A Major Setback For Mobile Wallets As SC Extends Aadhaar Linking Deadline

India’s mobile wallet companies are in a complete state of bafflement after the Apex Court, on March 13, 2018, extended the deadline for mandatory linking of Aadhaar Card to avail various government services and welfare schemes.

Voicing his concerns on Twitter, Bipin Preet Singh, CEO, MobiKwik said, “The timing couldn’t be worse for this SC decision – it’s leading to all sorts of confusion.”

The mood in the country’s mobile wallet industry is sombre as companies are trying to complete mandatory KYC (Know Your Customer) verification of their customer base as directed by the Central Bank a few months back.

As earlier reported by Inc42, the Reserve Bank of India (RBI) had refused to extend the deadline for KYC (Know Your Customer) beyond February 28, 2018, stating that enough time has already been granted to adhere  the prescribed guidelines.” Notably, the completion of the KYC involves linking of Aadhaar card and PAN card to the e-wallet mobile applications.

The RBI had stated that the customers, who are not willing to follow the KYC process, can close their PPI accounts and get the balance money transferred into their respective bank accounts.

It seems that such directives by the Supreme Court have not only created ripples in the Indian mobile wallet industry but have become an impediment to the future growth and expansion of mobile wallet companies such as Paytm, MobiKwik.

According to a person close to the development, “The new norms by Reserve Bank of India are disastrous. It is now like opening a bank account. So why will anyone want to go through the hassle? This will result in de-digitisation.”

According to him, despite the last-minute rush to meet the KYC norms, “the number of customers who would have completed KYC by February 28 will be in single digits (in percentage).”

These directives from the court come at a time when the digital transactions in India are at a peek. According to the RBI, in January 2018 2017, transactions worth $2 Tn (INR 131.95 Tn) were carried out on mobile wallets, This is in sharp contrast to the  $1.9 Tn (INR 125.51 Tn)  clocked in December 2017.

At present, in India, there are millions of people who are making the transaction via e-wallet. For instance, Paytm which is the market leader in the category, alone claims to have over 200 Mn users. Additionally, there are other players like Amazon Pay, MobiKwi, and Oxigen that have similar offerings.

What Does The SC Decision Mean For Mobile wallet Industry?

The apex court’s latest ruling to indefinitely extend the linking of Aadhar has further created troubles for the mobile wallet companies. It is believed that a majority of the users will not take the initiative to fulfill KYC in order to avail services.

Basically, these companies are still urging the Centre to rollback stringent KYC guidelines or give some relaxations for the same so that they don’t lose their customer base.

In response to an earlier email query by Inc42, an Amazon India spokesperson had said, “We request the regulator to reinstate the proportional KYC framework. 90%+ of PPI transactions are of small value (<10,000). 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.”

It was also reported that these mobile wallet companies are at risk of losing up to 40% of their user base, resulting in a reduction in profit making, limiting revenue stream and increased competition from banks and other non-banking players.

However, a few of the companies also promoted positive sentiments on the matter. In an email query by Inc42, a spokesperson from The Mobile Wallet stated that the apex court ruling will not have any immediate bearing on its user base.

“We have almost crossed the finishing line to comply with the full KYC compliance norms for PPIs and thus the court order is not going to pinch us in any manner. For us the SC order can best be called as an ex-post event as the order is applicable only for telecom and bank account linking and not for wallets and will not have any bearings on our business,” she added

Controversy Revolving Around Aadhaar Card Scheme

During the Budget 2017, the BJP-led NDA government rolled out a provision, making it mandatory to submit the 12-digit Aadhaar Card number while applying for PAN card as well as when filing Income Tax returns and availing other government subsidy schemes. The main aim of this exercise was to link the PAN with Aadhaar and thereby, also identify tax evaders.

However, in the past few months, Aadhaar has faced severe criticism primarily on fronts of security. For instance, recently in January, the Aadhar system was hacked by a self-proclaimed French cybersecurity expert who goes by the alias, Elliot Alderson. The expert posted a video on social media, detailing how to crack into the application in just a fraction of seconds.

Another complaint of leakage was reported after an unidentified group on WhatsApp shared links containing the login and the password details of 1 Bn Indian citizens. Not only that, this group even shared the entire functioning of the Aadhaar software from which an individual can easily print one’s Aadhaar details hassle free.

Meanwhile, there have been accusations against the present government of denying the Supreme Court’s concerns. The apex court judges are currently looking into a number of petitions, challenging the legal validity of Aadhaar. The Supreme Court had itself asserted in 2013 that Aadhaar should be voluntary, not mandatory.

In Conclusion

With such stringent measures, it seems that India’s dream of becoming a cashless economy is far-fetched. This dream cannot manifest without adequate consumer support and changes in the behavioural pattern. It is a known fact that Indian businessman majorly prefer spending and saving cash in order to avoid taxes and convenience.

Moreover, at present, India is still home to one-third of the illiterate population, who are unable to even ign. The same section cannot, hence, enjoy an access to a host of services necessary for digital India, including smartphones, mobile wallets, and digital platforms.

At the same time, to thwart security concerns, and bring digital inclusion throughout the country, linking of Aadhaar to all major processes looks like the need of the hour.

While the central government and authorities like RBI stand totally in support of linking Aadhaar / KYC at the earliest, SC judgment and the recent changes in its judgment brings a different equation, invoking a number of other parameters too. However, the moves are definitely affecting not only common lives but digital payments and other companies at large, adversely.

Will the Indian SC be able to take a balanced action, which will fare well for both consumers as well as mobile wallet companies, is something that only time can tell.