Transaction failures have become far more frequent in India’s digital payments ecosystem over the last few months than they have been historically. While the sudden surge in digital usage during the Covid scare was an important factor, industry executives said the burgeoning number of entities in the market whose systems are not always speaking to each other may also have played a part.
As the volume of transactions through digital channels surged, system outages across banks became almost a monthly feature last year. According to data from Downdetector.in, the three largest banks in the digital payments system together saw 61 instances of outages between March 2020 and so far in February 2021. State Bank of India (SBI) saw the maximum number of outages – 43 – followed by ICICI Bank (12) and HDFC Bank (6).
In an emailed response to FE’s queries, an ICICI Bank spokesperson said, “We have invested in robust infrastructure to execute the digital transactions of our customers. In fact, as per NPCI (National Payments Corporation of India) data, among large commercial banks, in terms of volume of transactions, ICICI Bank has the lowest average technical decline percentage in the nine months from April 2020 to December 2020.” SBI and HDFC Bank did not respond to queries as of press time.
Payment industry executives said that the emergence of new-age players such as Google Pay and PhonePe as multiple new customer interfaces in the absence of rapid infrastructure upscaling by banks is leading to problems. Madhusudanan R, cofounder, YAP by M2P Solutions, said that if one takes the example of Unified Payments Interface (UPI), the players who are coming in are customer-facing units, but the balances are still in bank accounts. “For the bank infrastructure to process all these transactions and manage it is becoming tough. Obviously, banks are trying to scale up, but the underlying core banking systems and how those systems talk to each other is not geared for such a load,” he said.
To put this in perspective, two years ago, the amount being processed through cards was $100 billion, but today over UPI it is of the order of $1 trillion. As a result, failures now plague even high-stake transactions, such as share allotments during initial public offerings (IPOs), where millions of people are initiating transactions all at once.
The multiple hops involved in each transaction increases the odds of failure and that must be corrected, said Mahesh Ramamoorthy, MD – banking solutions, FIS India. “Today, because of the sheer number of entities that you have in the system, you will always have hops in a single transaction,” he said, adding that wallets manage to deliver better client experiences on account of their practicality and the shorter payment flows, whereas in a direct-to-account system like UPI spread across multiple entities, any transaction is dependent on multiple hops and the availability and response across the payment chain.
Things may need to evolve to a stage where if a transaction fails with Bank A, it is automatically routed to backup Bank B, so that the transaction is completed and the experience is retained. More importantly, industry stakeholders, especially the NPCI, banks and non-bank players, will have to come together to model what kind of scale they plan to achieve over a period of time and the kind of infrastructure that would entail, Ramamoorthy said. “I think it calls for structured planning that revolves around predictability and scalability. The planning is about understanding how the growth of transactions is projected and anticipated payment flows that fuel the growth”, he said.
The industry must also improve its dispute resolution mechanisms in order to retain the faith of the consumer in digital payments, said Madhusudanan. “There are a lot of tricky questions from the user’s perspective when a transaction fails. I could end up paying twice and the merchant could be tricked into believing they have got the money even when they have not. These things create a trust deficit in the ecosystem and we need a lot of work in these areas,” he said.