Money & Banking

Digital wallet players backed into a corner as February 28 KYC deadline approaches

Priyanka Pani Mumbai | Updated on February 21, 2019

User base may fall 80% after Feb 28

In what could hamper the Centre’s efforts to encourage digital payments, mobile wallets in the country are likely to witness a nearly 80 per cent decline in their user base post the February 28 deadline set by the RBI to meet KYC requirements.

According to industry experts, the drop in user base is inevitable despite companies trying their best to get ‘full KYC’ done for all their users through push notifications urging them to visit neighbourhood partner retail outlets with documents.

“We want the RBI to be cognizant of the fact that wallets were instrumental in propelling digital transactions in the country, and the stricter norms will again boost the cash economy. We want to request the regulator to at least allow transactions with minimum KYC,” said Vishwas Patel, Chairman of industry body Payments Council of India.

The RBI, which has already given two extensions, seems to be in no mood to grant another, sources said. The banking regulator, which came out with the KYC norms in October 2017, has clearly stated that after February 28, 2019, users who have not submitted their full KYC details will not be able to use their e-wallets even for small transactions. Neither can they use the credit facility.

Currently, the RBI allows users to carry out transactions up to ₹10,000 a month with minimum KYC, which is done by updating the mobile and PAN card number on the wallet’s app itself. The full KYC needs a personal verification of paper documents such as voter ID or ration card, or driving licence, along with the PAN card.

Physical verification

However, the challenge remains with physical verification — a user has to either go to a company-certified KYC centre or the company has to send a person to collect the documents from the user.

Earlier, the players were able to meet the norms at minimal or no cost through Aadhaar biometrics. But since the Supreme Court has banned private companies from accessing Aadhaar data, the wallet players are forced to deal with complex and expensive KYC verification. Their cost of customer acquisition has now gone up by more than 100 times.

BusinessLine spoke to representatives of several company-certified KYC centres, who revealed that over the past three months, there has been a more than 70 per cent fall in the number of customers coming over for KYC verification. However, the fall could imply any of these — either the wallet users have already completed their verification, or they are not keen to do so, or they may want to retain just one wallet and delete the rest.

Currently, the ecosystem has over a dozen mobile wallets, such as Paytm, Mobikwik, PhonePe, Ola Money, Amazon Pay and Oxigen. It is likely that the largest players will alone survive, leading to a major consolidation in the segment that witnessed sharp growth following the November 2016 demonetisaton move.

None of the wallet players responded to queries from BusinessLine on the issue.

Published on February 21, 2019

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