On March 25, Paytm issued a notification to its merchant partners, declaring that it will cease collaborations with third-party payment orchestration platforms (POP) by the end of this month. This unexpected announcement has left merchants scrambling to find alternative solutions within a tight timeframe, especially those with longstanding partnerships with companies like Juspay, India's leading POP firm with approximately 70% market share.​

Payment gateway (PG) companies typically do not have direct partnerships with Juspay; instead, they connect to merchants through Juspay's network. Many merchants have relied heavily on Paytm's PG services due to favorable commission structures. However, this abrupt policy shift compels them to seek new PG partners to maintain flexibility and avoid dependency on a single provider.​

This move by Paytm aligns with a broader industry trend. Late last year, PG firms such as PhonePe, Razorpay, and Cashfree announced plans to discontinue collaborations with third-party POP players like Juspay, advocating for merchants to adopt their in-house POP solutions to continue partnerships. While some large merchants have secured exceptions, mid-size and small merchants face potential disruptions.​

Juspay plays a crucial role for retailers by integrating multiple PG firms and offering services like card tokenization, user interface enhancements, and optimized payment routing to improve success rates. However, PG firms have expressed concerns about Juspay's influence over transaction routing and its perceived lack of transparency. Additionally, Juspay's acquisition of a payment aggregator license and ongoing discussions for a $150 million funding round have heightened competitive tensions.​

In response to these developments, Juspay has emphasized merchant autonomy in choosing payment solutions and has open-sourced its payment routing engine, Hyperswitch, to promote interoperability and open systems in the payments ecosystem.​

For merchants, especially large ones, building an in-house POP is ideal but often impractical due to resource constraints. Juspay's open-source initiative offers a potential pathway for merchants to develop customized solutions, though this requires significant investment in time and resources.​

As the fintech landscape evolves, merchants must navigate these changes carefully, balancing the benefits of direct PG integrations with the flexibility offered by third-party platforms. The industry's shift towards direct integrations underscores the need for merchants to reassess their payment processing strategies to ensure continuity and efficiency.​

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