3 billion), representing a year-on-year growth of 43%.

The CEO’s remarks are timely due to the Reserve Bank of India’s (RBI) stringent restrictions on PPBL, a subsidiary of One97. With PPBL facing limitations, One97 is compelled to seek bank partnerships to sustain its UPI operations.

The RBI has instructed PPBL to cease all banking services, except for withdrawing remaining funds. It’s anticipated that payment service provider (PSP) services will also be impacted.

Additionally, most UPI addresses on the Paytm app are sponsored by PPBL, the PSP bank. These accounts now need to transition to different banks.

On February 23, the RBI mandated the National Payments Corporation of India (NPCI) to smoothly migrate all UPI @paytm handles to three or four commercial banks to avoid disrupting the country’s popular digital payment system.

PPBL serves as the PSP bank for all Paytm UPI accounts, each equipped with @paytm handles. To continue operations beyond March 15, these accounts require special approval from regulators for seamless migration to other banks. Additionally, they need permission to maintain PSP functions until assets are transferred, a process that might extend beyond March 15.

According to source , Paytm has collaborated with Axis Bank, HDFC Bank, and Yes Bank to operate its UPI services as a TPAP, akin to competitors like Google Pay and PhonePe.

“The TPAP application process is ongoing, with NPCI now in charge,” stated Kumar.

With an estimated 90 million UPI users, Paytm joins major UPI apps like PhonePe, Google Pay, Cred, and Amazon Pay as TPAPs, establishing similar PSP bank partnerships to facilitate UPI transactions.

Previously, Paytm operated its UPI payments independently, leveraging PPBL’s banking status. However, with NPCI approval, Paytm will transition to a TPAP, aligning with its competitors.

Paytm’s stock rises by 5%

During the day, Paytm’s stock rose by 5% to Rs 423.45 per share on the NSE. It currently trades at Rs 421 per share, up 4.4%, surpassing the 1.05% increase in the benchmark Nifty 50.

Over the last 12 months, the share price has declined by 33.9%. The total traded volume today is 0.18 times its 30-day average. The relative strength index stands at 41. According to Bloomberg data, out of 14 analysts covering the company, six recommend buying, three suggest holding, and five advise selling the stock. The average analyst price target over the next 12 months suggests a potential upside of 62.1%.

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