Fintech startups rocked by the Yes Bank collapse have petitioned the regulator for fresh guidelines to limit the impact of similar events in the future. The unified payments interface (UPI) handles of Yes Bank were blocked after the Reserve Bank of India placed the private sector lender under moratorium, hurting startups that had tied up with it for UPI payments.
Startups such as PhonePe and BharatPe have deployed QR code-based payments networks for merchants. BharatPe has around 1.8 million registered merchants, while PhonePe has 185 million registered users and 75 million monthly active users. Yes Bank accounted for 39% of all UPI transactions in India prior to the suspension.
“Each payment startup must be mandated to have only a 25% exposure to a banking partner, and each bank on UPI should also not have an exposure of over 25% to a single fintech brand. This will ensure that services don’t get shut overnight due to moratoriums or outages," Ashneer Grover, chief executive, BharatPe, said over the phone. He added that BharatPe had moved 70% of its merchants and user base to ICICI Bank prior to the moratorium.
A PhonePe spokesperson said it has begun discussions with other UPI banking partners. It has signed up with ICICI Bank for UPI payments after almost a 24-hour blockade. “We were actively working on adding other PSP (payment service providers). This is also as per the recent National Payments Corporation of India (NPCI) advisory and would have gone live with ICICI by April. Once the Yes Bank moratorium is over, it will mean PhonePe users will have a choice of two handles from two different banks to work with," he added.
Just four days before the Yes Bank curbs, NPCI had asked payments apps to move to a multi-bank partnership model for UPI. “TPAPs (third party app providers) processing more than 5% of the total monthly volume/value of UPI ecosystem shall be mandatorily on multi-bank model only... TPAPs in the multi-bank model should associate with a minimum of three sponsor banks and a maximum of 10 banks within six months," it had said.
Experts said it may not be always advisable to force a payment startup to work with multiple banks. “You can’t force anybody to work with four banks because some banks may give a commercial benefit and overall better business package to a startup (UPI payment partnership)," said Sanjay Khan Nagra, partner, Khaitan and Co, a law firm.