Yes Bank debacle, Phonepe down. Is digital payments a dream that is shifting further and further into the future?

The last time Yes Bank came crashing down was 1st October 2019. When it crashed, it blocked all outward NEFT for a couple of days. It sent frantic waves and people moved out a lot during that time, including Yes Bank employees. Phonepe went down as well. They promised then that they were moving out of Yes Bank. And possibly looking into ICICI as their new UPI back-end.

A flashback into 6th March 2020. It still faced the issue. With a fintech startup like Phonepe with its resources and ability could not move out, or have a backup in six months. It shows only how difficult it is to integrate new partners in the backend for other smaller players who don't have the foothold compared to what a Phonepe might have. It involves months of negotiation, back and forth, and a partner that works swiftly, which large players with this capability to provide API's usually don't. They move glacially slowly.

Fintech is mostly a balls game now, how many points, how many merchants, how many customers you have is what seems to matter. In many cases, the backend partner imposes such restrictions that the true vision of the platform never seems to come true. And that too you do get a partner only when you matter as a fintech. It's all a game of chicken and eggs.

The current scenario and today's incident only instil a certain degree of fear among customers or merchants who were earlier using the platform on a regular basis. With the latest UPI charges on the consumer end starting April 2020, and other mind-numbingly stupid decisions in the last couple of months might just bring the progress of the fintech world back to 2015. Will truly digital India always remain a dream never come true?

I truly hope not!

Update: "In this case, YBL which is Yes Bank’s IP, got transferred to ICICI Bank at the tech backend, not affecting PhonePe’s customers, and allowing the platform to continue business as usual. Further, it also saved PhonePe users from re-registering their accounts and applying for a new UPI handle. "

It is interesting that a consumer UPI app is completely locked down to a partner UPI platform, as the users are given a @handle that needs to set up again, in case you want to change your existing partner. Which is why Phonepe had to wait till the bank went down completely at which point RBI gave in the permission to reuse @ybl handles under ICICI bank's UPI platform.