Digital Payments Face Hiccup As SMS Scrubbing Delays OTP Deliveries
Picture for representative purposes (Photographer: Samyukta Lakshmi/Bloomberg)

Digital Payments Face Hiccup As SMS Scrubbing Delays OTP Deliveries

A new piece of technology meant to scrub text messages caused severe problems for digital payments on Monday, with banks and financial technology firms reporting transaction failures due to delays in receiving one-time passwords.

Even as banks and digital payments companies are trying to circumvent issues in delivery of time-critical OTPs to approve transactions, customers and services dependent on OTPs have complained about delayed responses and failed payments.

Telecom companies in India have implemented a digital ledger system to scrub data in SMSes as a way to block fraudulent messages being delivered to individual users. According to a senior banker, the technology which went live on Monday, caused unexpected hiccups for bank customers.

For large banks such as Axis Bank Ltd., only about 25-30% of the OTPs sent to customers are being delivered, the person quoted above said. Banks have been trying to manage the problem by allowing other modes of dynamic password deliveries such as emails or phonebanking and using other modes of identification such as using the customer identification numbers to approve transactions.

“The industry is working with several communication aggregators to get this in action smoothly. Some of the aggregators serving the industry were not prepared, which resulted in disruption in the early hours on Monday,” said Ratan Kesh, EVP & head-retail operations and service at Axis Bank in an emailed comment on Tuesday afternoon.

According to Kesh, the bank found that one of the aggregators it works with was able to deliver a high success rate, which resulted in the bank diverting all its SMS traffic, including OTP and other transaction communications to customers, through this aggregator. “This resulted in our bank achieving a 90% plus success rate throughout the day. We are now re-registering the templates through the other large aggregator partners to streamline the situation further while observing and handling feedback coming from the customer facing channels," Kesh said.

According to a person in the know, India’s largest private lender HDFC Bank Ltd. has managed to get its OTP services back on track, but is still working on delivery of other bank SMSes.

The chief executive officer of a digital lending firm, speaking on the condition of anonymity, said services across the board faced a problem.

Across the digital payment ecosystem, transaction volumes may have been impacted by as much as 30% during the day, said a person familiar with the matter. Troubles were at their most extreme in the early part of the day but eased by the evening, this person said.

The Economic Times first reported this story on Monday. Citing an unnamed telecom executive, the newspaper reported that companies had been given abundant time to adhere to the requirements for quicker approval and delivery of messages through the distributed ledger technology.

According to the senior banker quoted above, some companies, including banks, may not have fully compiled with the requirements of the new system, causing delays. However, if the entire system is seeing issues, then the problem is likely deeper. It would take 24-48 hours before the root cause of this problem is found out, the banker said.

Public sector lenders though are reporting fewer complaints than their private sector peers.

“The bank has not faced a major issue regarding this and the complaints are being dealt with by the respective department. It is under control for the bank,” said Rajkiran Rai G, managing director and chief executive of Union Bank of India.

PR Rajagopal, executive director of Bank of India, said the lender had alternative methods of approving transactions, which has meant that customers need not wait for OTPs. “We have a separate transaction password and a two-factor authentication via our StarToken security service because of which, the issue was not so much at our bank,” said Rajagopal.

This story has been updated with a response from Axis Bank received on Tuesday afternoon after the report was first published.

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