UPI outages indicate the need for new solutions, say fintech executives

Four UPI outages in 18 days are probably unprecedented for the National Payments Corporation of India.

UPI has long ceased to be an inter-personal money transferring method. Around 65 percent of all UPI transactions are merchant transactions.

This means that every 10 minutes UPI is unavailable, 24 lakh merchant transactions in the country are stuck.

“There is a large segment of the population in the country that does not carry wallets or cash anymore. So if UPI does not work, it could bring the commerce in the country to a standstill,” said an executive, who heads the digital operations of a large bank.

There are no official figures on how many transactions failed or how big the impact of these outages was. NPCI publishes monthly TD rates for all banks. A technical decline (TD), the industryspeak for a transaction not getting through, happens when the server of a bank or that of NPCI is unresponsive or for some technological reason the payment doesn’t get through. The details are not available for a particular day to analyse the impact of these outages of the last few days on the ecosystem.

Indian commerce runs on UPI

UPI has become the primary payment means for the country’s commerce. From IPO application to money loading for trading to insurance, loan and bill payments, it is the preferred payment method. The country’s small and large retailers depend on the ubiquitous QR codes to receive customer payments.

“That is where the unavailability of NPCI is unprecedented. Bank server issues are common. Many consumers in the country have multiple bank accounts and if one bank’s UPI service is unavailable, they could use another UPI address linked to another bank account. Bank issues can be treated as isolated incidents and not necessarily in NPCI’s hands. But when the NPCI server is unavailable, it becomes a major inconvenience with no transactions happening in the ecosystem,” said the banker.

NPCI had set a target of one billion transactions a day almost four years ago, setting up enough time for it to prepare for at least 500 million transactions in a day, which is what it has done on most days for over six months now.

Interestingly, the daily volume or value of UPI during the days when the outages happened, was not so big for the platform to be down because of a potential overload.

For instance, on April 12, the day of the second NPCI outage, UPI recorded only around 550 million transactions, whereas the platform facilitated around 620 million daily transactions on multiple other days in March and April without any hiccups.

“It is so difficult to pinpoint the actual issue but we already know UPI switches across banks are overwhelmed and if there are some unusual spikes due to some events, it flares up. The IPL spikes of small merchant transactions and already overworked servers of SBI and HDFC have a cascading effect on the entire UPI infrastructure,” said Deepak Abbot, co-founder of fintech startup IndiaGold. Abbot previously worked at Paytm.

Around 86 percent of all UPI transactions were below Rs 500. The core banking solutions (CBS) of the banks are not meant to facilitate 500 million microtransactions in a day.

The PSB problem

“The recent UPI outages are a timely reminder that even our most trusted digital infrastructures are not immune to disruption. As UPI continues to scale rapidly, it becomes critical to balance this remarkable growth with long-term resilience,” Srinath Sridharan, Corporate Advisor and Policy Researcher.

However, even for a single UPI transaction to be successful, almost six financial organisations need to get their act together. The number of moving parts makes the job hard for NPCI. Its hands are tied when it comes to ensuring that the public sector banks are moving at the same pace as an Axis Bank or Yes Bank—quite an envious job. While two out of the four outages happened because of bank issues, two happened at NPCI.

Moneycontrol recently reported that while most large private sector banks continue to have a low technical decline (TD) of below 0.1 percent, SBI's touched 0.9 percent in March, NPCI data shows. SBI’s TD rate was 0.84 percent in January and 0.34 percent in February.

Public sector banks such as Union Bank of India and Bank of Baroda, which have much fewer resources, continue to have a lower TD than SBI.

But their other PSU counterparts Canara Bank, Punjab National Bank and Bank of India usually have a higher TD, occasionally even higher than SBI.

While SBI is over thrice as big as the second largest bank, HDFC Bank, in the UPI ecosystem, its high TD is a drag on the overall performance of the country’s most popular real-time digital payments platform.

Old and NUE solutions?

Unless NPCI discloses the reasons behind the recent outages, the larger public will never know whether the organisations and banks are taking the relevant steps to prevent another similar situation.

“NPCI came up with the UPI Lite solution to address the increasing load of small ticket transactions in the ecosystem. However, with only around 25-30 lakh transactions in a day, it hardly had an impact on the overall load. But we don’t know how the NPCI outage happened. Was it an overload? That is a completely different issue that we need to address,” said a former banker who headed UPI for a private sector bank.

According to the founder of a large UPI app, despite promoting the Lite solution on the homepage, customers seem to prefer the direct bank account solution. "This is why the wallets did not take off in India," the founder said.

According to Sridharan, it may be worth impartially revisiting the New Umbrella Entity (NUE) framework—not as a critique of existing systems, but as a constructive step towards strengthening systemic stability and enabling healthy competition within our payment architecture.

“While the Reserve Bank of India (RBI) had previously set aside the NUE initiative due to the absence of truly innovative proposals, the vision behind NUE extended beyond innovation. It was about building alternatives, ensuring redundancy, and safeguarding the future of our financial ecosystem,” Sridharan said.

However, if any alternative systems ride on the existing banking infrastructure, it could still be at the mercy of the current limitations of the ecosystem.

"A simple software issue could result in such a large outage. We need alternate CBS for banks or better fallback servers and systems for the existing framework to deliver better results. This does not necessarily happen because of lack of investment. NPCI has enough money to invest in UPI," the UPI app founder quoted above added.

Sridharan said that the recent extension of the deadline for Third-Party App Providers (TPAPs) like Google Pay and PhonePe to comply with the 30 percent transaction volume cap—now pushed to December 31, 2026—further reflects the need to accelerate diversification.

“A robust digital economy must rest on the pillars of competition, contingency, and continuity. These principles should continue to shape our institutional and infrastructural priorities,” Sridharan said.