In U-turn, NPCI tells Flipkart's PhonePe to adhere to UPI norms

Making a U-turn in the tussle between private-sector lender ICICI Bank and Flipkart's digital wallet PhonePe, National Payments Corporation of India (NPCI) on Friday said PhonePe doesn't adhere to interoperability norms of the Unified Payments Interface (UPI).

NPCI, the umbrella organisation for all retail payments systems in India, added that PhonePe needs to first adhere to interoperability norms before ICICI Bank allows its customers to register on the app.

Just a day before, it had asked ICICI to give access to PhonePe, but the the lender stood its ground saying it will not unblock PhonePe till it adheres to the interoperability clause.

ICICI Bank had alleged that PhonePe allows users of only its own UPI handle to make payments via the app. It wanted PhonePe to end this "restrictive practice".

NPCI also told e-commerce firm Flipkart to allow payments from UPI handles of all banks on its apps.

"During a review of ICICI Bank blocking the UPI transactions made through Flipkart's PhonePe, we have found the said e-wallet and the Flipkart apps are in contravention of the UPI guidelines of interoperability. Hence, we have directed PhonePe and Flipkart to comply with the UPI guidelines and allow payments from UPI handles of all banks on their apps," NPCI said in a press statement on Friday.

ICICI Bank has been told to allow UPI transactions from the PhonePe app as soon as PhonePe starts complying with UPI norms on interoperability, the statement added.

The fight had started earlier this week when ICICI Bank blocked YES Bank-powered PhonePe citing "security-related" concerns.

PhonePe CEO Sameer Nigam had refuted ICICI Bank's concerns saying the PhonePe app had been operational since August 2016 and none of these issues had been raised earlier.

"We followed all the detailed guidelines and procedures laid down by NPCI for an app to go live on UPI. We went through over 100 use-case tests, detailed certification, vulnerability assessment, penetration testing and third-party application security testing before NPCI gave us the permission to go live," Nigam had said.

E-commerce giant Flipkart had acquired Bangalore-based mobile payments company PhonePe Internet Pvt Ltd in April last year. PhonePe was founded by Nigam and Rahul Chari, former Flipkart employees.

Last week, PhonePe claimed it crossed the 10-million-download mark on Google Play.

This is the second time that a major bank has blocked services of a digital payments firm. Last year, mobile wallet Paytm had run into trouble with State Bank of India, the country's largest lender.

In December last year, the government came up with its own UPI-based digital payments app called BHIM. Developed by NPCI, BHIM is available to download on Google Play.