Prepaid payment instruments (PPIs) or mobile wallets were mandated by the Reserve Bank of India in October 2017 to capture all information required under the know-your-customer (KYC) guidelines. So far, companies have been able to verify just a fraction of their total user base, and are yet to complete biometric or physical verification of the majority of users, industry executives told ET.
“More than 95% of the mobile wallets in the country could stop being operational by March,” said a senior executive with a New Delhi-based payments company.
The payments industry has been scrambling to conform to RBI guidelines issued after the Supreme Court’s judgment on Aadhaar that barred private companies from using the database for paperless verification of customers.
“There is no eKYC, the RBI has not told us anything clearly about the alternative KYC mechanisms that they plan to approve,” a senior payment executive told ET. “The deadline is just a few weeks away and we cannot adhere to (it) with this rate of progress,” he added.
There have been discussions around alternative KYC mechanism like using video-based verification or XML-based KYC, but neither has been formally approved by the banking regulator.
RBI did not respond to ET queries till the time of going to press.
“We are waiting till January 8, that is the last day of the winter session of Parliament; let us see what happens to the Aadhaar Bill,” said another payment industry executive. “We will reach out to RBI and ask for the next course of action.”
Mobile wallets kickstarted the Indian digital payment revolution about four years ago but now only a few such companies remain in the fray. Most of the PPI licence holders such as MobiKwik, PhonePe and Amazon Pay are either focusing on Unified Payments Interface business or have diverged into other fintech activities.
‘Standalone Wallets Directly Affected’
“A large chunk of the wallets which were used for remittance have anyway moved to the business correspondent channels because of regulatory restrictions,” said a senior industry executive.
“Only standalone wallets will be directly affected by the (current impasse),” he added. Sachin Seth, fintech leader for India, Middle East and Africa for EY, told ET that only those mobile wallets that have developed compelling use cases will be able to sustain.
“The entire proposition around ease of opening wallets is not there anymore; hence it is now only about use cases where wallets will be a staging area where you can store money and transact,” he said.
After the central bank directed wallets to become fully KYC compliant payment instruments in 2017, companies like PhonePe, Amazon Pay and Paytm began asking customers for identification documents. Paytm, which had received a banking licence, went all out to use biometric dongles and field agents to convert its existing wallets into full KYC ones and to also open bank accounts. A company executive estimates that Paytm has managed to convert 70% of its user base into full KYC ones.
But other payment companies have struggled. “We have undertaken the first stage of identification, but without biometrics how do we accomplish the full verification, that would mean we need to get paper documents collected and verified which means jump in cost of operations and feasibility challenges,” said one of the sources cited above.
These companies are hoping that Parliament approves pending legislation, which allows voluntary use of the Aadhaar number by consumers for online as well as offline verification.
“Looking at the convenience factor, consumers would opt for Aadhaar verification, but it all depends on how the Act is passed… it would have helped if we could get some assurance from the central bank,” said one of the executives quoted above.