The technical failure rate of over 3%, for the second successive month, is leading to widespread concern in the fintech industry as it braces for the full-scale launch of new entrant WhatsApp Pay. Banking experts estimate that failure rates above 0.1% for a widely-used real time fund transfer system is a concern.
NPCI data shows that digital remittances from state-owned lender Corporation Bank had the highest technical decline rate of 14.8%. Others with high failure rates include Canara Bank with a failure rate of 9.8%, Bank of India with 4.2 %, while the country’s largest mass-lender State Bank of India recorded a rate of 3.7%.
“For a 24&7 payment channel to record elevated failure rates over a prolonged time can lead to pile-up in debit reversal dues and cause reputational risks,” said a senior fintech executive who did not want to be identified. SBI, Corporation Bank, Canara Bank and NPCI did not reply to email queries from ET on the high rate failed digital transactions.
These failures, which are classified as technical declines, occur largely due to server downtimes and network issues within the banks. Private sector banks fared better in comparison, with HDFC Bank, Axis Bank and ICICI Bank all recording failure rates less than 1%. Among large private lenders Kotak Mahindra Bank had the highest failure rate at 2.36% in October.
Paytm Payments Bank had the lowest failure rate in the industry at 0.02%, the NPCI data showed.
“The UPI architecture is complex as it involves real time communication standards between the servers of up to 5 entities. Any delay in real time information exchange even in one of the layers due to downtimes or network failures can lead to failed deal,” said a fintech executive.
As reported first by ET, the record surge in online payments since the start of the pandemic has tested the robustness of the country’s payment infra, as transactions through the UPI spiked from 99.9 crore transactions worth 1.51 lakh crore in April to 207 crore deals worth 3.86 lakh crore at end of October.
Even in September ten of the top thirty UPI remitting banks, showed failure rates of over 3% according to data from NPCI. According to an industry executive, the real failure rate could be even higher as “millions of transactions declined due to switching errors” and are not reflected in NPCI's data set. ET could not independently verify this.
A typical peer-to-peer UPI transaction involves the exchange of real time information between the servers of remitter bank, sponsor bank on UPI network, the NPCI’s server, and the beneficiary account.
For merchant transactions, the flow becomes even more complex with an additional settlement layer. Also, a matter of concern for the payments industry is the pile-up of credit reversal dues when the amount gets debited from the remitters’ account but is not credited in the beneficiary’s bank account. SBI in October alone processed 13.16 million debit reversals of which 84% were successful, NPCI data showed.
To be sure, there are two kinds of failures on UPI payments — technical decline and business decline. While technical decline is caused due to issues with bank or NPCI systems, business declines are caused due to reasons pertaining to customers such as incorrect pin entry or transactions beyond stipulated limits.
NPCI data showed that business decline rates were also on the rise due to an increase in first time users of the channel further putting pressure on the banking infrastructure. During pandemic several new categories such as bill payments, education and wage settlements moved online.
The UPI channel, which has emerged as the most prominent retail payment channel, grew by 107% in volume and 155% in value between April and October, latest data from the Reserve Bank of India showed.
In comparison, only four banks recorded more than 3% technical declines (TD) on UPI in August, while in July high rates of declines were recorded by only three banks. Before July, the technical decline rates for most of the top UPI remitting banks were below 1%, reading of the NPCI’s database showed.
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1 Comment on this Story
Dilip Mitra8 days ago
Consumer preferences for payments through Digital mode for retail purchase has become a part of new-normal in this pandemic. It is heartening to see a volume growth of 107pc through NPCI in digital transactions. But the increasing faults - technical decline rate in digital transactions that too for PSU banks is a cause for worry for customers. Need upgrade in tools and mehod.