Digital payments company Paytm has integrated the Unified Payments Interface (UPI) into its services to load money into the wallet. To begin with, the UPI integration will be only available on the Paytm website, though the company says it will be introduced on the application as well.

Interoperability concerns as NPCI limits wallets

Before you are able to deposit money using UPI, you need to already have a UPI ID or app, and, unlike PhonePe, which is a YesBank UPI app run by a Flipkart owned company, Paytm cannot generate one for you and link it to your bank account, since it is acting as a merchant accepting money in this case. Paytm’s UPI is operating using an ICICI Bank Virtual Payments Address (VPA): paytm@icici. This means that you’re sending money, say from nixxin@ybl, via UPI to paytm@icici.

Paytm is still a wallet, and wallets are not allowed to directly integrate into UPI because the NPCI, which is a bank owned organisation which runs UPI, wants to favour banks over wallets. Don’t take our word for it: the NPCI MD said so himself. Things might change once Paytm becomes a Payments Bank, but again, that depends on whether the legacy banks allow Payments Banks into UPI, and also which Payments Banks they choose allow. The NPCI is not an independent, RBI or government run system, but one run by the  Indian Banks’ Association (IBA), a representative body for legacy banks.

Not the first wallet to load money via UPI

Note that Paytm isn’t the first digital wallet to allow loading of money through the UPI and Snapdeal-owned FreeCharge had done this integration in July last year in partnership with Axis Bank. But it looks like that FreeCharge has now rolled back adding money through UPI and does not list it as an option on the website or app. We had pointed out that it was strange that FreeCharge had partnered with Axis Bank and not YES Bank which powers its wallet.

How it works

The image at the beginning of this post was from the launch of the ill-fated app PoS from Paytm, and the demo on stage highlighted to me that money transfer from card to the merchant’s wallet takes far too long.  We tested a couple of transactions and from UPI to Paytm:

– First, log in to the Paytm website (which is two steps, given the OTP).
– Second, click on Add Money.
– Third, choose UPI as an option, and add your VPA. An SMS is sent to you via your host UPI app (in my case, PhonePe), with a link, which opens a browser, which opens the PhonePe application.  You then click on send to send the money, and then enter your MPIN, after which the money is sent. That’s around 10-11 steps.

In case of  using a credit card to deposit money, it’s around four-five steps less. If money was being loaded in the Paytm Wallet from the Paytm Payments Bank, if it were allowed to integrate with UPI, it would probably have been even fewer.

An Experiment

As an experiment, I also tried sending directly to Paytm@icici using UPI from PhonePe, without initiating a link for receiving money from the Paytm app. If this worked, it would reduce a significant amount of friction, in terms of number of steps for loading money into Paytm. While the payment was confirmed via an SMS from ICICI Bank and PhonePe, the amount has still not been reflected in the wallet. I’ll update if it does, but if it doesn’t, because Paytm isn’t able to identify the recipient, I’m wondering about what happens to this money.