Even before the pandemic, Indian consumers adopted mobile payment technology at an alarming rate. There is a problem: India’s largest banking network struggled to keep up, and it collapsed again and again.

Analysts and executives said the power outages exposed years of underinvestment in technology and unexpected lack of preparation. For HDFC Bank, the country’s largest bank market capitalization, these issues are particularly embarrassing. It touted its online prowess until frustrated customers opened their eyes on Twitter, and Indian banking regulators banned the company from offering new digital products until its technology was confirmed.

Number of reported downtimes
Banks are in short supply in a highly competitive market. The Central Bank of India estimates that the number of online transactions has increased 500% in the past five years. The government of Prime Minister Narendra Modi has called for local solutions to bridge the country’s growing digital divide, but overseas companies are also aggressively entering the payment sector. Amazon, Facebook, and Google invested billions of dollars to build their own application ecosystem, linking payments to the retail network of thousands of moms and popular stores. They have been able to carry India’s innovative unified payment interface, which is a retail payment platform that allows banks and applications to interact seamlessly.

In India’s strictly regulated financial sector, financial technology companies still need banks to complete transactions and provide services such as loans. But Indian banks may see a repeat of what happened in China, where customer engagement and loyalty have shifted from traditional banks to fintech brands. Mahesh Ramamoorthy, managing director of FIS India Banking Solutions, said: “These large global technology companies will take market share within a period of time.” “Banks will settle these transactions more at the back end rather than facing online customers. .”

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Share of online retail payments in India volume
On the afternoon of November 21, the online transactions of HDFC Bank’s 56 million customers collapsed because the diesel backup generators in the data center at the edge of the financial capital Mumbai could not be started after the main power supply failed. The power outage lasted for several hours and also disrupted the services of certain customers of HDFC Bank’s online payment partner Google Pay.

People with the matter said that HDFC Bank employees began to notice short but frequent downtime as early as 2017, so as early as 2017 they had already noticed the risks caused the lack of adequate technical infrastructure. People familiar with the matter said, but it took more than three years for HDFC Bank to move to a new data center, and when the downtime occurred in November, the transition had not yet been completed.

In the past 12 months, this was one of about 14 technical failures that occurred in HDFC Bank. According to data released Down Detector, during this period, the Internet and mobile banking of the State Bank of India (State Bank of India), which is supported by the government, dropped 68 times, while the second largest private bank ICICI Bank Ltd. experienced 21 times. Service interruption. A report by PricewaterhouseCoopers showed that by September 2020, 10 of the top 30 banks in India had a transaction failure rate of 3% on the payment backbone.

Sashidhar Jagdishan, CEO of HDFC Bank, said the lender is “founding a foothold” to enhance its digital capabilities. The central bank’s investigation will determine when the ban on new digital products will be lifted. A bank spokesperson said in an emailed statement: “We have also used time to not only strengthen our platform, but also to develop strategies and improve our workforce skills,”

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Digital payments in India
People with the matter said that the Central Bank of India and the Reserve Bank of India, a senior financial regulator, have also asked SBI about reports of malfunctioning Internet banking and mobile applications. They said that SBI is putting more resources into its private cloud and expanding the capacity of its data center. SBI did not respond to emails seeking comment. The central bank did not respond to questions about the power outage. But at an industry conference in March, Reserve Bank Governor Shaktikanta Das urged banks to strengthen cyber security and technological infrastructure.

Despite the problems, online transactions are still expected to maintain rapid growth. But for this, the bank will need to spend more on technology. Vivek Belgavi, partner and head of PwC India’s financial technology business, said: “The living room to be kept clean, but the attic is cluttered.” Banks need to re-prioritize and repair their core foundations. facility. It takes time and intention to do so. “

©2021 Bloomberg (Bloomberg LP)

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