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PhonePe resumes services after being impacted by Yes Bank moratorium


Update: PhonePe is up and running. By 4 PM they had Debit and Credit Cards, and the PhonePe wallet functional. By 11:43 PM, they had UPI back up and running.

Update at 3 pm: PhonePe has made it clear that it will not be working with Paytm or its acquirer bank Paytm Payments Bank to restore services. Paytm invited PhonePe to work with its own payments bank as an acquirer, stating that it already has huge adoption and can “seamlessly scale manifold” to handle PhonePe’s business.

PhonePe replied that they would have called Paytm Payments Bank if UPI platform was ‘so seamlessly capable’, “No point getting back up faster, if we have to desert our long term partners when they’re down. Form is temporary, class is permanent.

Update at 12:10 pm: PhonePe CTO Rahul Chari said it has started disbursing merchant settlements.

Digital payments service PhonePe has been down since last night — it has now been at least 10 hours. PhonePe’s app says it’s “temporarily available” due to an “unscheduled maintenance activity” and said it “should not take more than 24 hours” to be running again. PhonePe CEO Sameer Nigam said the company’s partner bank Yes Bank was placed under moratorium by the RBI, and that the entire team has been working all night to get services back up asap. “We hope to be live in a few hours,” Nigam said. Yes Bank is PhonePe’s acquiring bank.

The RBI yesterday superseded the board of Yes Bank, and placed the bank under a month-long moratorium. It expects to arrive at a credible restructuring plan in the next few days. The RBI said it went ahead with the moratorium after the bank showed inability to get investors to infuse capital. Depositors have been restricted to a maximum withdrawal of Rs 50,000 even if they have multiple accounts. The bank’s netbanking services are down.

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5paisa, a discount brokerage and financial advisory company, said it is not accepting Yes Bank’s NEFT/IMPS services, and customers can instead use netbanking or UPI. Apart from PhonePe, several other business such as Cleartrip, Airtel, Swiggy, Redbus, PVR, Udaan, among others have Yes Bank as their sole payments service provider (PSP), per the NPCI.

On Monday, the NPCI mandated that large third-party app providers offering UPI payments do so with multiple banks, instead of relying on a single bank as their acquirer/PSP. The regulator said large third-party app providers have to work with a minimum of three sponsor banks, and a maximum of 10 banks, within 6 months of them becoming a third-party app provider. A payments app becomes such a provider when they process over 5% of the total monthly volume/value of all UPI payments. NPCI will reserve the right to mandate systemically large TPAPs to on-board multi-bank right from the time the service goes live.

PhonePe, along with other business such as Cleartrip and RedBus, have only one bank as their PSP. Google Pay has four PSPs, both Truecaller and MakeMyTrip have two PSPs each. All the other 38 third-party app providers for UPI are dependent on a single aquirer bank to process their UPI payments.

Instamojo said there will be no interruption in payment collections, since it works with multiple banks. Payments from customers using Yes Bank cards, netbanking, UPI apps may not work. The company is temporarily withholding payouts to Yes Bank accountholders until there is more clarity on the moratorium. Payment gateway Razorpay said that it’s payment gateway services are unaffected, though some other services may get affected; and it’s team is reaching out to the affected businesses via email.

BharatPe, which assigns bank-linked QR codes to merchants to accept UPI payments from multiple apps such as Google Pay, PhonePe, Paytm, among others. It also relied on Yes Bank as one of the bank partners to which the amounts paid would be transferred. They might be replacing their Yes Bank-linked QR codes powered by ICICI Bank.

Apart from Yes Bank supported UPI payments services facing issues, the bank also had several digital banking services, these are the latest numbers from Q2FY20:

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  • Credit cards: 6.5 lakh in force; Debit cards: over 2 crore transactions amounting to Rs 3000 crore done in HIFY20
  • IMPS: Processed 60 million transactions, up 80% YoY
  • AePS: Processed 103 million transactions, up 189% YoY; 41% market share by transaction value in September 2019
  • UPI: Processed 1 billion transactions; 40% market share, with 26.8% YoY increase
  • API Banking: 1200 Set ups done for customers; Throughput: Value increased by 2.9x YoY; Volume increased by 2.8x YoY; Individual Inward remittance under RDA grew 1.9x by volume; and 1.6x by value YoY; Customers include Ola, Cars24, PayNearby, Oyo, WesternUnion WU, zomato, Dream11, Swiggy
  • The bank was/is the sole UPI banker for Maharashtra income tax payments collection.

This is a developing story. We’ll have more shortly.

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