Third-party application providers (TPAPs) are entities that offer applications or platforms enabling users and merchants to initiate and receive payments. They connect stakeholders in the payment process, ensuring smooth and secure transactions.

TPAPs offer a variety of features that enhance the digital payment experience for both users and merchants. Here are some notable aspects of TPAPs:

• Seamless Integration: TPAPs facilitate smooth connections between different parties, ensuring efficient transactions.

• Dispute Resolution: TPAPs can utilize NPCI’s dispute management framework to handle conflicts arising during transactions.

• Regulatory Compliance: TPAPs adhere to strict regulatory standards set forth by organizations like NPCI, maintaining high levels of security and integrity. 

• Access to UPI Platform: With a TPAP license, entities can access the UPI platform, expanding their reach and capabilities. 

• Legitimacy and Trust: A TPAP license adds credibility and trustworthiness to a service provider, reassuring users, banks, and merchants of their compliance with UPI regulations. 

• Financial Institutions: Authorized financial institutions, such as banks and non-banking financial companies, can apply for a TPAP license. 

• Payment Aggregators: Payment aggregators that facilitate merchant transactions on UPI may also require a TPAP license, depending on NPCI’s guidelines. 

• Multi-Bank Models: Large TPAPs can tie up with multiple banks to act as payment service providers (PSPs). 

• Up-to-date documentation: Accurate and up-to-date documentation is vital for a successful application. 

• Market Share Capping: NPCI caps the market share of individual TPAPs at 30%, offering fairness and competition in the market. 

These features contribute to the growth and stability of the digital payment industry, fostering innovation and consumer confidence. 

Some examples of Third-party Application Providers (TPAPs) in India's Unified Payments Interface (UPI) ecosystem include Google Pay and WhatsApp. These TPAPs play a crucial role in facilitating seamless transactions for users and merchants, connecting them to the banking system, and enhancing the digital payments landscape in India. 

Obtaining a TPAP license offers several advantages to service providers operating in the UPI ecosystem, including increased legitimacy, enhanced security, improved customer satisfaction, and expanded market presence.