PhonePe stops UPI payments on Flipkart app after NPCI rap

PhonePe App
Flipkart-owned digital payments platform PhonePe has suspended UPI transactions on the parent company’s app a day after the National Payments Corporation of India (NPCI) said it was in contravention to the UPI guidelines of interoperability.

Flipkart is currently one of the only merchants to accept UPI transactions through PhonePe, with the company claiming to have at least 25 more partnerships in the pipeline.

The issue arose on January 13 when ICICI Bank blocked all UPI transactions on PhonePe for its customers, citing security concerns and that the service breached guidelines of interoperability. The NPCI, which first came out in support of PhonePe, on Friday issued a statement asking the firm to comply with UPI guidelines and allow payments to all banks on its app.

"PhonePe has disabled UPI-based payment support for its merchant Flipkart's Android App temporarily. It's been 8 days since ICICI unilaterally blocked all @YBL (Yes Bank) transactions leading to significant inconvenience for our customers and their own,” said Sameer Nigam, chief executive of PhonePe in a statement.

“We have made multiple requests to NPCI to resolve the matter quickly. Unfortunately, ICICI has refused to unblock UPI access — even after NPCI issued a public directive telling them to do so on Thursday. Then, without explanation, NPCI reversed it's own directive via a press release on Friday night, but yet again failed to highlight exactly which interoperability guidelines they believe PhonePe is in violation off,” he added.

The lack of clarity around the guidelines for digital wallets to enable UPI transactions has become clear in this instance, with experts saying more work needs to be done. PhonePe rides off the back of Yes Bank for UPI, but it isn’t clear if the company is allowed to do so, since only banks have access to the payment method for now.

There’s also a sense that banks (such as ICICI) are blocking transactions on digital wallets to protect their own turf. In a previous instance, State Bank of India, the country’s largest bank, blocked its customers from recharging their Paytm wallets through Net Banking, making it harder for them to load money and use the service.

Flipkart acquired PhonePe in April last year, making it the company’s third payments related acquisition having bought FX Mart and NGPay earlier. PhonePe was founded by Sameer Nigam, Rahul Chari and Burzin Engineer, the former two being early employees of Flipkart who left the company to start up on their own.

PhonePe went on to launch its UPI-based digital wallet in August and by January 2017 announced that it had racked up over 10 million downloads. The company did not disclose how many active users it has or how many transactions it had completed so far. 

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