Aren't The Tech Outages Showcasing The Health Of the Bank?

Several Founders, Co-Founders, CXO Bankers, CXO Fintech professional & people who participated in the ePanel discussions:

Mr. A P Hota, Former Managing Director & CEO of NPCI
Mr. Dilip Asbe, Managing Director & CEO, NPCI
Mr. Vijay Shekhar Sharma, Founder & CEO, Paytm
Mr. Manish Khera, Founder & MD, Arth Impact (HAPPY)
Mr. Probir Roy, Co-founder, Paymate
Mr. Anil Bharadwaj V, Co-Founder & CCO, Payswiff
Mr. Jayesh Shah, CEO, Prism Cybersoft Private Ltd
Mr. Kamonasish Aayush Mazumdar, Founder & CEO at Foodieverse
Mr. Shashank Kumar, Co-Founder at Razorpay
Mr. Narayan Rao, Chief Services Officer, Suryoday Small Finance Bank
Mr. Arun Tanksali, Co-founder & CTO, Nearex
Mr. Shirsha Ghosh, Co-Founder Torit Innovations
Mr. Ishan Vaish, India Partnership Manager- Worldwide Developer Relations, Apple
Mr. Himanshu Khare, former Head Corporate Legal & Advisory, VISPL
Mr. Madhav Nair, Country Head – India, Mashreqbank
Mr. Neeraj Chandra, Head of Operations and Technology, India, Abu Dhabi Commercial Bank
Mr. Sameer Ratolikar, Executive Vice President & CISO – Chief Information Security Officer, HDFC Bank
Mr. Rahul Dayal, Head- Information Technology, Aditya Birla Sun Life Mutual Fund
Mr. Anand V, Vice President & Product Head- NRI Business, Kotak Mahindra Bank
Mr. Abhishek Mody, former Associate Director-Payment & Digital Initiatives, IDFC FIRST Bank
Mr. Hemal Shah, former Technical Product Manager, Mastercard
Mr. Subbiaa Olimuthu, former Product Manager – RuPay Product
Mr. Hitesh Thakkar, Fintech Consultant, Self-Service Automation
Mr. Chitti Babu, Global Head – Payments & Digital Solutions Unimoni
Mr. Amarto Chakrabarty, former Principal Consultant- Global Consulting Group, Wipro Limited
Mr. Shashank Chowdhury, Former Executive VP- Inclusion Initiatives, Vakrangee Software Ltd
Mr. Dhanender Chandna, Managing Director, Viren Business Solutions Pvt Ltd.
Mr. Sharad Goklani, CTO at Equitas Small Finance Bank
Mr. Harveer Singh, former Head- Digital Solutions for India & South Asia, Mastercard
Mr, Srinath Vasudevan, Principal Payment Acceptance, Amazon
Mr. Abhishek Arun, Chief Operating Officer, Paytm Payments Bank
Mr. John Choudhury, Head – Payments, Alliances & Commercial Lending, Flipkart
Mr. Rakesh Shetty, Product Head Micro Loans, Fortune Credit Capital Ltd
Mr. Vikas R Panditrao, Co-Founder, Forum of Industry and Academic Knowledge Sharing (FIAKS)
Many other CEO/CXO Bankers & Fintech professionals on FIAKS Forum requested to remain anonymous

So around 7:30 pm on 21-Nov 2020, a community member says customers are unable to complete transactions in the mall for the last 45 min as POS machines are not accepting HDFC cards and ICICI Cards. Amex cards are working at these POS machines. Long queues in various shops as HDFC bank cards are giving cash backs. It seems this a very common issue with POS transactions.

Member says Amex is working as it’s using a separate network/switch and is not through Master/Visa. While the POS could be the same, connectivity is separate.
Another member says I don’t have the details of what exactly went wrong, but it would not have impacted the Amex network/switch. On the Amex card alone being successful, one logical reason could be that since it operates more like a closed-loop program.
The upshot is that while one key participant went down, the overall network was still up and running, thanks to its federated nature. It’s surprising as to why the ‘stand-in’ services offered by large networks (V/M) did not kick in and allow debit card transactions to be completed.

Then comes this update from HDFC;

Wonder what RBI will say if some fintech had the same predicament as HDFC, PMC, YES BANK, ILFS, LVB. There would be hue and cry. And the heavy hand of the regulator will come upon it. The disruptor challenger- Fintech category would all be but wiped out. What is sauce for the goose is Tobasco for gander!

How are regulators keeping track of such outages and compensating the customers? Isn’t cash a better option?

Too many points of failure in a system. These too many points are created to build open and multi-party participation. So a system that is a mash of diverse scope by multiple parties and multiple tech providers is defiantly going to have some outages.
Every bank/company wants to serve their customers so they will protect and build the next level of scale too.
Well, it is not a subject of regulation, it concerns supervision. The bank management, the business continuity plan, and the team responsible for activating remedial measures instantly is something that often fails to respond within a TAT. (Turn around time)
Compensation should be made mandatory for the merchants as well as retail customers though it is unfortunate that there are no metrics for assessing the loss of respective parties

Additionally FIAKS community member says outage has an unreported story too. Why should ICICI bank cards or Citi bank cards also fail while Amex Card is successful? What’s the connection here?

Now here are some significant questions raised up;

Question 1: How can a bank guarantee a customer that his balance in the account of say 1,00,000 does not become 000001. Do they understand Infosys or Oracle or TCS core banking system? Who controls the black box i.e. algorithm banker or a tech company?

Well, the balance in your account is the insured/responsibility of the bank. It can never happen unless the card/account holder himself shares account login and /card CVV OTP
Algo is written by the tech companies as specified by banks. Banks carry out thorough testing. Banks are responsible for the customer
It’s a loaded question actually. Algorithms are surely by tech cos but all logics, configurations, logs, data, and reports are 100% under the watch of the bank at all times. If they really want, banks can indeed “reverse engineer” and create their own systems. There are pros & cons to this approach, which is for another time.
We can fetch cliché. You outsource technology but not responsibility and ownership. The risk review mitigation is done by the owner of data, not the tech company. Tech companies are weapons merchant sells to all banks to compete and fight in the market place. If BBVA Spain can realize 10 years back that they need to be thinking like a software company others need to also.

Question 2: Are these tech companies made accountable for such outages?

Member mentions, usually banks have SLA (Service Level Agreements) and penalty clauses. How many cases they recover, it all depends. However rarely have I seen it passed on to the customer who is actually the most impacted party
Yes, there are SLA penalty escrow agreements in place with the right to audit terms.
Tech companies typically provide only a portion of the software; there is so much more to the services therein, which typically cannot/should not be controlled by them, such as infrastructure. Yes, in a SaaS model, they should and generally are held accountable.

Question 3: Do we need to rethink the NUE initiative by regulators as with that logic NUE is required for SBI, ICICI, HDFC, PNB Banks as they are too big an organization compared to NPCI?

Question 4: Is the digital strategy of the banks on right track? How are the banks ensuring that fundamentals are right?