PhonePe suffered an extended service outage for 24 hours that started immediately after RBI's sudden takeover of Yes Bank. Here's how the team bounced back.
On March 5, in a rare move, the Reserve Bank of India (RBI) imposed a moratorium on Yes Bank. Because the moratorium extends to Yes Banks’ banking handles (YBL), it invariably affects its digital partners as well.
The common man didn’t see it coming. As it turns out, the private lender’s digital partners didn’t see it coming either. One of them was Flipkart-owned Fintech startup, PhonePe. The moratorium, in fact, hit PhonePe harder than any other competing platform.
Bengaluru-based PhonePe was subscribing to a single-bank model and even though it was hard at work on a multi-bank strategy, Yes Bank was its only ‘official’ banking partner until the moratorium happened. PhonePe suffered an extended service outage for 24 hours that started immediately after RBI’s sudden takeover of Yes Bank. PhonePe’s near 40 crore customers could not use the app to make transactions through March 6. Total chaos ensued.
“It was an extraordinarily difficult situation with little precedence,” Karthik Raghupathy, VP Strategy & Business Development, PhonePe, says in an exclusive interview with Financial Express online. Here’s how the team bounced back. Excerpts.
— Could you talk about the whole Yes Bank situation – did you see it coming? What lies ahead with the partnership now? Does this affect your existing partnership with Yes Bank in any way?
No one anticipated the moratorium. But, we were (already) actively working on adding other partners – this is also as per the recent NPCI advisory and we would have gone live with ICICI soon regardless of the Yes Bank situation.
Post the moratorium on Thursday evening, we have added ICICI bank as our new banking partner and all our services are restored to normal. There is absolutely no change in the way our customers use PhonePe. They can continue using PhonePe as they have in the past. All @ybl handles now points to ICICI to ensure a safe, secure and seamless experience. We will shortly be launching an additional VPA with ICICI bank.
Once Yes Bank moratorium is over, it will mean PhonePe users will have a choice of two handles from two different banks to work with.
— Take us through the ‘miraculous’ comeback over the weekend – how did you bounce back so quickly under so much pressure?
We saw an extended service outage, which started immediately after the RBI moratorium on Yes Bank on March 5 (Thursday) lasting for nearly 24 hours till March 6 (Friday). The PhonePe team worked overnight with NPCI and ICICI bank, our new banking partner to ensure all our services were up and running within a day. All merchant payment settlements were restored by Friday noon and all consumer wallet, credit, and debit card payments were restored by 3 p.m. All UPI services were restored by Friday night, with PhonePe users continuing to use their @ybl handles. This ensured that there was a seamless transition for all of our 20 crore customers.
It was an extraordinarily difficult situation with little precedence. We are grateful to RBI, NPCI, Yes Bank and ICICI for working collectively to ensure that millions of our customers and merchants were not inconvenienced a minute longer than necessary. The trust and loyalty that our customers and merchant partners reposed in us by coming back in larger numbers than ever before is truly humbling. The mammoth effort of all the PhonePe employees who worked tirelessly for 36 hours non-stop with a singular focus on getting all our customer and merchant services live as fast as possible was simply amazing – this was an experience that truly showcased the company’s incredible culture and capabilities.
— Could you talk about your new partnership with ICICI and the ‘strategic’ timing of the announcement?
As we have already said in several forums recently, we were actively working on adding other partners. This is also as per the recent NPCI advisory and we would have gone live with ICICI by April anyway. Given Yes Bank’s current situation we opted to speed up this process and there is little we could have done to speed this up any further.
— How has PhonePe’s journey as a startup been so far?
When PhonePe was started over four years ago, the vision was to become India’s largest transaction platform, anchored on payments. To achieve this vision, we pioneered the growth of UPI based payments and, in a short span of time, PhonePe established itself as a leader in the Fintech industry and revolutionized payments in India. The journey has been incredible, to say the least, not just in terms of growth in users and transactions, but also in realizing the social impact that payments and financial services can create. With our money transfer and bill payment offerings, wide merchant acceptance, both online and offline, the ‘Switch’ platform that opens up the gateway to a world of merchants, and our forays into financial services with gold, mutual funds, travel insurance among others, we have developed a wide variety of use cases that connect consumers, merchants, and banks together thereby creating one of India’s largest transaction platforms.
— What are some of the challenges/concerns in India’s Fintech sector today? How is PhonePe addressing that?
Adoption of digital payments across geographies, especially in tier 2 and 3 cities and towns and remote areas is something that we are pursuing aggressively. Currently, about 70% of transactions on our platform are arising from tier 2, 3, 4 cities and beyond.
We are looking to increasingly leverage technology to build customized solutions that can solve the requirements of hundreds of millions of consumers residing in Tier 2, 3 and 4 towns. We are also doing more collaborative work with traditional financial institutions to drive penetration of financial services products in India. Leveraging each other’s strengths will be imperative to power the future of payments & financial services transformation.
— Could you talk about your backend technology and the team behind it – what makes PhonePe tick?
The key technology differentiator for PhonePe is our ability to build future-provisioned platforms at scale from Day 1. This allows us to not only scale our offerings right out of the gate but also gives us the opportunity to rapidly build newer experiences on existing capabilities to provide our users with a holistic product offering when it comes to money usage and money management.
— Your advice to young entrepreneurs looking to enter Fintech in India?
The digital payments space in the country is still at a very nascent stage, with tremendous scope and potential for growth in the coming years. Digital payments is a very large scale area with multiple stakeholders and various problem statements – hence, there is tremendous scope for new entrants to innovate in different parts of the ecosystem. Besides, the rising competition encourages innovation which is very good for the ecosystem. In terms of specific areas, financial services is significantly underpenetrated in India – there is a clear opportunity to use technology to rapidly innovate in this space.