PhonePe Glitch Halts UPI Payments; NPCI Assures System Stability

On Monday evening, May 12, 2025, several users experienced payment failures when they used PhonePe, creating confusion and uncertainty. When users quickly made their way to social media to register their complaints, PhonePe confirmed that there was a technical fault in its system that caused the issue.

The disturbance started at around 6 p.m. and reached its peak at around 6:45 p.m., when many users saw their transactions either getting stuck or failing. Most thought that the UPI platform, which is utilised extensively for instant bank transfers in India, had crashed. But the National Payments Corporation of India (NPCI), which operates UPI, issued an immediate statement stating that the UPI network was operating normally and the problem lay with PhonePe's internal systems itself.

PhonePe co-founder Rahul Chari provided more information, saying that the firm had shifted all of its services to a new data centre on Monday. The new data center, unfortunately, was not fully prepared to deal with the large traffic during busy hours. Consequently, it experienced a network capacity deficit, which resulted in the failure of transactions.

"This evening, 100 per cent of our traffic across all our services was being serviced through a new data centre...Unfortunately, the Monday evening peak traffic exposed a network capacity shortfall due to which transactions started failing," Chari explained in an X post.

To rectify the situation, PhonePe immediately rebalanced traffic across its older data centres. The firm stated that services have begun to normalise. Additionally, PhonePe has conducted more disaster recovery exercises and enhanced its network security to prevent such issues in the future.

Outage tracking site Down Detector also indicated a sudden spike in user complaints from 6 p.m. onwards, with several users confusing the problem as a broader UPI failure. This further contributed to the panic and confusion among frequent digital payment users.

Chari further stated that the PhonePe team is seriously considering this incident and will use the learnings to further enhance their systems. He apologised to the users for the inconvenience and mentioned that restoring user trust is of utmost importance.

Although the glitch was specific to PhonePe and was of limited duration, the incident highlights the importance of payment systems being well-prepared for high volumes of traffic and being well-backed up.