26 March 2025, Hyderabad: In a significant move for India’s digital payment ecosystem, Paytm Payments Services, a unit of fintech giant Paytm, has announced that it will stop processing transactions routed through third-party payment aggregators such as Juspay. Instead, the company will directly handle transactions landing on its own payment gateway.
This decision places Paytm in line with other major digital payment service providers like Razorpay and Cashfree, both of which have recently implemented similar measures. The move is expected to bring about fundamental changes in how businesses process digital payments, particularly those that rely on third-party routing services.
Shift Towards Direct Processing
In an email to merchants, reviewed by ET, Paytm Payments Services stated that starting April 1, all transactions will be processed internally, eliminating third-party routed payments, particularly those through Juspay. The company has urged businesses that currently rely on Juspay’s routing services to migrate their payment processing before the deadline to avoid disruptions.
The development was first reported by Moneycontrol and highlights a broader shift in the payment aggregation and orchestration market in India. As competition intensifies, payment aggregators are rapidly expanding their product offerings into overlapping markets, leading to increased scrutiny and policy changes by major players.
Industry-Wide Impact and Response
Juspay, a third-party payment orchestration platform, has positioned itself as an intermediary that enables merchants to integrate multiple payment gateways. By offering flexibility in processing digital transactions, Juspay has played a crucial role in simplifying payment operations for businesses of various sizes. However, restrictions on third-party routing could significantly impact its role in the payments ecosystem.
Juspay has argued that limiting third-party integrations could disrupt businesses and negatively affect the broader digital payment ecosystem. To counteract potential losses, the company announced on Monday that it has developed its own payment routing engine, Hyperswitch. This move is expected to help Juspay sustain its market relevance despite the withdrawal of support from major payment providers like Paytm.
Regulatory Considerations and Market Competition
The payments industry in India has witnessed rapid growth and regulatory scrutiny in recent years. The Reserve Bank of India (RBI) has been actively monitoring digital payment gateways, emphasizing compliance with stringent operational guidelines. Industry experts suggest that Paytm’s decision to halt third-party routing could be influenced by regulatory concerns, operational efficiencies, and competition within the fintech space.
With an increasing number of fintech companies vying for dominance, the shift towards direct processing could also be an effort to strengthen brand control and streamline transaction security. Razorpay and Cashfree, both leading digital payment aggregators, have already taken similar measures, signaling a larger industry trend towards reducing third-party dependency.
Merchant and Consumer Implications
For businesses, this change means a necessary adjustment in their payment processing infrastructure. Merchants currently using Juspay’s services will need to transition to direct integrations with Paytm’s payment gateway or explore alternative options before the April 1 deadline. Failure to do so could result in transaction disruptions, potentially affecting revenue flow.
On the consumer front, this shift is unlikely to cause significant changes in how payments are made. However, improved processing speed, increased security, and fewer points of failure in the transaction chain may enhance overall user experience.
The Future of Payment Aggregation in India
The Indian digital payment landscape is undergoing a transformation, with major players making strategic decisions that will shape the industry’s future. As businesses and consumers become more reliant on seamless and secure digital transactions, payment service providers are expected to prioritize efficiency, compliance, and direct control over their payment infrastructure.
Juspay’s response to develop an alternative payment routing engine, Hyperswitch, indicates that third-party service providers are quickly adapting to these industry shifts. Whether this move will sustain their relevance or lead to a diminished role in digital transactions remains to be seen.
As Paytm, Razorpay, and Cashfree implement these changes, industry stakeholders will closely watch how merchants, consumers, and third-party service providers navigate this evolving landscape. The success of these shifts will depend on how smoothly businesses transition and whether alternative solutions can bridge the emerging gaps in the ecosystem.
Paytm’s decision to halt third-party routing services marks a pivotal moment in India’s digital payment sector. As competition among fintech companies intensifies and regulatory oversight increases, industry players are making strategic moves to consolidate control over transaction processing. While businesses may face initial challenges in adapting to these changes, the long-term impact on payment security, efficiency, and compliance is expected to be positive. As the April 1 deadline approaches, merchants must act swiftly to ensure uninterrupted payment services and adapt to the changing digital finance landscape in India.
Source: The Economic Times
