Latest UPI outage points to deeper systemic risks

Unified Payments Interface processes a ginormous 4.5 billion transactions a month. That’s at least 150 million transactions every day and 7 million every hour. So, when UPI suffered a glitch between 2 pm and 5 pm last Sunday, it quickly became the most-discussed annoyance, online and offline, in the country.

National Payments Corporation of India, which runs UPI, tweeted at 5.18 pm that normality had returned.

“There was a hardware problem in the main server. But what made the issue acute was that the disaster recovery system didn’t kick in at the right time,” revealed a senior banker aware of the developments.

The disruption prompted renewed conversations in banking circles about the risks building up on UPI because of the concentration of operational and market power in a few hands. And how in these circumstances, there is a possibility of problems cropping up again. 

NPCI single-handedly manages UPI, the country’s most popular payments platform whose volumes have surged in recent years. Within UPI, just three players, PhonePe, Google Pay and Paytm, collectively account for roughly 95% of the market share. Banking applications play a secondary role.

A large number of users could potentially face difficulties if any one of the major participants here is hit by a serious snag. NPCI had set a 30% limit on the volume of transactions a third-party app can process, but the lopsided race makes imposing the rule a challenge.