I look at this scenario with this perspective…
When Phonepe had to migrate from Yes Bank to ICICI bank because of RBI diktat in 2020, UPI’s major utility was P2P than P2M. In P2P, the underlying account remains with an existing bank and a virtual payment address is provided by the UPI Player in tie-up with a bank like ICICI or Axis or Yes bank. You may observe that when you create a new Virtual payment address, on a new UPI app, its created instantaneously without any KYC completion. So Phonepe had only migrated the Virtual address and not the underlying account which is a far easier exercise
But the situation can be very different when it comes to the merchant onboarding which gained traction around 2021 with BharatPe cracking this model.
In this P2M model, a QR/ Soundbox issuer like Paytm gives the product along with the underlying bank account with a bank account… Paytm having exclusive Payments bank license, it routed all its merchants to PPBL to maximize the opportunity. When the underlying new account is that of Paytm, it is obligated to complete the KYC. Now when you transfer the underlying account, either of 2 things should happen:
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Merchant has an existing alternative KYC verified account and Paytm has to just link the QR Code to that account and merchant can continue to operate with that account — (heavy on Ops – Merchant should be reached out to by Feet on street and collect the new account number and then link the current QR Code)
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Merchant has no existing alternative KYC account and Paytm has to issue a new account with Axis/ ICICI/ Yes Bank and get the KYC done with the new bank and then link the QR to that newly opened account — (Centralized Activity – KYC to be collected and bank account to be created by FoS)
I think Paytm will focus on migrating the merchants who had loan accounts with them followed by Sound box merchants followed by QR Stickers to migrate. But even if any of these get missed, it will be a reputation risk for Paytm and will have deleterious consequences on the paytm brand name
But I hope and believe that Paytm will be able to overcome this within deadline or work back with RBI for an extension
PS: This is my understanding of the process from my secondary research. Please feel free to correct my understanding
Discl: Invested
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