As cash dries up, Indian card networks are starting to feel the strain

On Thursday, student Rachel Issac and her family were celebrating her aunt’s birthday at a restaurant in Silchar, a town in Lower Assam. The bill came to Rs 1,000. They were about to fish out their cards when the restaurant said their swiping machines had stopped working. Debit or credit cards would not be accepted.

“I had a Rs 500 note on me but that was it,” said Issac. “Most of us had deposited all our money just that morning, so no one had much cash.” Finally, her uncle had to go home, scramble together whatever cash he had and then go back to pay the restaurant.

Across the country, lawyer Sanjay Hegde had lined up at a hypermart near his home in Shahdara, in Delhi, on Saturday. “We wanted to buy basic provisions for ourselves and our domestic help,” he said. “My wife and I were going to pool our cards together.”

But everyone was stocking up that evening, anticipating worse to come. There was a long queue and after a couple of hours, an announcement. Cards would not be taken, since the servers were not working. Hegde had to return the next morning to get essential supplies.

The same evening in Gurgaon, Pierre Fitter had gone to a salon in Sector 51 with his wife, who got a haircut. The bill was Rs 500 and the couple wanted to pay by card. “We tried two machines,” said Fitter, who works in digital advertising. “One PayUmoney and one bank card machine. Neither worked so we finally had to pay through Paytm.” The salon owner told them the problem had started in the morning.

Tomojit Basu, who works with a human rights NGO, went chasing around In N’Out and 24X7 outlets in South Delhi to buy rice and other staples late on Saturday evening. But none of the servers were working so he eventually had to line up outside a bank for cash.

Cash to card

In Mumbai and other big cities, it was the same story. Serpentine queues at convenience stores that usually accept cards and then failed or delayed transactions because the servers had crashed.

After the government announced on November 8 that the old Rs 500 and Rs 1,000 notes would be demonetised, cash has been in short supply, with banks running dry and ATMs yet to be reconfigured. On Saturday, the government advised the public to use plastic money instead of paper. Those who had the option, turned to card transactions to tide them through.

It has meant a sharp and sudden spike in cashless transactions, and increased pressure on credit or debit card networks. As the middle classes hit the supermarkets over the weekend to buy groceries, the stress was starting to show.

Damodar Mall, chief executive officer of Reliance Retail, took to social media on Sunday evening to voice worries and appeal to banks for support:

Credit economies

In several convenience stores, informal credit economies have sprouted overnight. On Sunday afternoon, in Delhi’s busy Lajpat Nagar area, Sanjay Yadav was trying to pacify an agitated customer at his departmental store.

“I have one machine and it is not working because of some server problem,” explained Yadav. “The machine had stopped responding last evening too. I had to sell vegetables on credit to a few customers, after taking down their names, addresses and phone numbers,” he said. “I know most of them by face. They often come to my shop.”

After a while, the agitated customer left, having bought supplies on credit. Shopkeepers who can afford more than one swiping machine are not happy either. As his departmental store filled up on Sunday afternoon, Bhagat Ram took charge of one debit/credit card swiping machine and asked an employee to make sure that the other two are working properly.

“Almost 80% customers are paying through cards, so we are using three machines to make sure that any server problem does not affect business,” Ram said. “However, we are charging the customer 1% extra if they choose to pay through card.”

This was because the banks charged them 1.8% for the service anyway, he hastened to explain. “Considering the quantum of payment received through debit cards in the past 3-4 days, we have decided to charge the customer 1% on the billed amount,” he said.

Clogging the gateways

When payments are made by credit or debit card, three groups of servers play a direct role: the internet service provider, the bank associated with the transaction and the payment gateway.

“If one is clogged, the transaction will get abandoned midway,” explained Kislay Chaudhary, founder of a group named Indian Cyber Army and technical consultant to several government agencies. “When credit or debit card transactions of such massive scale happens, the worst hit at the servers of the payment gateways.”

Banks and card companies, however, were not too worried. “There is no such immense stress on bank servers,” said Kalpana Gupta, zonal head of Punjab National Bank in Rajasthan. “Meeting the daily demand for notes exchange is the prime cause of stress for banks at this hour.”

To deal with pressure on payment gateways, Gupta said, most banks had to tie up with more than one. “In case the traffic is too heavy in one, the process gets automatically redirected to another,” she explained. “And as far as banks’ own servers are concerned, they are usually capable of taking such load.”

The technical glitches in card servers were only temporary, she said, but the really pressing problem was the severe shortage of manpower in a time of crisis.

MasterCard, which has 1.44 million point of sale terminals at merchant locations in India, admitted that there had been a huge surge in transactions but said their networks were equipped to deal with it.

“Despite the surge in electronic payments, MasterCard has not witnessed any downtime in processing merchant transactions,” said Porush Singh, division president of MasterCard in South Asia. “Our networks are designed to process 43 billion transactions per second. MasterCard is working closely with the banks and all our partners to ensure that our customers are able to make payments safely and conveniently 24X7.”

Both Gupta and Singh were supportive of the prime minister’s move to take old Rs 500 and Rs 1,000 notes out of circulation. “The idea [of demonetisation] is good and one of the the basic aims is to move from more liquid transactions to more online transactions,” Gupta said.

Singh, for his part, said that the company was ready to support demonetisation through new technologies.