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Sameer Nigam, the PhonePe CEO, said in a tweet, Dear PhonePe Customers. We Sincerely regret the long outage. Out partner bank (Yes Bank) was placed under moratorium by RBI. The entire team’s been working all night to get services back up asap. We hope to be live in a few hours. Thanks for your patience. Stay tuned for updates
Moneycontrol spoke with ICICI Bank executive director Anup Bagchi to get a sense of how the difficult task of moving between two banks for such large payment companies got accomplished within 36 hours. Yes, Bank had more than 40 percent market share in Unified Payments Interface (UPI) payments, a large part of which got redirected to ICICI Bank which had to support such sudden spurt in transactions.
The RBI enforced a moratorium on Yes Bank late on March 5 evening. While the move was aimed to protect depositors and prevent erosion of capital of the bank, its payments and settlement systems stopped functioning as well.
ICICI Bank had to establish multiple features and services such as creating nodal accounts, reconciliation systems, processing capacities in the back end to be able to support transactions through these entities. Its officials worked very closely with the PhonePe team on and got up and running quickly.
We brought in officials from different teams like legal, account opening, technology, business banking, and others, in order to ensure decision making and execution was prompt, said Bagchi.
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The bank’s services such as instant current account opening, remote onboarding of customers, helped it migrate PhonePe customers into its fold instantly
Industry sources told Moneycontrol that PhonePe had been in discussions with ICICI Bank for months after NPCI mandated a multiparty model for all UPI third-party applications. Even BharatPe was processing some part of its daily volume through ICICI Bank. But, Yes Bank was still their major processor.
Bankers also pointed to the important role played by NPCI in the migration of services. As a settlement platform, NPCI now has to route transactions originating from Yes Bank handles into ICICI Bank systems.
PhonePe shifted its nodal accounts to ICICI Bank to ensure that its merchants receive the funds on time and the confidence in the system is not hurt. Till the Yes Bank moratorium gets over, Nigam added that they had taken a hit on their working capital. PhonePe has 200 million users and is accepted by 100 million merchants over 300 locations.
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QR Codes Impacted By YES Bank Crisis
These startups are in the spotlight because they have been essentially using the YES Bank UPI service, the APIs and the QR codes. The Reserve Bank of India (RBI) has put restrictions on withdrawals from YES Bank accounts, which are now capped at INR 50K. and healthcare. The central bank is now restructuring YES Bank, which will take up to 30 days. Considering the increasing dependency of QR codes to boost UPI and digital payment adoption the country, a potential dissolution of YES Bank could result in massive QR code outage in the country.