The Reserve Bank of India (RBI) on Thursday placed a moratorium on Yes Bank that restricted withdrawals of up to Rs. 50,000 per account for a month. The sudden development has not just affected Yes Bank account holders but also various third-party apps and fintech startups in India. Amongst the most impacted entities is PhonePe that has started facing a complete outage shortly after the apex bank made the moratorium announcement public. However, the impact of the latest update is also visible on Swiggy and Flipkart.
Many PhonePe users on social media complained about the issues they're facing due to inaccessibility in making transactions. Through a tweet posted late Thursday, PhonePe acknowledged the outage and highlighted it as an “unscheduled maintenance activity”.
Update: PhonePe UPI services are claimed to be back up after a "gruelling 24 hours". In the meanwhile, NPCI has silently updated its website to remove the list of acquiring banks and payment service providers used by third-party apps. We've sent an email to NPCI to get clarity on the issue.
However, PhonePe founder and CEO Sameer Nigam on Friday confirmed that the issue is due to Yes Bank's update.
“We sincerely regret the long outage. Our partner bank (Yes Bank) was placed under moratorium by RBI. Entire team's been working all night to get services back up asap. We hope to be live in a few hours. Thanks for your patience. Stay tuned for updates!” Nigam tweeted.
PhonePe is one of many fintech startups that have Yes Bank as the acquiring bank or payment service provider (PSP). Thus, it isn't the one that's been impacted by the restrictions made on Yes Bank.
Swiggy, which also has Yes Bank as the bank for supporting UPI payments, has removed the option to order food using a UPI account. Similarly, Flipkart has also removed the option to make payments using PhonePe. Payment gateway RazorPay that also uses Yes Bank in the backend has pointed out that while its payment gateway services are unaffected, some other services might get impacted due to the update.
Companies such as Airtel Payments Bank and CRED have also provided clarifications on social media to detail whether the update would put any impact on their operations.
CRED operates on @AxisBank UPI and has no impact of @YESBANK UPI downtime that may have impacted other apps.— Kunal Shah (@kunalb11) March 6, 2020
We also work with multiple banks on settlements and business is functioning as usual and transactions are happening smoothly.
If you face any issue : firstname.lastname@example.org
Yes Bank is notably one of the leading private banks in India that is providing multiple solutions to power startups. Just in November last year, the Mumbai-based bank launched the Yes Fintech Developer platform as an API sandbox with over 50 virtual APIs to let startups and individual developers test banking integrations for their apps.
Fintech expert Himanshu Gupta underlined that thanks to Yes Bank's moratorium, half of Indian fintech space is down.
Half of Indian Fintech is down because of Yes Bank going down. Not a single UPI transaction on PhonePe (which is on Yes Bank PSP) is going through. Same for CRED, UDAAN, Swiggy and many others. Yes Bank's own app, NetBanking website and accounts are inaccessible.— Himanshu Gupta (@HalfRebel) March 6, 2020
Such a mess.
“I think the issue is new in the sense that with previous cases, like PMC Bank or other bank or institutional failures, the impact was usually limited to customers of those institutions," Gupta told Gadgets 360. "But with Yes Bank becoming a key infrastructure player for fintech, the surface area of disruption is now very high. So understanding the second-order effects becomes far more important for regulators as well as ecosystem players."
The NPCI website shows that Yes Bank is backing merchants such as Angel Broking, MakeMyTrip, Swiggy, RedBus, Flipkart, Myntra, Udaan, and ShareIT among others. Gadgets 360 has reached out to these entities to get clarity on the impact of the change that came into force on Thursday.
Alongside its impact on third-party apps and payment platforms, the Yes Bank update has made its native apps and netbanking services inaccessible. This means if you have a Yes Bank account, you won't be able to transfer your funds or make payments using netbanking. But no need to panic, things should hopefully return to normalcy soon.