Although one of the big selling points of the Unified Payments Interface (UPI) has been that it is interoperable unlike mobile wallets, it appears that ICICI Bank has been blocking the @ybl virtual payment addresses (VPAs) that Yes Bank and PhonePe (Flipkart's UPI app) use, since Friday.
PhonePe founder Sameer Nigam tweeted on Saturday that ICICI has been blocking all PhonePe transactions, and isn't allowing transactions using the @ybl VPA. We were able to verify this ourselves - transactions to a @ybl VPA were declined when using the UPI option in ICICI's iMobile app; and in PhonePe, we were not able to link our ICICI account to @ybl VPA either.
This restriction is only on PhonePe - other UPI apps such as BHIM worked perfectly well on the same account. Given the size of ICICI Bank, this would suggest that a significant number of digital payments have simply not been possible for at least four days, at a time when the government is stressing the value of moving away from cash.
In a statement to Mint, ICICI says: "Some banks including us have raised security related concerns at appropriate forums about the access to UPI data to a non-banking application. Further, this entity is following restrictive practices allowing users to make payments with only its UPI handle, which is in contravention to the UPI guidelines of interoperability and choice that empowers a customer to choose any app to make payments through UPI."
As noted by Mint and other commentators, this move by ICICI looks like an incumbent protecting its turf. Post demonetisation, the reliance on digital modes of payment has shot up, and the UPI was slow to roll out despite being announced months earlier. As a result, mobile wallet companies stole a march on the banks.
But by limiting PhonePe's access to its accounts, ICICI - one of the biggest banks in India - effectively cuts PhonePe off from a significant part of the market as well. With netbanking, each bank was able to fully own its customers, but with UPI, the best implementations should win. But ICICI - whose implementation of the UPI is one of the most cumbersome ones we've used - seems to have found a way around that concern.
This is not so different from the actions of the State Bank of India. India's biggest bank has blocked netbanking transactions with mobile wallets, and has been aggressively pushing downloads of its SBI Buddy wallet instead. Outside its branches, you find posters that compare the two, which take great care to say Paytm is "partly owned by Chinese company Alibaba" [emphasis SBI], while SBI's column says, "Owned by government of India." Inside the branches too, the employees are hard-selling downloads of SBI Buddy.
ICICI's decision strikes a similar note, and coming so soon after Flipkart started accepting UPI payments (powered by PhonePe, and designed in such a way as to funnel as many users as possible into the PhonePe app, although it is possible - if cumbersome - to use a different VPA), it seems to have less to do with security measures, and more to do with user numbers.