UPI users get locked out as Yes Bank goes offline

UPI users get locked out as Yes Bank goes offline

Millions of users on PhonePe, one of India’s largest Unified Payments Interface (UPI) payment platforms, failed to make or receive payments for the most part of Friday because of curbs imposed on the payments company’s partner Yes Bank.

PhonePe, however, resumed UPI services by the end of the day with a new partner bank.

When users create UPI handles, which are called virtual payments addresses (VPAs), they are attributed to that platform’s partner bank.

According to executives at an Indian payments app, the National Payments Corporation of India (NPCI) blocked Yes Bank’s UPI handles after RBI imposed a moratorium. The bank had two UPI handles — @ybl and @yesbank.

Apps such as PhonePe also act as issuing authorities for VPAs, which means that a first-time UPI user can create VPAs through the PhonePe platform. Since PhonePe’s partner in this case was Yes Bank, all VPAs created through PhonePe were made under the Yes Bank handle and became invalid after the moratorium.

VPAs can be created with a partner bank irrespective of the bank where the customer actually has an account. So, a person may have an account with ICICI Bank, but their VPA could still be XYZ@ybl. Once created, customers can use the same VPA handle across apps.

An executive at one of India’s big payments gateways said that such VPAs will not work on any app. That means if your UPI handle is XYZ@ybl or ABC@yesbank, then it won’t work irrespective of which UPI app of payments platform you’re using. You can go to Paytm, Google Pay, BharatPe or any other platform, but since your VPA itself is invalid, the payment won’t go through. By the evening, PhonePe customers with Yes Bank’s handles were once again able to use UPI, but the industry executives cited above said companies will have to transition them to another bank eventually.

He said that since PhonePe’s handle was under Yes Bank, their QR codes, which you see in offline stores, also carry a similar handle. As a result, these QR codes also become invalid and the company will have to gradually move them to a new VPA when it gets a new partner. This applies to any QR code issued by a UPI-based app that’s tagged to a Yes Bank handle.

In contrast, Google Pay — the UPI platform run by Google—has HDFC Bank, Axis Bank, ICICI Bank and State Bank of India as partners. That means when you create a VPA through Google Pay, you get the option to choose one of these banks’ handles, and their QR codes could be from any of them.

According to reports, Yes Bank accounted for 39% of all UPI transactions in the country. PhonePe claims it has 185 million registered users and 75 million monthly active users. While it is unclear how many of these users created handles using PhonePe, the app is among the largest UPI platforms. “UPI’s image took a knock, through no real fault of NPCI’s,” said Prasanto K. Roy, a tech policy adviser. “This does highlight the importance of not being dependent on one payment system or gateway,” he added.

The moratorium also affected merchants who used UPI for payments. Harshil Mathur, co-founder of payment gateway Razorpay, said the company is already being approached by multiple merchants to move to a different UPI provider. Mathur said the move is simple and can be done in a matter of hours using a few coders.

Satish Gupta, managing director and chief executive officer of Paytm Payments Bank Ltd (PPBL), said the company has “stopped all transactions to Yes Bank accounts so that the money doesn’t get blocked.”

Both Paytm and Instamojo, another payments gateway, said they have asked merchants to change their accounts to other banks.