Indian government seems to be on a role as it is introducing new laws every now and then. The Supreme Court recently banned private companies from using and storing Aadhaar data of Indians and now the controversies over KYC have become so serious that after February end, over 95% of mobile wallets in India can stop functioning, and all fund can be frozen.
The big question- Why this is happening?
In October 2017, RBI had said that every Prepaid Payment Instrument (also known as mobile wallet) has to complete KYC or Know Your Customer process for their customers. The final deadline for this activity was March 1st, 2019.
Due to this, every mobile wallet was focussing on Aadhaar based KYC, and they were successful in completing KYC for more than 70% of their users.
But, after Supreme Court’s verdict on Aadhaar Act in September last year, every plan seems to be a failure.
Mobile wallets cannot use Aadhaar for KYC, and this means, KYC process has come to a screeching halt.
Talking about the current situation, more than 95% of mobile wallet users have no KYC, and as per RBI’s deadline, they can be stopped from functioning after March 2019.
A senior executive from a mobile wallet company said, “More than 95% of the mobile wallets in the country could stop being operational by March,”
What is the solution?
Alternate KYC for customers, without using Aadhaar looks like the only solution. For that, companies need to encourage users to give their PAN Card/Driving License or other valid identity proofs. Also, live video-based KYC is in talks.
But nothing is clear to companies in this regard, and they are confused.
How Paytm can survive?
Good news is- the biggest name in this market- Paytm, can survive this turmoil. They already have field agents, who are equipped with biometric machines and other gadgets to complete KYC process via offline route for users, and 70% of all Paytm users have completed their KYC.
But other companies like PhonePe, Freecharge, MobiKwik are still waiting for confirmation from the Govt. regarding alternative KYC methods.