Digital payment companies Paytm, PhonePe, and FreeCharge are not accepting Aadhaar for the RBI’s mandatory Know Your Customer (KYC) user validation process for mobile wallets. The RBI had introduced mandatory KYC guidelines in March this year to strengthen safety and security of transactions and to enhance customer protection.
Instead, these mobile wallet companies are giving users options such as passport, Voter ID, driving licence, PAN card, and even MNREGA job card to choose from for the KYC process. However, they earlier insisted on users’ Aadhaar proof to verify accounts.
Speaking to Inc42, PhonePe banking and payments head Hemant Gala reasoned that the Unique Identification Authority of India (UIDAI), which is responsible for Aadhaar enrollment and authentication, has not yet responded to its application for obtaining KUA (KYC user agency) licence.
“We had applied to the UIDAI for a KUA licence last year. However, it is still pending for approval. In the interim, we were working with KUAs and using their services to complete eKYC, but the same has also been terminated. This has been the major challenge faced by PhonePe to do Aadhaar-based eKYC for its PPI (prepaid payment instrument such as mobile wallets) users,” Gala said, in response to an email query from Inc42.
It’s not the first time this has happened. In April, too, the UIDAI had revoked eKYC authentication licenses for some payments companies.
According to the UIDAI, only those entities that fulfill the criteria laid down in Schedule A under Aadhaar Act, 2016 are eligible to apply (to become a requesting entity such as an Aadhaar authentication agency or a KUA). The authority may, by order, amend Schedule A from time to time so as to modify the eligibility criteria, it said.
Notably, while Paytm is listed as a KUA, PhonePe and FreeCharge are not listed as requesting agencies in UIDAI’s list published on August 31, 2018.
“Now there is no way for customers to complete eKYC and there are many who cannot withdraw the money they transferred into the wallet back to their bank account unless the KYC is done,” Gala said.
On Wednesday (September 5), while responding to a Twitter post by Sohail Shaikh @4669S over the KYC delay, Paytm Travel Care revealed that the company is not accepting KYC requests currently:
Even Freecharge isn’t letting users complete their KYC through Aadhaar. Freecharge is also not accepting driving licences for KYC.
The UIDAI, Paytm, and FreeCharge are yet to respond to Inc42’s email query seeking comment on the issue.
This furore over non-compliance of mobile wallets with the RBI’s KYC norms comes at time when the UIDAI has suspended services for banks and Aadhaar authentication agencies (AUA) citing their dismal performance in achieving targets of Aadhaar enrolments and updations.
Prior to this, the Payments Council of India (PCI), a body that caters to the needs of the digital payment industry, in a letter to the RBI, wrote that digital payments companies would be able to comply with the KYC guidelines once they receive global authentication agency (AUA) licences, which will enable them to authenticate customers using Aadhaar.
Since the RBI made KYC mandatory for mobile wallet customers, there has been a sharp decline in the number of mobile wallet transactions in the country. New RBI data revealed that mobile wallet transactions fell 13% to 268.79 Mn in March from 310.01 Mn in February while 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 result of users shying away from full KYC authentication.
[This development was reported by The Quint.]