In the aftermath of the Reserve Bank of India (RBI) making know-your-customer (KYC) mandatory for mobile wallet customers in March this year, there has been a sharp decline in the number of mobile wallet transactions.
New RBI data revealed that mobile wallet transactions fell 13% to 268.79 Mn in March from 310.01 Mn in February, and the the total transaction value of mobile wallets dropped 23% to $1,482 Mn (INR 10,000 Cr) from $1,941.6 Mn (INR 13,100 Cr) in the same period. Inc42 had reported on April 19 that since October last year, according to industry estimates, digital wallet users dropped by a whopping 80% to 90%, largely as a the result of users shying away from full KYC authentication.
Many fintech firms are of the opinion that there has been a sizeable dip in the value of cash loaded into e-wallets by users since KYC was made mandatory. The completion of the KYC involves linking of Aadhaar card and PAN card to e-wallet mobile apps.
Earlier last month, the digital payments arm of Amazon India, Amazon Pay reportedly witnessed a significant decrease in cash loading in e-wallets. “Cash loads have reduced by 95%. This will mean lower digital payment adoption in the long run,” ET cited a company spokesperson as saying.
Similarly, Sunil Kulkarni, joint managing director of Oxigen Services, which runs a wallet for domestic remittances, had earlier said that the industry average was still in the low single digits for the number of people who have done their KYC out of the total number of users of mobile wallets.
On the other hand, transactions made through prepaid cards have also dropped to 24.8 Mn in March from 35.3 Mn in February this year. However, debit card swipes at point of sales jumped to 318 Mn in March from 282 Mn in February. Further, IMPS transactions jumped 10% to 110.15 Mn. Also, transactions via the Unified Payments Interface (UPI) jumped to 190 Mn in March from 178 Mn in February.
The RBI had earlier refused to extend the deadline for KYC beyond February 28, 2018. It also directed all payment system operators in the country to store data – pertaining to their customers – within India to ensure that user details remain secure against privacy breaches.
According to RBI’s earlier data, transactions worth $2 Tn (INR 131.95 Tn) were carried out on mobile wallets in January 2018, as compared to $1.9 Tn (INR 125.51 Tn) in December 2017.
Google and Boston Consulting Group has estimated the digital payments sector of India to reach $500 Bn by 2020, contributing 15% of India’s GDP. Further, a report by Credit Suisse predicts that the market, which is currently worth around $200 Bn, is expected to grow five-fold to reach $1 Tn by 2023. Experts opine that the main challenge for the industry here would be to convert ewallet customers into full KYC customers within one year, as mandated by RBI.