Twenty-four hours. That’s how quickly Walmart-owned payments unicorn PhonePe migrated from Yes Bank to ICICI Bank. Originally Yes Bank’s first payments app partner, PhonePe transitioned swiftly as the beleaguered bank lurched into darkness. Some would even say too swiftly.

After all, partner banks and third-party apps are incredibly intertwined. From payments infrastructure to taking care of settlements during payments, the relationship is an intricate tapestry. And, of course, there’s also the regulatory obstacle course that’s more snakes than ladders.

But PhonePe had to act quick because Yes Bank was a sinking ship. One which had slowly taken on water for months, but which was finally reaching the point of no return. And the impetus to abandon ship came on 5 March at 8:58 PM, when the RBI announced on its official Twitter channel that it had placed a moratorium Moratorium A temporary prohibition moratorium on Yes Bank Ltd.

In one fell swoop, Yes Bank’s customers were subjected to a one-time Rs 50,000 ($674) withdrawal cap, cessation of loan activity, and a freeze on all current and savings accounts of the bank for the next 30 days. In that time, government-run State Bank of India (SBI) would resuscitate Yes Bank by pumping Business Standard SBI says YES Bank survival crucial, can invest up to Rs 10,000 cr in it Read more pumping as much as Rs 10,000 crore ($1.3 billion) into the business for a 49% stake.

What the central bank seemingly didn’t take into account, though, was the impact this moratorium would have on India’s online businesses. Because—despite 7.39% of its loans going bad, corporate governance failures, and a founder arrested for fraud—Yes Bank was an invisible cog helping turn the wheels of India’s digital economy.

PhonePe was just one of the many businesses affected. Fellow payments startup BharatPe was another. Yes Bank was a partner bank to both companies. Others used Yes Bank’s API Application Programming Interface API is a software intermediary that allows two applications to talk to each other, and enables seamless data exchange API . These ranged from food delivery company Swiggy to online travel aggregator MakeMyTrip and ride-hailing company Ola. Payments intermediary Razorpay also relies on Yes Bank’s APIs to do business.

With Yes Bank, for all practical purposes, out of action, all these digital companies were tripped up.

“We are now going back to doing merchant payouts manually,” said Jatin Mazalcar, CFO of Meesho, a social commerce company. Payments aggregator Razorpay, meanwhile, has paid merchants out of its own pocket as merchants’ money in Yes Bank is blocked.

AUTHOR

Arundhati Ramanathan

Arundhati is Bengaluru-based. She is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She has spent over 10 years reporting and writing on various subjects. Previous stints were at Mint, Outlook Business and Reuters.

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