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UPI Third Party Application Provider TPAP Licence

TPAP stands for Third Party Application Provider. It refers to an entity that provides an application or platform that enables customers and merchants to initiate and receive UPI Payments. These TPAPs act as intermediaries, connecting the various stakeholders involved in a transaction and ensuring smooth execution. They play a critical role in the UPI ecosystem, enabling millions of transactions every day.

As the digital payments landscape continues to evolve, the role of payment aggregators is becoming increasingly important. These entities facilitate seamless transactions between customers, merchants and banks, ensuring a smooth and secure payment experience. To make a difference in theIndiaOperate and participate as a payment aggregatorUnified Payment Interface of India (UPI), which must be downloaded from theNational Payments Corporation of IndiaObtain a Third Party Application Provider (TPAP) licence.

To operate as a TPAP in the UPI ecosystem, a service provider must start with the NPCI Obtain a TPAP licence. This licence signifies compliance with NPCI rules and regulations and ensures the security and integrity of the UPI platform. The TPAP licence is essential for TPAP to provide services to end users, banks and merchants.

A TPAP licence is a key requirement for entities looking to operate as payment aggregators in India and participate in the UPI ecosystem. By obtaining a TPAP licence from NPCI, entities can provide a seamless and secure payment experience to their customers. It is important to carefully follow the registration process, fulfil the eligibility criteria and provide all the necessary documentation to ensure a successful application. With the rapid growth of digital payments in India, obtaining a TPAP licence provides a tremendous opportunity for entities to thrive in the evolving payments landscape.

Recommended Reading:What is UPI, the Indian payment system?

Role of NPCI

National Payments Corporation of India (NPCI) is the organisation responsible for the development and operation of the Unified Payments Interface (UPI) platform in India.NPCI develops rules, regulations and guidelines for UPI participants, including TPAP. It ensures the safety, security and efficiency of the UPI system and network.

NPCI's main responsibilities include:

Participant Approval: NPCI approves card issuing banks, PSP banks, TPAPs andPrepaid payment instrumentsThe issuer (PPI) participates in UPI. Transaction Processing and Settlement: NPCI handles the processing and settlement of UPI transactions to ensure smooth and secure fund transfers. Dispute Management: NPCI provides a framework for managing disputes related to UPI transactions to ensure fair resolution. Audit and Data Access: NPCI can audit UPI participants and access their data, information and systems as needed. Regulatory Compliance: NPCI ensures that all UPI Participants comply with applicable laws, rules, regulations and guidelines.

Recommended Reading:National Payments Corporation of India NPCI

TPAP licence eligibility

TPAP licences are granted to entities that meet certain eligibility criteria set by NPCI. While specific criteria may vary, in general, the following entities are eligible to apply for a TPAP licence:

Registered Companies: Entities registered under the Companies Act 2013 or any other relevant legislation can apply for a TPAP licence. Financial Institutions: Banks,Non-Banking Financial Companies (NBFC) and other authorised financial institutions may also apply for TPAP licences. Payment Aggregators: TPAP licences may also be required for payment aggregators that facilitate merchant transactions on UPIs in accordance with NPCI guidelines.

Recommended Reading:Non-Banking Financial Corporation of India NBFC

Advantages of TPAP licences

Obtaining a TPAP licence offers a variety of benefits to service providers operating in the UPI ecosystem. Some of the key benefits include:

Legitimacy and trust: TPAP licences issued by NPCI add credibility and trustworthiness to service providers, ensuring that subscribers, banks and merchants comply with UPI regulations. Access to the UPI platform: A licensed TPAP can access the UPI platform to provide a wide range of services to end users. Seamless integration: TPAP licences ensure seamless integration with banks and other UPI participants, facilitating efficient transactions. Dispute Resolution: Licensed TPAPs can leverage NPCI's dispute management framework to resolve any conflicts or issues that may arise during a transaction. Regulatory Compliance: By obtaining a TPAP licence, service providers demonstrate their commitment to comply with applicable laws, regulations and guidelines.

Is a TPAP licence mandatory?

While the TPAP licence is not mandatory for all service providers, it is highly recommended for entities operating in the UPI ecosystem. Licensed TPAPs enjoy a variety of benefits, including access to the UPI platform and credibility with subscribers, banks and merchants. In addition, obtaining a TPAP licence ensures compliance with NPCI regulations, thereby ensuring the security and integrity of the UPI ecosystem.

Payment aggregators, in particular, may need to obtain a TPAP licence when facilitating merchant transactions on UPI.NPCI guidelines for TPAP licensing for payment aggregators may vary and it is important for these entities to keep abreast of the latest regulations.

TPAP Licence Registration Process

The registration process for obtaining a TPAP licence involves several steps. It is important to follow these steps carefully to ensure a successful application. Below is a step-by-step guide to the TPAP licence registration process:

Eligibility Check: Applicants must ensure that they meet the eligibility criteria set by NPCI for TPAP licences. Preparation: Before starting the registration process, gather all the necessary information and documents required for the application. This includes details about the entity, its directors, shareholders and key personnel. Apply Online: Visit the official NPCI website and navigate to the TPAP Licence Registration section. Complete the online application form with accurate and up-to-date information. Ensure that all required details are provided, including the entity's legal name, registered address, contact information and other relevant information. Document Submission: Upload all required documents as specified by NPCI. These documents may include the entity's Certificate of Incorporation, Memorandum and Articles of Association, KYC documents for directors and shareholders, financial statements and any other documents deemed necessary by NPCI. Application Review: NPCI will review the submitted application and documents. This review process ensures that the entity meets the eligibility criteria and provides all necessary information. Validation and Assessment: NPCI may conduct a thorough validation and assessment of the entity's background, financial stability, regulatory compliance and other factors. This step is critical to ensuring the integrity and security of the UPI ecosystem. Approval and Issuance: If the application is deemed satisfactory and meets all requirements, NPCI will approve the TPAP licence and issue it to the entity. The licence will enable the entity to operate as a TPAP and participate in the UPI ecosystem. Compliance and Ongoing Obligations: Upon obtaining a TPAP licence, the entity must comply with all regulations and guidelines established by NPCI. This includes regular reporting, adherence to safety standards, and ongoing compliance with UPI regulations.

Documents required for TPAP licences

The documentation required for TPAP licence registration may vary depending on the nature of the entity and regulatory requirements. However, some common documents that are usually required include:

Certificate of Incorporation Memorandum and Articles of Association KYC documents for directors and shareholders Financial statements (audited or self-certified) Business plan and operational details Security and Privacy Policy Any other documents specified by NPCI

It is important to note that these documents should be accurate, up-to-date, and in compliance with the regulatory requirements set forth by NPCI.

Should payment aggregators choose a TPAP licence?

Payment aggregators play an important role in facilitating digital payments. They act as intermediaries between merchants, customers and banks, providing a simplified platform for payment transactions. While payment aggregators are not mandated to obtain a TPAP licence, it is highly recommended that they do so. Obtaining a TPAP licence enables payment aggregators to leverage the UPI ecosystem and provide their customers with a seamless UPI-based payment solution.

Exemptions and Compliance

NPCI recognises that sudden market disruptions should be avoided when TPAP's market share reaches the 30% cap. To address this issue, NPCI has created a waiver that allows TPAPs to continue to operate for a limited period of time of up to six months. This waiver is granted on a case-by-case basis, and TPAPs must apply through their PSP banks when certain thresholds are violated.

However, TPAPs must ensure compliance with volume caps to avoid penalties and operational disruptions. Failure to comply with NPCI regulations may result in penalties and other consequences, as described in the UPI Procedural Guide.

NPCI Standard Operating Procedure for Market Share Caps for Third Party Application Providers

Detailed summary of NPCI's Standard Operating Procedure (SOP) for Third Party Application Provider (TPAP) Market Share Caps, including attachments:

BACKGROUND AND OBJECTIVES The UPI platform has become the payment method of choice for customers, with November 2020 monthly transaction volumes exceeding 2 billion. In order to provide diversification opportunities to the UPI ecosystem, UPI has established a transaction volume cap for TPAP 30%. The purpose of this document is to establish a set of Standard Operating Procedures (SOPs) to monitor the market share cap of the End User Access Points (EUAPs) and to take corrective action if the EUAPs violate the cap. METHODOLOGY The design principle of this SOP for controlling the market share cap is that it is achieved through the user's login on the payment platform of the main city access partner. When the volume cap is reached, provision will be made to exempt participants to a certain extent so as not to cause sudden market disruption. Calculation of End-User Access Scheme Market Share The SOP outlines the key points to be taken into account when calculating the market share of the End-User Access Scheme, including the total number of UPI transactions, the volume of UPI transactions of the End-User Access Scheme, the volume of active transactions, the total number of transactions of the End-User Access Scheme, the volume of pre-approved B2C and B2B transactions, as well as the identifier of the End-User Access Scheme. Monitoring of UPI Transaction Thresholds The upper limit of the transaction volume of the End User Identification Schemes shall be monitored and a notification shall be sent to the relevant End User Identification Schemes when the following thresholds are reached. There are three levels of alerts based on the market share of the End-User Identification Schemes. Compliance of existing UPIs with the volume cap Existing UPIs exceeding the volume cap will have two years to comply with the SOP in a phased manner. Exemptions In the event of a breach of the thresholds when the volume cap is reached, there will be provisions for exempting Participants to a certain extent, based on requests from end-users through their PSP banks. Customer Communication In the case of Moderated Entry or Discontinuation of Full Entry, End User Licensing Schemes and PSP Banks shall communicate with New Customers. Action on Violations NPCI has the right to penalise non-compliant TPAPs in accordance with the provisions of the UPI Procedural Guidelines. The volume cap for reporting of TPAPs is effective from 1 January 2021 and the approved logic for calculating the total volume of TPAPs is required to be reported centrally on the NPCI website. Expiry date and authority to amend the SOP As indicated in the Aggregate Cap Circular, NPCI has issued this SOP. The SOP shall be reviewed at least once in every six months to ensure that the objectives of the SOP are achieved with minimum inconvenience to the customers. Intra UPU Transfers means transactions which are not processed and cleared through the UPU Central System and which PSP Banks are required to report to NPCI on a monthly basis by the 3rd of the following month.

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