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High technical failures in UPI show gaps in banks’ digital infrastructure: Report

Ten top banks (nine of these public sector ones) recorded technical failure rate of over 3 percent in September, against 1 percent in July

October 21, 2020 / 09:59 AM IST

The flood of online payments due to COVID-19 pandemic is “testing” banks’ digital infrastructure – indicated by the jump in number of failed transactions, shows data from the National Payments Corporation of India (NPCI).

From the country’s top 30 banks, 10 banks (nine of these public sector ones) recorded a technical failure rate of over 3 percent in September, against 1 percent in July, for transactions made using the NPCI’s Unified Payment Interface (UPI), said a report by The Economic Times.

Comparatively, only 3 banks in July and 4 banks in August, recorded more than 3 percent technical declines. Before July, the rate for most top banks was below 1 percent.

Of these 10 banks in September, Union Bank of India recorded the highest technical failure rate of 12.4 percent; followed by Canara Bank (5.9 percent), State Bank of India (SBI – 5.3 percent), NPCI data shows.

Amidst the pandemic, UPI transactions reached the 1 billion mark in June, while September recorded higher numbers at 1.8 billion transactions worth Rs 3.6 lakh crore.

Thus, the “piled up” amount due in credit reversals has “triggered alarm with industry executives,” the report said, noting many are concerned that outdated digital infrastructure will be unable to cope with the sudden surge in payment volumes.

“Every UPI transaction hits the banks’ core banking system (CBS). The tricky part is that in the UPI architecture, every transaction is clocked twice, once by remitting banks and then by receiving banks. This can lead to a pile-up of credit reversal failures especially as nobody anticipated UPI volumes to double in such a short span,” a senior banker told the paper.

Moneycontrol could not independently verify the report.

Canara Bank, SBI and Union Bank of India did not respond to queries, the report said.

There is also concern that failure rate may be higher than that indicated by NPCI data as it only accounts for “technical failures” when “business declines” caused by customers inputting wrong details, etc., also exist.

Till now in October, UPI transactions have already crossed the 1 billion mark, and is poised to touch 2 billion on account of festive shopping, e-commerce sales and opening up of travel, experts said. Adding: Banks will have to upgrade the backend infrastructure to keep up – something that “could cost millions and offers no incentives in form of large scale revenues.”

Moneycontrol News
first published: Oct 21, 2020 09:59 am

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