Several Unified Payments Interface (UPI) users saw payment disruption on May 12 after PhonePe's disaster recovery measures saw a capacity shortfall in the evening.
PhonePe is the largest UPI player with 47 percent volume and over 50 percent value market share.
The company said that it was carrying out disaster recovery drills and the traffic was routed through a new data centre, which resulted in a capacity shortage and transactions started failing, the company chief technology officer, Rahul Chari said on the social media platform X (formerly Twitter)
"Given the escalation of the conflict last week, at PhonePe we initiated active DR drills, with heightened cybersecurity measures on our network firewall. This evening, 100% of our traffic across all our services was being served through a new data centre," Chari said.
Given the dominance of PhonePe in the UPI ecosystem, several payment users suspected that UPI was down. Over the last 40 days, UPI had seen multiple outages due to various reasons and several people suspected that the system was down.
Chari apologised and added: "Unfortunately, the Monday evening peak traffic exposed a network capacity shortfall, due to which transactions started failing. We have now rebalanced our traffic across our other sites and are seeing the recovery. Our apologies for this."
This is not the first time a PhonePe issue has caused widespread inconvenience to mobile payment users. Back in 2020, a Yes Bank crisis had seen customers unable to use the platform after RBI imposed restrictions on Yes Bank transactions. Yes Bank was the sole banking partner of PhonePe then. Since then,
The National Payments Corporation of India (NPCI), which runs UPI, has recommended a 30 percent market cap for a single UPI player to avoid similar system-level issues arising out of the duopoly. PhonePe and Google Pay controls more than 85 percent of all UPI transactions.
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