Yes Bank Open To Taking Over Paytm Payments Bank Merchant Accounts

Amid the Paytm Payments Bank crisis following the Reserve Bank of India’s (RBI’s) clampdown, private sector lender Yes Bank is willing to acquire the payments bank’s merchant accounts. 

As per a Moneycontrol report, Yes Bank MD and CEO Prashant Kumar said the bank is open to acquiring Paytm Payments Bank’s merchants as it would open up a significant opportunity.

However, he also stated that this would require Yes Bank to complete Know Your Customer (KYC) verification and due diligence. Given the chance to cross-sell has a potential long-term benefit for the bank, it would undertake a proper KYC compliance process if it succeeds in acquiring the payments bank merchants.

“Regulator is very clear, we cannot shift risk from one entity to another. If there have been risks identified in compliance or any other risk within Paytm (and PPBL) because (of) which the regulatory action is taken, then we need to make sure the risk is not migrated to other entities and rather resolved and taken care of,” Kumar was quoted as saying.

It is pertinent to note that recently, after barring Paytm Payments Bank from carrying out its business, the Reserve Bank of India (RBI) said in its FAQs on the issue that Paytm QR codes, soundboxes and card machines will continue to be operational after the March 15 deadline only if the merchants migrate to other banks.

Following the crackdown on Paytm Payments Bank, market experts have also cautioned about Paytm losing its merchant base. 

Paytm Payments Bank has been working with several banks to help its merchants seamlessly continue with Paytm’s offerings. Recently, Reuters reported that Paytm was likely to partner with Yes Bank, Axis Bank, HDFC Bank, and State Bank of India (SBI) for processing transactions via the unified payments interface (UPI).

Meanwhile, last week, the RBI also advised the National Payments Corporation of India (NPCI) to examine Paytm’s request to become a third-party application provider for UPI payments.

Amid the crisis, Paytm Payments Bank’s decision to shift its nodal account to Axis Bank provided some respite to the tanking share price of Paytm.

Brokerage UBS, in a research note on Wednesday (February 28), said that Paytm could retain a large part of its customer and merchant base post certain approvals from the NPCI but a 15-20% churn in merchants, customers, and devices is expected in Q4 FY24 compared to Q3 levels, along with about a 60% QoQ decline in loan origination.

The brokerage expects Paytm to experience a near-term financial impact on its business and some permanent loss of business in FY25 due to the loss of wallet and merchant/customer churn. 

However, brokerage Bernstein recently said that the damage to the long-term user/merchant base of Paytm would be limited.

On the other hand, Jefferies opined that with Paytm’s focus now moving to retain its customers/merchants, there could be a dip in its cash reserves given increasing spending on retaining users.

Meanwhile, following the Paytm Payments Bank fiasco, Yes Bank has tightened the compliance process and due-diligence checks for fintech partnerships, its CEO said.

“We used to check and make sure that our credit underwriting is as per regulations but today I would also like to verify and check the customers who are getting pushed by our fintech partners. Whether my partner is completing all KYC and due diligence,” he was quoted as saying by the publication.

While shares of Paytm crashed in the days after the RBI’s action on Paytm Payments Bank, the stock has regained some momentum in the last few sessions. However, it is currently trading 46.6% lower on the BSE from its price on January 31, the day RBI announced its curbs.

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