Prepaid payment instruments, including e-wallets, are still struggling to get their users to comply with full KYC (Know Your Customer) norms as set by the Reserve Bank of India.

As per the guidelines, users without full KYC are not allowed to load money into the wallet or transfer the balance to a bank account or send money to any other user. Full KYC requires users to visit a physical store or an outlet to get their documents verified, and many of the wallet players are finding this to be a challenge.

However, the worry over losing customers due to the stringent KYC guidelines have made the firms find a way around the process and comply with the RBI rules.

Firms are now allowing users to do eKYC or minimum KYC to keep the wallet operational. Under eKYC, users can simply feed in their phone number and Aadhar number online, and verify it with a one-time password (OTP). With this, a user can load up to ₹10,000 a month and a maximum of ₹one lakh in a financial year. However, at any given point in time, the wallet balance should not exceed ₹10,000.

Several wallets are allowing people to load money into their wallets by complying with the RBI’s eKYC guidelines .

Short-term respite

According to experts tracking the industry, the eKYC rule has brought in short-term respite for both the users and the wallets, which initially thought that they would be soon out of business. Only about 10 per cent of wallet users have complied with the full KYC norms. While many users are finding it cumbersome, few do not want to share their personal details, especially their UID numbers, with wallets.

A spokesperson of a leading wallet firm said on condition of anonymity that the company is trying hard to get full KYC details of users, but the eKYC norm is keeping the business going.

An Amazon spokesperson said Amazon Pay has seen its new customer adoption rate decline 30 per cent due to the requirement of officially valid document numbers as mandated by the new regulations. Cash-loads at customers’ doorsteps, which enable cash-using customers to participate in digital payments, has also taken a hit by 80 per cent.

“We request the regulator to reinstate the proportional KYC framework and reduce friction in new account set-up (which has been created due to mandatory collection of officially valid document numbers) at a time of customer on-boarding, as 90 per cent of PPI transactions are of small value (< ₹10,000),” said the Amazon spokesperson. “Asking customers to submit an officially valid document to be permitted to make such transactions adds friction and will send the customer back to cash as seen by the significant adoption decline in the last week.”

He added that requiring that such customers should do a KYC within 12 months regardless of their level of usage will further result in significant drops. Customers should be triggered for KYC based on risk or value of transactions, not by time.

“We are making very significant investments to induce digital payment behaviour and look to the regulator to provide a conducive working environment and supportive regulations,” Amazon said.

“It’s going to be challenging times ahead for all PPIs. A migrant worker, for example, can comply with photo ID, but not with address proof for his current residence,” said Navin Surya, Chairman, Payments Council of India.

Consolidation ahead

In all, there are over 50 non-banking wallets such as Amazon Pay, MobiKwik and Oxigen, and the stringent guidelines might soon bring in a major consolidation in the sector. Most of the wallets are not profitable and operate under wafer-thin margins. In this scenario, with limited revenues streams, the margins will decrease further. Meanwhile, many wallets are offering cash-backs and other offers as incentives to complete the KYC process.

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