I experienced this at a Merchant Establishment yesterday. I scanned the Merchant’s QR code with my PayTM app. PayTM asked me to link my bank account to complete the payment via UPI. I refused because I don’t use UPI and anyway wanted to make the payment with my credit card (not wallet balance either).

I then asked the cashier for the PayTM-only QR. He told me they accepted PayTM only via UPI (for which the UPI QR that I’d scanned was the correct QR), not otherwise.

So it’s not PayTM. It’s the Merchant.

Looks like Merchants have the freedom to accept PayTM via UPI but not via wallet or linked credit card.

Let me take this opportunity to touch upon the related topic of payment “rails” i.e. the backend systems involved in processing cashless payments. The leading payment rails in the world are:

  1. Wallet rail, which is internal to the PSP e.g. PayTM & PayZapp & PhonePe (India), Venmo (USA), SQUARE (USA), PayPal (global)
  2. Card network rail e.g. Visa, MasterCard, RuPay
  3. Bank rail e.g. UPI-IMPS-NEFT (NPCI, India), FPS (UK), Zelle (USA)
  4. MNO / Career Billing rail e.g. Zong, Boku
  5. Check truncation rail e.g. Fed / Check 21 (USA)

A Payment Service Provider (PSP) / digital payment app provider can support one or more of these rails to process a digital payment. For example, PayTM and PayZapp support rails #1, 2 and 3.

Banks may offer rail #3 to a wide swathe of Merchants but restrict rail #2 to large Merchants only, thus leaving it to nonbank fintechs (e.g. PayPal, SQUARE) to tap the market for card payments among small and micro merchants.

It’s also possible for a Merchant to accept only some rails and not the others. My yesterday’s Merchant accepts rails #2 and 3, but not rail #1.

To the common man, all rails – even apps over them – may all appear the same but, behind the scenes, they have different cost, benefit, fraud protection, settlement time, etc.

As long as everything works fine, the common man doesn’t feel the need to know these differences. But the moment a payment fails or an unauthorized transaction happens on his account, he suddenly learns that there are significant differences between them – even between credit card and debit card rails.