Record high digital payments expose big gaps in backend infrastructure

Banks underinvest in hardware while creaming off surge in UPI transactions


April 14, 2021

/ By / New Delhi

Record high digital payments expose big gaps in backend infrastructure

UBI recorded highest rate of technical errors at 12.4 pc followed by Canara Bank at 5.9 pc & SBI at 5.3 pc in September 2020 (MIG photos/Aman Kanojia)

Arrival of pandemic in 2020 provided instant boost to digital payments in India, making it the biggest player in terms of number of transactions. However, lack of adequate technical infrastructure for big volumes of digital payments has led to spike in number of failed transactions.

On April 1, 2021, the first day of the new fiscal year, the failure rate of Immediate Payment Services (IMPS) and Unified Payments Interface (UPI) transactions shot up dramatically. While total number of transactions for the day were much lower than usual, the failure rate had shot up. A total of about 0.45 million transactions were made, which is less than 4.5 pc of an estimated 10-12 million transactions made each day, but the failure rate had shot up considerably higher than the typical 0.5 pc.

The incident was just the latest large-scale glitch that have inflicted Indian digital payments ecosystem over the past year as the infrastructure has been overwhelmed by the sharp spike in demand visible since the outbreak of the pandemic last year. The Covid-19 pandemic propelled India to the top slot in the world in terms of digital payments with 25.5 billion real-time payments transactions.

Unfortunately, for the users, the boom was accompanied by another trend of frequent outages and failed transactions as the physical infrastructure and technical systems of the Indian banking sector failed to keep pace with the rise in volumes.

Many users took to twitter to express their concerns and frustration, however, bankers have another story to tell. “On April 1, since it is the end of the fiscal year we are closed for system regeneration, completion of records and payments and for fixing or upgrading systems as required. Therefore most sites are slow for one day, but people make huge transactions during the time as they leave payment of taxes and other things for the end which slows down the sites. Our systems being down due to excessive loads is natural but people don’t have patience. From April 1-7 pensions release and thousands of people use it at the same time, like they won’t see another day,” a Union Bank employee who did not want to be named tells Media India Group.

On April 2, NPCI tweeted: “The financial year-end closing had led to some UPI and IMPS transaction failures at few banks. We have observed that most of these bank systems are back to normal since last evening. Customers may avail uninterrupted IMPS and UPI services.”

But the bankers’ excuse for April 1 does not appear to hold much water as the failure rate in India has consistently been high. A report in December last year by international consultancy, PwC, says, 10 of the top 30 banks using the country’s Unified Payment Interface (UPI) network recorded failure rates of over 3 pc in September 2020. These outages exposed years of underinvestment and lack of preparedness of the banking sector as highlighted by the recent incidents occurred with top-tier banks like HDFC and State Bank of India.

HDFC, which has been struggling with technical glitches for two years, faced temporary restrictions imposed by the Reserve Bank of India (RBI) on its new digital launches till it resolves all outage issues. The order in December asked the bank to temporarily stop all launches of the digital business generating activities planned under its programme Digital 2.0 (to be launched) and other proposed business generating IT applications as well as sourcing of new credit card customers.

In January 2021, the bank submitted a detailed plan to the central bank on ways it plans to fix the repeated breakdown of digital services.

In case of State Bank of India, a multitude of customers took to Twitter to complain about their inability to use the bank’s digital services in December 2020. “Yono SBI mobile application has been impacted due to a system outage. Steps are being taken for restoration of uninterrupted service,” SBI’s official twitter handle had said.

 The blame game

“People shifted to net banking but they don’t want to adopt or use it. The problem is reluctance arising from the fear of their accounts being hacked or losing their money, which is understandable but the major problem is impatience, when a transaction gets stuck, they immediately make another one without waiting which leads to issues and they start bashing the banks on Twitter,” explains the employee.

But it is clear that while the government is proactively promoting the use of digital modes of transactions through various campaigns and schemes like Digital India, banks, government-run as well as private, are struggling to keep up with the sudden surge while still operating on obsolete technology.

“While logging in, it takes a lot of time to get the One Time Password or OTP. Sometimes we have to refresh several times whereas sometimes on a lucky day we get it on the very first try,” Manish Sachdeva, a Punjab National Bank user tells Media India Group.

“Sometimes when we pay through IMPS, the amount gets debited from our account but doesn’t reach the person and in that case we have to wait for a return,” he adds.

United Bank of India recorded the highest rate of technical errors at 12.4 pc followed by Canara Bank at 5.9 pc and State Bank of India at 5.3 pc in September 2020, owing to unavailability of systems and network issues, either at the bank or with NPCI. In comparison, before July, the technical decline rates for most of the top 30 banks stood at less than 1pc stated a recent report by National Payments Corporation of India (NPCI), an umbrella organisation for all retail payment systems in India.

Though the banking sector has shown improvement in their ability to manage the outages, as stated in a report by NPCI, the UPI transaction rate of the State Bank of India or SBI has improved considerably. The bank registered only a 1.44 pc technical decline rate in January 2021, as compared to 8.96 pc in the previous month; with Indian consumers having access to cheaper internet services and governments pushing for digitalisation, the industry bodies feel it is imperative to establish a reliable infrastructure.

“In the wake of the current Covid-19 pandemic, especially during the lockdown, there has been increased adoption of teleworking, telemedicine, and online education. This could result in a sudden upsurge in the network traffic, which could only be fulfilled by a robust supporting infrastructure,” Confederation of Indian Industry, CII had said in a report on June 24, 2020.

A year later it seems most banks are yet to do much about it, the users feel.



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