The Supreme Court (SC) on Tuesday extended the deadline for linking Aadhaar with mobile phones and bank accounts for an indefinite period. The SC said that its interim order will remain in force till further verdict.
The decision has increased the problem for prepaid payment issuers (PPIs) or mobile wallet companies, which have to fulfil know-your-customer (KYC) details as mandated by the Reserve Bank of India (RBI).
The Reserve Bank of India (RBI) had set a deadline for digital wallet companies to fulfil KYC norms for all their users by February-end.
However, the wallet companies now feel that in the wake of the SC’s decision, consumers may hesitate to share biometric details with them.
Importantly, the RBI’s mandatory KYC verification process for mobile wallet companies include any government approved ID cards such as driving license, pan card, passport, voter card, NAREGA job card or Aadhaar card. However, companies have been focusing on the Aadhaar biometric database to validate their consumers.
Talking to ET, a senior executive of a VC firm explained that companies are choosing to do the Aadhaar-based KYC because it is much cheaper than the paper-based KYC. The cost of Aadhaar-based KYC is around Rs 25 whereas the paper-based KYC would cost as much as Rs 500.
Besides, non Aadhaar-based KYC also has a security risk. The paper-based documents have to be manually matched against the picture and personal details submitted by the consumer, which may expose the setup to fraudsters.
According to media reports, the wallet companies would have lost over 200 million users as they failed to do the required KYC before the RBI’s deadline.
At a time of the end of the deadline for KYC, which was on February 28, there were more than 500 million mobile wallet users on Paytm, Mobikwik, Amazon Pay, PhonePe, and others, collectively.
The RBI’s move will affect wallet companies against UPI-based apps such as Google Tez and Whatsapp Payments. The UPI-based companies allow direct transfer of money from one account to another via mobile numbers.