As the central bank placed Yes Bank under moratorium till April 3rd, several startups including the digital payment firms PhonePe and BharatPe, which relied on Yes Bank as their banking partner seemed to face outages. It has been reported by many users of the PhonePe app that no Unified Payment Interface (UPI) transactions are going through the app since last night.
BharatPe, which is one of the leading competitors of PhonePe, went through similar outages as well. However, they managed to recover quickly after a partial hit only because they are also partnered with the ICICI bank for their banking needs.
When it comes to UPI-based transactions, the two heavyweights PhonePe and BharatPe contribute to Yes Bank’s UPI volume in a massive way. While BharatPe focuses only on peer-to-merchant (P2M) payments offerings under its platform, the Walmart-owned digital payments app PhonePe also supports peer-to-peer (P2P) payments besides that of P2M on their platform.
Various other startups and platforms which were affected by Yes Bank’s moratorium besides PhonePe and BharatPe include CRED, Udaan, Neo-bank, Cashfree, Razorpay, MakeMyTrip, Myntra, Ezetap and Swiggy.
However, as the credit card bill payment platform CRED happens to be reliant on multiple other banks including Axis Bank as well, no impacts or outages were observed on its settlements and business during this Yes Bank related crisis.
Most of the above-mentioned startups haven’t yet reached back to any news outlets with a comment regarding this outage. However, it has been observed by many people who are related to this industry that these startups are well on their way to migrate to different banking partners.
The incident, however, has provided an opportunity to Paytm to lure UPI users of its competitors, especially PhonePe. In fact, a recent tweet war between Paytm and PhonePe is out in open, that clearly indicate the concerning state of UPI users and players in India.
Impact On UPI’s Transaction Volume Post Outage
We are likely to observe a significant decline in the number of UPI transactions for the month post this outage due to the Yes Bank Crisis.
It should be noted that the open API architecture offered by Yes Bank helped many fintech companies to come into existence. In UPI alone, in January, all the leading private banks were outrun by Yes Bank which contributed a whopping 39% of the total transactions registered on Unified Payment Interface (UPI).
The UPI has shown remarkably consistent growth in terms of volume as well as transaction value in the last five months. As of January 2020, 1305.02 million UPI transactions amounting to ₹2,16,212.92 crores were processed by 144 banks. Out of 1.3 billion (1305.02 million) UPI transactions, the private sector lender, Yes Bank processed 514 million transactions.
RBI Takes Over The Control Of Yes Bank
On Thursday evening, restrictions on cash withdrawals for Yes Bank customers were put in place by the RBI. For depositors, the apex bank capped withdrawals at Rs 50,000 and no more. The RBI has also appointed Prashant Kumar as the administrator of the bank by superseding Yes Bank’s board.
As of right now, Yes Bank is completely barred from making any renewals, giving loan grants, making investments or transferring any of its properties or assets. However, the apex bank has guaranteed its depositors that their money will be fully protected.
The RBI in a statement has said that, in the next few days, with the approval of the Central government, they will explore and draw up a new scheme for the bank’s reconstruction or amalgamation before the 30-day moratorium period ends.
Almost every fintech company which is largely relying on yes Bank infrastructure for processing payments has either migrated or in the process of migrating to another bank. ICICI seems to emerge as the biggest beneficiary when it comes to UPI as PhonePe is successfully processing all the new transactions through ICICI Bank gateway. While the impact of Yes Bank crisis seems very demotivating for the fintech sector, only time will tell if such crisis leads the industry to a new alternate or find a completely new innovation to refrain from such situation in the future.