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SBI's UPI Platform: High Failure Rates Raise Red Flags for Investors
Banking, Markets - April 14, 2025

SBI's UPI Platform: High Failure Rates Raise Red Flags for Investors

SBI’s UPI Platform: High Failure Rates Raise Red Flags for Investors

 

SBI’s UPI Transaction Failures: A Persistent Issue

The biggest public sector bank in India, State Bank of India (SBI), has been having trouble with high technical decline (TD) rates in its transactions using the Unified Payments Interface (UPI). According to data from the National Payments Corporation of India (NPCI), SBI’s TD rate rose sharply from 0.34 percent in February and 0.84 percent in January to 0.9 percent in March 2025.
Technical decline refers to UPI transactions that fail due to issues such as unresponsive servers or connectivity failures. While NPCI typically ensures 100 percent uptime for its system, the consistent failure rates from SBI’s infrastructure have raised concerns. This issue is particularly problematic because SBI plays a crucial role in the UPI ecosystem, accounting for the highest volume of transactions.

What is Technical Decline in UPI Transactions?

In the UPI ecosystem, a technical decline (TD) occurs when a transaction fails due to system-related issues, preventing the completion of a payment. For UPI to be effective, these issues must be minimal, as the platform relies heavily on its ability to process transactions seamlessly.
SBI’s rising TD rate suggests that the bank’s infrastructure may be facing technical challenges. This is in contrast to other major banks, such as HDFC, ICICI, Axis, and Kotak Mahindra, which all reported much lower TD rates, ranging between 0.02 percent and 0.13 percent in March. These low TD rates from private banks highlight a growing disparity in the reliability of UPI services across different banking institutions.

SBI’s Dominance in the UPI Ecosystem

SBI is an integral player in India’s UPI ecosystem, with its massive share of the transaction volume. The second-largest player in the market, HDFC Bank, handled 1.5 billion UPI transactions in March 2025; SBI processed 5 billion, more than three times that amount. SBI’s high TD rate, however, causes a bottleneck despite its dominance and affects the UPI system’s overall performance.
UPI has become the backbone of India’s digital payment infrastructure, accounting for 83 percent of all digital transactions. Therefore, any technical failures in a bank as significant as SBI can have a ripple effect, lowering the platform’s overall success ratio.

A Closer Look at Other Banks’ Performance

By comparison, banks like HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank boast far lower TD rates, underlining the infrastructure disparity. For instance, HDFC Bank reported a TD rate of just 0.02 percent in March, whereas ICICI Bank and Axis Bank reported TD rates of 0.13 and 0.03 percent, respectively. This performance disparity raises questions about the efficacy of SBI’s systems in handling large transaction volumes.
Smaller public sector banks like Union Bank of India and Bank of Baroda also had better TD rates than SBI, suggesting that SBI’s high TD rate may be due to its unique infrastructure or technological problems rather than being a direct effect of being a public sector bank.

The Impact of High Failure Rates on UPI Users

For UPI users, SBI’s high TD rate can be incredibly frustrating. As UPI becomes an essential tool for digital transactions in India, payment failures become a significant barrier to a smooth user experience. These disruptions are particularly impactful when users attempt to make urgent or important payments, such as paying bills or transferring money for essential services.
Moreover, third-party apps that rely on SBI’s infrastructure, such as Google Pay, Paytm, and PhonePe, also face challenges due to these failures. Since these apps depend on banks like SBI as their payment service providers (PSPs), users often face delays, failed transactions, or errors during transactions.
As UPI grows in popularity and becomes the primary payment method for millions of users, ensuring a reliable and seamless experience is crucial. With SBI’s high TD rate, the platform risks losing customer trust and affecting the overall growth trajectory of digital payments.

The Role of NPCI and UPI’s Future

While SBI’s infrastructure struggles remain a problem, NPCI, the body responsible for overseeing UPI, maintains 100 percent uptime. This indicates that the underlying UPI system is functioning as expected, and the issue lies with individual banks like SBI. NPCI has also ensured that UPI outages are rare, but the recent disruptions—three in the last couple of weeks—highlight vulnerabilities in the system, particularly with partner banks that face technical or infrastructure-related challenges.
The most recent outage on March 26 was caused by a technical issue at NPCI itself, while the others were attributed to processing issues at partner banks due to financial year-end load. Such outages underscore the challenges faced by UPI’s ecosystem, particularly as more users and transactions come online.

Final Thoughts: What’s Next for SBI and UPI?

SBI’s high TD rate poses a considerable risk to its reputation and to the UPI system as a whole. As the leader in India’s digital payments landscape, SBI must address its technical challenges to maintain its position in the UPI ecosystem. Failure to improve its infrastructure could erode customer trust and negatively affect the entire UPI platform.

For the broader UPI ecosystem, it’s essential for all participating banks to invest in the technology and systems that ensure seamless payments. Although SBI’s high TD rate hinders UPI’s overall performance, it can help improve UPI’s success ratio and the digital payment system for millions of Indian consumers if its infrastructure is upgraded properly.

 

 

 

 

 

 

 

 

 

 

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UPI transactions rise 8% to 16.73 billion in December

UPI transactions rise 8% to 16.73 billion in December

Digital transactions in India observed an upward trend in the month of December. The data provided by National Payments Corporation of India (NPCI) states that the financial transactions carried through the Unified Payments Interface (UPI) registered 16.73 billion transactions in the month of December, 2024. It increased by 8 percent month-on-month as compared to the 15.48 billion transaction in the month of November, 2024. It recorded the highest volume for the digital transaction since it came to function in April, 2016. NPCI is a public sector company responsible for operating the retail payments and settlement systems in India. As per the data of NPCI, the growth for December, 2024 was 39 percent in terms of volume of transactions compared to the previous year of the same period. While in terms of value in transaction, it increased 28 percent against the value of transaction in the month of December, 2023.

The data of NPCI released on 1st January states that the value of the UPI transaction was Rs. 23.25 lakh crore in December as compared to Rs. 21.55 lakh crore value of the previous month’s UPI transaction. While the count of the average daily transaction in December surged to 540 million from 516 million in November. Also the overall volume of digital transactions increased by 46 percent which accounts for 172 billion transactions compared to 118 billion transactions in the year 2023. In terms of value of transactions, it rose by Rs. 247 trillion during the year 2024 as compared to Rs. 183 trillion in the year 2023, indicating an increase in volume by 46 percent. The increase in transactions is mainly due to the rise in person-to-merchant transactions or the buying of goods and services.

Even though the App-wise data for the month of December is yet to be available, PhonePe, owned by Walmart, is observed to be leading the market. This is based on the data available for the month of November where PhonePe contributes to 47.8% of the shares in UPI transactions. It is followed by Google Pay and Paytm. NPCI has extended the deadline by two years for UPI providers to fulfill the obligation of 30 percent market share. This extension of the deadline indicates that it is not probable for the shift in market concentration in the near future. The predetermined date for the new deadline is now 31st December, 2026. This is for the second time NPCI has extended the deadline regarding this subject. This provision by NPCI is based on the regulation in 2020. Its purpose is to prevent more than 30 percent share of any third-party app provider in the total UPI transaction volumes. The main reason for this is to prevent excessive control of a single entity as well as to mitigate concentration of risk. It also aims at giving relief to market leaders in UPI providers such as PhonePe and Google Pay. As both of them contribute for UPI volume transactions around 47.8 percent and 37.02 percent respectively in the month of November based on the report of NPCI. This action of NPCI to limit the large market share of a single entity led to growing concerns among UPI providers about limitations in their growth as well as growth of the digital transactions in India.

The Immediate Payment Service (IMPS) provides users with the facility to transfer funds in real-time between banks. As per the report of NPCI, IMPS registered 441 million transactions in the month of December and the value of transactions is Rs. 6.02 lakh crore. While the transaction through Aadhar-Enabled Payment System (AEPS) is around 93 million in December. As compared to previous month, the transaction activities remain flat for AEPS. On the other hand, Fastag recorded a transaction volume of 382 million in December which accounts for a surge of 6 percent as compared to the volume of 359 million and 345 million in November and October respectively. In terms of value of transaction, it increased by 9 percent which was around Rs. 6,642 crore in December against the value of Rs 6,070 crore and Rs 6,115 crore in November and October respectively.

NPCI made a formal statement in its press release on 31st December, 2024 about the removal of the user limit on Whatsapp Pay which was earlier limited to 100 million users. Now Whatsapp Pay can be facilitated to its entire users in India. Its aim is to bring Whatsapp payment in the mainstream of UPI provider ecosystem and make UPI ecosystem more inclusive and competitive in nature. At present, the total users of Whatsapp messaging service in India is over 500 million users. According to the report of NPCI, the fiscal year of 2024 observed a 37 percent surge in net profit which accounts for Rs. 1,134 crore.

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SBI's UPI Platform: High Failure Rates Raise Red Flags for Investors
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India’s Digital Transactions Set TO 3X By 2028-29

India’s Digital Transactions Set TO 3X By 2028-29

Digital financial transactions in India are expected to triple from 159 billion in 2023–2024 to 481 billion by 2028–2029, according to a PwC India report. The Native Payments Handbook 2024-29. The value of these digital payments is also set to double, growing from $3.16 trillion (Rs. 265 trillion) to $7.06 trillion (Rs. 593 trillion) during the same period. This impressive growth is being driven by several factors, including technological innovations, stronger government regulations, and the introduction of advanced technologies aimed at improving user experience and managing risks.

A major player in this growth is the Unified Payments Interface (UPI), which is projected to experience a 57% increase in transaction volumes. The number of UPI transactions is expected to rise from 131 billion to 439 billion by the fiscal year 2028-29, accounting for over 91% of all retail digital payments in India by that time.

Credit cards have also seen substantial growth, with more than 16 million new cards issued in 2023-24, bringing the total number of credit cards in use to over 100 million. Due to the rise in credit card usage, transaction volumes and values have increased by 22% and 28%, respectively. On the other hand, debit card usage has declined, with the number of transactions falling from 3.94 billion in FY22 to 2.29 billion in FY24, and transaction values dropping from $86.97 billion (Rs. 7.3 trillion) to $70.29 billion (Rs. 5.9 trillion).

The expansion of QR code infrastructure has been another significant factor in the growth of digital payments, with nearly 30% year-over-year growth in 2023-24 across various city tiers. Innovations such as soundboxes and the Payments Infrastructure Development Fund (PIDF), introduced by the Reserve Bank of India (RBI), have further accelerated this growth. The PIDF was specifically designed to encourage the deployment of Point of Sale (PoS) infrastructure in smaller cities and towns across the country, particularly in Tier-III to Tier-VI centres.

The last decade, India’s digital payment ecosystem has witnessed remarkable growth, positioning the country as a global leader in this space. This evolution has been pivotal in transitioning from a cash-dominated economy to one that increasingly relies on digital transactions, with significant adoption across metropolitan areas, tier 1 to tier 4 cities, and even rural regions. At the forefront of this revolution is UPI, which has driven deeper penetration of digital payments in India. Innovative use cases, including credit card linkages and international partnerships, are further propelling this momentum. Notably, there is a discernible shift towards person-to-merchant (P2M) transactions, enhancing the network effect as more customers engage with merchant.

In the last ten years, India’s digital payment system has grown rapidly, making the country a global leader in this area. This growth has helped move India from relying heavily on cash to using more digital transactions, with people in big cities, smaller towns, and even rural areas adopting digital payments .A key player in this change is the Unified Payments Interface (UPI), which has greatly increased the use of digital payments across India. New features like linking credit cards to UPI and partnerships with international companies are pushing this growth even further. More people are now using digital payments when shopping, both online and in stores, which is encouraging more merchants to accept digital payments.

Innovations like soundboxes and better selling strategies are helping more merchants use digital payments. Due to this, it is anticipated that UPI will increase from around 350 million transactions per day in 2024 to 1 billion transactions per day by the fiscal year 2028.
The number of credit cards in use now exceeds 100 million, and this number is increasing.

This number is expected to double to 200 million by 2029, with daily transactions increasing to 25 million, which is 2.5 times the current volume. Additionally, the Bharat Bill Payment System (BBPS) is becoming more popular, thanks to government support and the addition of new billers, making it easier to handle cross-border transactions and helping the system grow.

This year has seen the implementation and growth of several new payment technologies and use cases, including UPI Lite, credit cards on UPI, virtual credit cards, pay-by-points, business payments, and merchant acquisition. These advancements are part of a broader strategy to enhance the issuance and distribution of payment solutions while also promoting digital payments among merchants through innovative activation strategies and cross-sells.

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