Mobile wallet operators like PhonePe, Paytm and Amazon Pay, who have been working out ways to upgrade their users’ non-compliant accounts to ‘full KYC’ (Know Your Customer) within the February-end deadline, have now been given a way to allow such customers to continue operating.
The wallet users will now have the option to convert their ‘minimum KYC’ accounts to ‘low KYC’ pre-paid instruments or PPI accounts newly introduced by the Reserve Bank of India (RBI).
The low KYC PPI account will have a monthly transaction limit of Rs 10,000, according to an ET report. This move will likely help 200 million non-compliant KYC mobile wallet users, many of whom authenticated via Aadhaar, as the deadline for full KYC compliance ends on February 29.
These are mostly accounts whose KYC authentication through Aadhaar was ruled invalid by the Supreme Court by its landmark 2018 verdict in which the court had ruled that Aadhaar could not be used as a binding document to complete KYC.
The master direction regarding PPIs has been amended three times after the first release in October 2017.
In August last year, the RBI had come out with a new notification giving an extension of six months for the conversion of minimum detail PPIs to get KYC compliant.
There will not be any more deadline extensions, added the report.
Earlier, wallet operators had expressed concerns and requested the government and the central bank to ease the guidelines related to KYC.
These firms struggled with the KYC process of their customer base as physical KYC ended up taking way more time than estimated. It was a huge economic burden as highlighted by digital payments major Paytm whose estimated KYC cost totalled to over Rs 2000 crore.
In efforts to get fully compliant before the deadline within reasonable costs, the wallet operators resorted to alternative ways such as digital KYC and video KYC.
With UPI emerging as dominating payment mode, the share of wallets has declined despite the increase in the number of transactions in 2019.