International

Yes Bank’s Chaos Means No-Go For Payments

Yes Bank India

For digital payments, for eCommerce, when a bank gets interrupted … the impact is instantaneous and disruptive.

To get a sense of the ripple effects, in India, tens of millions of financial system stakeholders, merchants and consumers among them, were unable to complete transactions after the RBI, India’s central bank, seized control of Yes Bank, among the top lenders in that country.

The seizure was deemed an “emergency” measure, as the lender said it has tried to raise $2 billion in capital to offset the impact of bad loans.

In the wake of that takeover, firms have been unable to conduct activities tied to QR codes and point of sale terminals or through UPI (Unified Payments Interface), which underpins digital payments.

The central bank said withdrawals from the bank, which has been facing a capital crunch, were limited to 50,000 rupees for the next month.

As reported, PhonePe, the payments app that is owned by Walmart, had been rendered inaccessible since Thursday (March 5) by its 175 million users, and where 8.7 million merchants have presence on the platform.

As Bloomberg reported, Udaan, the business software platform, told users to stop using the Udaan Pay QR Code that is offered through Yes Bank. Microsoft has also been affected through interruptions of its Kaizala mobile chat app.

PhonePe said in a statement delivered through Co-Founder and CEO Sameer Nigam, “We sincerely regret the long outage. Our partner bank Yes Bank was placed under moratorium by RBI. Entire team’s been working all night to get services back up as soon as possible.” The company said Friday that service ultimately was restored.

“We were integrated with Yes Bank’s digital infrastructure for our QR Code payments,” Udaan Co-Founder Amod Malviya said in a call with Bloomberg. Udaan said it has paused settlements to Yes Bank accounts.

PhonePe’s Nigam said via tweet that it was hard to imagine the “bank itself would go totally dark like this. Lesson learnt in the hardest possible way. But we’ll come out stronger and more robust.”

Beyond digital payments done as part of day-to-day commerce, government services also were impacted, according to reports.

Separately, NDTV reported Friday that Yes Bank Founder Rana Kapoor’s house in Mumbai was searched by the Enforcement Directorate (ED), as a money-laundering probe was launched against Kapoor. The investigation is centered on loans granted to Dewan Housing Finance. Livemint reported an ED official stating that “In some instances we found that the funds that were diverted by DHFL originated from Yes Bank. The searches are to ascertain the nature of these loans and whether there was any irregularity in granting them.”

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Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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