Mumbai: National Payments Corporation of India (NPCI), the developer of the interface that allows customers to transfer money across banks, has asked ICICI Bank Ltd to reverse a decision to block transactions from Flipkart’s payments app PhonePe.
NPCI gave a clean chit to PhonePe, an app based on the unified payments interface (UPI), in a press statement released on Thursday evening after a review and discussions with ICICI Bank and Yes Bank Ltd, the banker to PhonePe.
“We would like to state that ICICI Bank has been advised to open UPI transactions immediately,” NPCI said in the statement. “We have also advised banks to adhere to the merchant on-boarding guidelines meticulously from the angle of interoperability of merchant app so that such disputes are avoided.”
NCPI’s statement comes in response to concerns raised by ICICI Bank regarding transactions done on PhonePe. The bank said that the creation of @ybl virtual payment address that Phone Pe uses violates the interoperability rules of the UPI platform.
An ICICI Bank spokesperson said NPCI had given the bank a written assurance that PhonePe will allow interoperability. “As soon as this is corrected, ICICI Bank will start allowing UPI transactions to resume on this app,” the spokesperson said.
ICICI Bank is one of the 10 promoters of NPCI and owned 7.47% of its shares as on 22 January 2016, according to the Watal committee report. In September, NPCI said it had broad-based its shareholding to include 46 new banks, but didn’t specify what the new shareholding structure is.
Yes Bank defended PhonePe in a statement to stock exchanges, stating that the app had complied with all the rules laid down by NCPI. “All member banks who are offering UPI services have undergone exactly the same process and were allowed to go live only after complying with the same process,” said Yes Bank.
On Sunday, the lender said it had temporarily blocked transactions originating from PhonePe, pending the resolution of its concerns related to restrictive practices followed by the app.
“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,” an ICICI spokesperson said.
PhonePe’s co-founder and chief executive officer Sameer Nigam took to Twitter on 14 January to allege that ICICI was abruptly blocking its customers from using the app. Separately, in an open letter released on Tuesday, the company said that more than 20,000 UPI transactions amounting to more than Rs5 crore by value had failed after ICICI Bank’s action.
“We followed all the detailed guidelines and procedures laid down by NPCI for an app to go live on UPI. We went through over a 100+ use case test cases, detailed certification, vulnerability assessment, penetration testing and third-party application security testing, before NPCI gave us permission to go live. PhonePe has been live since August 2016 and none of these issues have been raised earlier,” PhonePe clarified in its letter.
PhonePe said in its letter it wasn’t fully compliant with NPCI’s ‘Android Intent Calls’ guidelines, but added that the deadline for compliance was 31 January. It also pointed out that other UPI apps including Bharat Interface for Money (BHIM) have not been updated to meet these guidelines. These guidelines state that when a payment is to be made, an app will initiate an intent call to other UPI apps present on a mobile device.
PhonePe declined to comment on Thursday, saying it had not got any official communication from NPCI yet.
This is the second instance of a commercial bank blocking transactions arising from non-bank mobile wallet and payment services companies. On 4 January, CNBC-TV18 reported that State Bank of India (SBI) had blocked net banking transactions with e-wallet companies, although it allowed customers to top up their mobile wallets with debit and credit cards. At that time, SBI chairman Arundhati Bhattacharya had said that service was blocked because of security concerns.
Since the government decided to ban Rs500 and Rs1,000 currency notes on 8 November, it has announced several measures to encourage cashless transactions including waiving off debit card transaction fees to offering discounts for using digital payments to buy fuel. The biggest beneficiaries of this move have been digital payment firms and wallet operators.
Now, with the focus slowly shifting to UPI (where a user can link a bank account to any app—even that of a different bank, or of a third party), the competition has just got tougher for banks as smartphone users switch to these services instead of cash and cards.