Paytm has announced that it stops using third-party payments orchestration platforms, such as Juspay, and transition to direct processing. Starting April 1, 2025, Paytm Payments Services Limited (PPSL) will process transactions exclusively through its system. The company has urged merchants to transition before the deadline to avoid service disruptions.
This decision aligns with a broader industry trend, where fintech giants like Razorpay, PhonePe, and Cashfree Payments have also moved away from external payment routing services. Payment orchestration platforms, like Juspay, help merchants optimize transaction routing through multiple gateways. However, concerns over transparency and market influence have led leading payment service providers to adopt direct processing models.
Juspay recently open-sourced its payment routing engine, Hyperswitch, in response to industry concerns. Despite this, major players like Paytm prefer in-house processing to enhance control over transaction flows and merchant relationships. This shift marks a significant change in India’s digital payment landscape, affecting merchants and payment gateways alike.
1. Understanding Paytm’s Business Model
1.1. Founders and Background
Paytm, founded in 2010 by Vijay Shekhar Sharma, started as a mobile recharge platform before expanding into digital payments, financial services, and e-commerce. The company played a crucial role in India’s digital payments revolution, offering services like UPI, wallets, bill payments, and banking through Paytm Payments Bank.
1.2. Revenue Model
Paytm generates revenue through multiple streams, including:
- Payment Services: Transaction fees from merchants using Paytm for payments.
- Financial Services: Loans, insurance, and wealth management.
- E-commerce & Ticketing: Revenue from Paytm Mall, movie, and travel bookings.
- Advertising & Data Monetization: Digital marketing and data insights for businesses.
1.3. Funding and Valuation
Paytm has raised significant funding from investors like SoftBank, Alibaba, and Berkshire Hathaway. It went public in 2021 with one of India’s largest IPOs, though its stock has faced fluctuations since then. Despite challenges, Paytm remains a key player in India’s fintech space.
2. Why Paytm stops third-party payments?
2.1. Issues with Third-Party Payment Orchestration
- Lack of Transparency: Payment gateways argue that orchestration platforms control transaction routing decisions, affecting revenue distribution.
- Regulatory Concerns: Some orchestration platforms hold payment aggregator licenses, creating potential conflicts of interest.
- Merchant Dependency: Merchants relying on orchestration services may face challenges if payment providers withdraw support.
2.2. Industry-Wide Shift
- PhonePe was the first to exit Juspay’s orchestration in December 2024.
- Cashfree Payments and Razorpay soon followed.
- Paytm’s decision aligns with this trend, reinforcing its direct merchant relationships.
3. Juspay’s Response and Market Impact
3.1. Open-Source Strategy
Juspay launched Hyperswitch, an open-source payment routing engine, to address concerns. This allows businesses to customize payment flows while reducing dependence on proprietary platforms.
3.2. Market Reaction
Despite Juspay’s open-source approach, major payment processors remain cautious. Juspay is also seeking $150 million in funding to expand its operations, but skepticism persists regarding the transparency of its routing decisions.
4. How Merchants Will Be Affected
- Technical Migration: Merchants using Juspay must integrate directly with Paytm’s payment gateway.
- Service Continuity: Businesses failing to transition by April 1, 2025, risk payment disruptions.
- Cost Implications: Reports suggest Paytm may introduce a 1% additional fee post-migration.
- Enhanced Reliability: Direct processing may improve transaction success rates and reduce failures.
5. Industry Trends and Future Outlook
- Consolidation of Payment Services: More fintechs are integrating direct payment processing to retain control.
- Regulatory Changes: Authorities may introduce stricter regulations for orchestration platforms.
- Merchant Autonomy: Businesses may explore hybrid models combining direct processing with backup payment gateways.
6. Learning for Startups and Entrepreneurs
- Control Over Core Operations: Owning key processes reduces dependency risks.
- Transparency and Trust: Ensuring fair business practices builds long-term credibility.
- Tech-Driven Innovation: Open-source models can attract wider adoption if implemented transparently.
- Regulatory Awareness: Startups should anticipate policy shifts and adapt accordingly.
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