PhonePe says that it allows customers to login with their preferred virtual payment address (VPA) and does not make it mandatory for users to login to the app with a YES Bank handle, founders Rahul Chari and Sameer Nigam clarified in blog post. “Users who’re registered with PhonePe can save their preferred CC/DC card details and won’t need to enter 16 digit card nos every time. Similarly, they’ll be able save their preferred UPI VPAs (including non-ybl handles) with us if they choose to do so,” the post mentioned.

“We believe the main issue relates to a rather unfortunate misunderstanding on where and when the inter-operability guidelines themselves come into play. PhonePe’s Payment SDK on 3rd party merchant apps requires the user to first login to/register a PhonePe account before accessing any of our services. But, once a user is logged in and decided to pay for something using UPI as a payment option, we never mandate a user to link their Bank account to a @ybl handle,” the blog added.

Late Friday evening, the National Payments Corporation of India (NPCI) reversed its decision and asked YES Bank and PhonePe to comply with its regulations on interoperability and simultaneously asked ICICI Bank to open transactions once it was done. On Thursday, YES Bank, ICICI Bank, Flipkart and the NPCI issued statements which contradicted each other and ICICI Bank said that it would not open transactions yet.

Last week, ICICI Bank blocked UPI payments from PhonePe, a Flipkart-owned YES Bank application. It blocked payments from @ybl handle (YES Bank’s VPA) citing security concerns as well as lack of interoperability for UPI-based payments.  PhonePe said that more than 20,000 transactions with total value of over Rs 5 crore failed because of ICICI Bank’s move.

However, PhonePe was critical of banks trying to control the user experience on the UPI. “Our UX choices cannot be driven by threats from individual banks’ to adhere to what they believe constitutes a great digital payments experience. It would be very unfortunate if big banks hold back the power of UPI, by enforcing their standards of consumer application design, UX and usability on other non-banking digital payment companies,” Nigam and Chari added.

However, the Economic Times points out that the blog post had initially referred to ICICI bank’s media statements against PhonePe as “defamation tactics” but the wordings were later changed.

A timeline of the tussle

– PhonePe was started by three former Flipkart employees Sameer Nigam, Rahul Chari and Burzin Engineer in December 2015.

– April 2016: Flipkart confirmed that it bought out the payments company, but had said then that it would function as an independent business unit.

– August 2016: PhonePe launches its operations with YES Bank.

– October 2016: The payments company claims that it has 500,000 registered users and has over 1 million downloads from the Google Play Store

– January 11: Flipkart integrates PhonePe for UPI transactions. Flipkart users without a PhonePe account needed to register with a phone number and bank details to process UPI  payments.

– January 13: ICICI Bank blocks all its customers’ UPI transactions to/from ‘@ybl’ handle users.

– January 17: PhonePe said that it saw around 20,000 transactions with total value of over Rs 5 crore failing.

– January 20: YES Bank, NPCI, Flipkart and ICICI Bank issue statements regarding the block.

Update: The headline was updated for better clarity and a time line of events was added.