In a blow to some fintech firms, which are based on Aadhar authentication for customer acquisition, Unique Identification Authority of India (UIDAI) has revoked their access to e-KYC verification and authentication services.
Fintech startups across the insurance, lending and broking sectors have reported non-access of the abovementioned services. They will no longer be able to provide e-KYC upgradation to onboard new customers.
E-KYCs and Aadhaar authentication are of crucial importance to these fin-tech companies as the recent RBI instructions require strict KYCs for them to function in the market.
This is after the Apex Court raised concern around multiple unregulated entities accessing the database during the hearing on privacy concerns around Aadhaar. These services are expected to remain suspended till the conclusion of the case in the Supreme Court.
“This has been done on the basis of the Supreme Court observation on March 27,” Ashok Hariharan, founder of IDfy, which provides authentication services on Aadhaar and electoral databases as a sub-authentication user agency or AUA for Khosla Labs was quoted as saying to ET.
Importantly, not all fintech firms are confronting this issue as only some KUAs are blocking this service. Meanwhile, UIDAI has not issued any clarification adding woes to the firms operating in the space.
Reacting to the development, Jitendra Gupta, founder of Citrus Pay and MD, PayU India, an online payments service, tweeted that KUAs and sub-KUAs were not being allowed validations which has left some firms scrambling.
Aadhar stopped all KUA and sub KUA to do validations!! Suddenly , all fintech businesses banking on Aadhar left scrambling!! India stack story will crumble very soon if it continues in this manner.@India_Stack @NandanNilekani @UIDAI
— Jitendra Gupta (@guptajiten) April 4, 2018
The stoppage of services would make e-KYC process expensive for fintech firms as the move will see an increase in operational costs for a period not known.
In the last two weeks, almost 5 days registered eKYC transactions recorded low. The transaction graph showed March 24 with 515 transactions, March 28 with 2 transactions and April 1 with 3 transactions against a daily average of over 1.2 crore transactions per day, as outlined by Medianama report. However, the March 27 was missing from the graph.
Earlier on January 12, a number of industry executives formed a coalition to reach out to the Supreme Court to ensure that Aadhaar authentication for service providers do not get stopped.