Less than a week after the Reserve Bank of India allowed HDFC Bank to issue new credit cards, the country’s largest private sector lender has entered into a strategic partnership with fintech major Paytm.

As per this arrangement, the two companies will provide innovative digital solutions for financial transformation by combining their strengths in the banking, lending and digital payments space.

Paytm and HDFC Bank will build comprehensive solutions across payment gateway, POS machines and credit products including Paytm Postpaid, which is a buy now pay later (BNPL) solution, easy EMI and Flexi pay, and more.

The first leg of the partnership will include payment gateway and POS solutions for Indian merchant partners. The partnership will also aim to empower new businesses, which have recently ventured online, and enable them to scale up further.

Paytm and HDFC Bank are partnering for two broad POS offerings:

Firstly, HDFC Bank will drive merchant partnerships across India, to whom Paytm will offer its existing range of Android POS devices. Through the partnership, HDFC Bank's salespersons will start selling Paytm’s payment solutions in the market. HDFC Bank will be the payment partner, while Paytm will be the distribution and software partner.

Secondly, Paytm and HDFC Bank will jointly launch a co-branded POS product in the retail segment, which Paytm will have the option to offer to its own customer base.

“This partnership will further strengthen the financial services ecosystem by bringing together our technology and digital solutions and HDFC Bank’s retail and credit prowess,” said Bhavesh Gupta, CEO at Paytm Lending.

The partnership will bring more people into formal banking channels. While Paytm has 333 million users and 21 million merchants onboard, HDFC Bank has over 50 million card customers (both credit and debit cards) and over two million merchant acceptance points.

“Through this partnership, we will also be jointly delivering enhanced SmartHub solutions to the market. We believe that this is the start of a great partnership and the cumulative strength of both HDFC Bank and Paytm will help us strengthen our respective leadership positions,” said Parag Rao, Group Head – Payments, Consumer Finance, Digital Banking & IT at HDFC Bank.