India's Mobile Payments Revolution Dragged Down By Bank Tech Glitches

The outages are exposing years of underinvestment in technology and a surprising lack of preparedness, analysts and executives say.

Even before the pandemic, Indian consumers were taking up mobile payment technologies with remarkable speed. There's just one problem: The networks of India's biggest banks have struggled to keep pace, crashing again and again. The outages are exposing years of underinvestment in technology and a surprising lack of preparedness, analysts and executives say. The problems have been especially embarrassing for HDFC Bank Ltd., the country's top bank by market value. It's touted its online prowess, only to be blasted on Twitter by frustrated customers and banned by India's bank regulator from offering new digital products until its technology is fixed. The banks are coming up short in a hotly competitive market. India's central bank estimates the number of online transactions grew 500% in the past five years. Prime Minister Narendra Modi's government has called for homegrown solutions to bridge the country's yawning digital divide, but overseas companies have moved aggressively into payments as well. Amazon.com, Facebook, and Google are pouring billions of dollars into building their own ecosystems for apps, linking payments to the retail networks of thousands of mom and pop stores. They've been able to piggyback on India's innovative Unified Payments Interface, a retail payments platform that lets banks and apps interact seamlessly. In India's tightly regulated financial sphere, financial technology companies still need banks to complete transactions and offer services such as loans. But banks in India risk seeing a repeat of what's happened in China, where customer engagement and loyalty have shifted from conventional banks to fintech brands. "Over a period of time these global big tech firms will be able to take away market share," says Mahesh Ramamoorthy, managing director of banking solutions at FIS India. "Banks will be more on the back end, settling these transactions than facing online customers."