No sector has seen as much churn in recent months as the digital payments industry. With the introduction of UPI, and the government’s demonetizaton scheme, both private and public companies have rushed to make their moves in the changed landscape. And they’re invariably stepping on each others’ toes.
Flipkart-owned wallet PhonePe has alleged that ICICI bank is blocking UPI transactions on its app. This was tweeted by PhonePe founder Sameer Nigam. Nigam had joined Flipkart after it had acquired PhonePe.
— Sameer.Nigam (@_sameernigam) January 14, 2017
PhonePe has a right to feel aggrieved – UPI is a government interface that allows for seamless transactions between participating entities. As long as a participating party uses the common interface, they should be able to transfer funds from one to the other. This is frequently touted as one of the biggest strengths of the UPI by the government.
While it’s unclear why ICICI would block PhonePe’s transactions, this isn’t the first time a bank has blocked a smaller private player from making a move in the financial industry. Earlier, SBI had come under fire for not letting its online users transfer money to online wallets, including Paytm and Mobikwik. SBI had cited security reasons for its move, but had been encouraging users to use its own wallet, Buddy, instead.
The wallet ecosystem has become increasingly complex in recent months. It initially consisted of wallet companies like Paytm and Freecharge, but with the introduction of the UPI, several new players jumped in. They included private players, like Flipkart’s PhonePe, and the UPI apps of banks, such as SBI’s SBI Pay and HDFC’s HDFC MobileBanking. To further complicate matters, even traditional wallet companies, such as Paytm, are now integrating with the UPI.
This has meant that the ecosystem is currently flooded with UPI apps – there are as many as 30 at last count – and they’re all actively trying to build user bases and loyalty. The legacy banking players have more to lose in the ensuing melee. They had a stronghold over financial transactions, and are now being actively challenged by smaller, private companies. This has led to companies like SBI putting out posters comparing Paytm unfavourably to their own apps, and blocking transactions to its wallet. Smaller companies will have no recourse other than to approach the RBI, or hope that the public outcry will help large banks change their stances. With India’s multibillion dollar digital payments market at stake, the wars for marketshare might just be getting started.
Update: ICICI Bank contacted OfficeChai with this statement:
“ICICI Bank is among the first few banks to introduce UPI through its mobile banking apps. We have also played a key role in conceptualising the UPI initiative along with NPCI to bring in interoperability among banks for ease in payments.
ICICI Bank is committed to support UPI and interoperability. Our customers and even non-customers can use BHIM and our mobile banking apps to link any of their bank accounts with other participating UPI banks and make seamless payments.
Some banks including us have raised security related concerns at appropriate forums about the access to UPI data to a non-banking application. Further, 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. Pending resolution of these concerns, we have temporarily declined to undertake UPI transactions originating from this entity.”