Payments service PhonePe was able to restore services on late evening of March 7, with ICICI Bank as their new UPI partner. PhonePe system went down on the evening of March 5, after the RBI placed a moratorium on Yes Bank, which was PhonePe’s sole payments service provider. The bank issued its UPI handles, processed payments, and also issued QR codes for merchants. PhonePe CEO Sameer Nigam said “it would have been impossible to do so in record time without incredible effort & inspirational leadership” displayed by National Payments Corporation of India (NPCI) and ICICI Bank.

All merchant payment settlements were restored by noon on March 6, and all consumer wallet, credit and debit card payments were restored by afternoon, and all UPI services were restored by the same night.

Yes Bank gave a no-objection certificate to migrate user UPI handles to ICICI Bank until the moratorium is in place, reported the Times of India. Current norms mandate that customers’ consent be taken before such migration. “We are grateful to RBI, NPCI, Yes Bank and ICICI for working collectively to ensure that millions of our customers and merchants were not inconvenienced a minute longer than necessary,” Nigam said in a statement.

On March 9, PhonePe had initiated talks with the State Bank of India (SBI) to onboard it as another partner, per the report. Nigam told a user that users’ Yes Bank handle will work exactly like before, and no change is required. “Just never imagined the bank itself going totally dark like this. Lesson learnt in the hardest possible way,” Nigam said. On March 8, PhonePe said it processed Rs 4,000 crore worth of transactions, and saw the largest user traffic volume in a single day with over 70 million app sessions.

ICICI Bank is currently the partner bank for processing UPI transactions for Google Pay. Truecaller, MakeMyTrip, MI Pay, and WhatsApp’s pilot UPI payments service also have ICICI Bank as partner for UPI payments.

NPCI calls for multi-bank model, again

Days before the Yes Bank moratorium hit the fintech industry, the NPCI had, on March 2, 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 sponsor 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.

On March 9, the NPCI said it has been “a proponent of the Multi Bank model, to ensure full resilience of the ecosystem”. “The last leg payment service providers also prefer to work with multiple parties to ensure high availability of payment systems. Where required, the payment providers identified alternative partner banks who quickly stepped in to address contingency requirements,” the UPI-owner and operator said in a statement.

The NPCI also updated it’s list of third-party apps which provide UPI payments. According to NPCI, there are 33 third-party app providers, with 16 providers relying on Yes Bank for their UPI payments. Of these, 11 are now operating UPI with other partners — this includes Cleartrip, Flipkart, Myntra, and PhonePe, among others. Another five apps which partnered with Yes Bank, including Udaan, Angel Bee, MudraPay, and Omegaon will soon go live on UPI, according to NPCI.

NPCI also dropped some third-party apps which had partnered with Yes Bank, including Airtel, Jabong, Microsoft Kaizala, Pay World, and Expense on Demand. It also removed Ola Cabs, which had partnered with Axis Bank.

Spat between Paytm and PhonePe

While PhonePe was working on restoring its services, Paytm invited PhonePe to use Paytm Payments Bank as its UPI partner. PhonePe hit back, saying that it would have called Paytm if its platform really was ‘seamlessly scalable’. “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,” PhonePe said. Paytm founder and CEO Vijay Shekhar Sharma said this was a lesson and reminder that NPCI should not allow such apps to depend solely on one bank. Paytm also sent out mass SMSs to people, urging them to join Paytm if their payments app was not working. 

“It should also not allow more than a 33% market share for any single payments application. This is an example of how overdependence between a few players can send things into a tailspin,” Sharma told the Times of India. Paytm’s UPI operations are processed and handled by its own payments bank.