UPI has recently shown a significant rise in failure rates, underscoring the need for greater investment
With India’s consumers having access to cheap internet connections and the government pushing digital transactions, it is imperative that the infrastructure is reliable
Mumbai/New Delhi: Frequent outages in digital delivery of financial services in India could be a concern in a post-covid world, where such transactions are of significant importance for consumers and providers alike.
Providing seamless experience to customers is what every financial institution claims their priority is. However, recent experiences like that of HDFC Bank customers and more recently for customers of India’s largest lender State Bank of India (SBI) on the Yono mobile app say otherwise. In the case of SBI, scores of customers took to social media platform Twitter to complain on Wednesday and Thursday that they are unable to use the bank’s digital banking services.
“Yono SBI mobile application has been impacted due to a system outage. Steps are being taken for restoration of uninterrupted service,” SBI’s official twitter handle said on Thursday.
These incidents show that information technology (IT) infrastructure needs to keep pace with the rise in payment volumes in India, which might not be the case here. The private sector has always led the new technology initiatives for banks and public sector peers except for SBI, have lagged behind.
Unified payments interface (UPI), the most talked-about payments innovation, has recently shown a significant rise in failure rates, underscoring the need for greater investment. An executive of a top payments firm had told Mint last month that the National Payments Corp. of India (NPCI) will eventually have to push banks to overhaul their infrastructure to manage this new demand.
UPI transactions grew 6.7% sequentially to 2.2 billion in November, data released by the NPCI shows. Around 1.21 billion transactions were recorded in November 2019.
Prasanto K Roy, a tech policy analyst said that the extraordinary growth story of digital payments has been sullied this year by thoughtless application of zero-MDR (merchant discount rate) by the government, with no thought to consequences, and no reconsideration even when severe damage to the payments industry is visible.
“Payment startup founders are talking about UPI payments stuck for 3-4 weeks. What is clear is that with zero revenue, banks will not invest in upgrading payment infrastructure to keep up with exploding demand – which applies to UPI as well as relevant cards,” said Roy.
Glitches in digital transactions are not restricted only to banks, with stock markets also featuring prominently in the list. To be sure, such outages in stock markets are not a new phenomenon for traders and investors both in India and abroad.
In 2017, trading on the National Stock Exchange (NSE) was halted for almost three hours in one of the longest ever stoppages because of a technical snag that disrupted buy and sell orders on India’s largest bourse by stock volumes. In September 2019, NSE had faced three technical glitches and the markets regulator had levied a penalty of ₹50 lakh.
More recently, on 4 June, the NSE was hit by a trading glitch as prices in the option segment of Bank Nifty were not reflecting or updating on terminals linked to the country’s largest bourse, resulting in huge losses for investors. Thar apart, in June, HDFC Securities and Sharekhan trading platforms also faced a technical glitch which was resolved within few hours but resulted in investors loss as no transactions were allowed during the outage.
With India’s consumers having access to cheap internet connections on their mobile phones and the government pushing digital transactions, it is imperative that the infrastructure is reliable.
“In the wake of the current covid-19 pandemic, especially during the lockdown, there has been increased adoption of teleworking, telemedicine, and online education. This could result in a sudden upsurge in the network traffic, which could only be fulfilled by a robust supporting infrastructure,” industry body CII said in a report on 24 June.