As per orders issued by the Reserve Bank of India, February 28, 2018 is the last day for mandatory Know Your Customer (KYC) compliance by prepaid wallet customers. Going forward all non-KYC complaint wallet accounts will have very limited usability.
Here is the low down on what happens next and what users should do.
What is full KYC?
When users signup for a wallet, in most cases they are required to do some sort of limited KYC. Earlier it involved verifying a user’s phone number, recently it required a person’s name and another detail like PAN or Aadhaar number. This allowed users to perform transactions under Rs 10,000 per month.
A full KYC to a wallet or PPI (Prepaid Payment Instruments) requires the users to link their Aadhaar to the PPI, this can be either done through the phone using Aadhaar’s OTP based verification system or by visiting a KYC centre.
How to complete a full KYC?
The process varies from platform to platform. For example, with Ola Money or Mobikwik, you have to enter your Aadhaar Number and verify it by Aadhaar’s OTP system. Paytm on the other hand requires an in person verification or a visit to a KYC centre. To incentivise users, Paytm is offering a Rs 200 cashback for doing the same. Note that Paytm is now a Payments Bank unlike Ola Money, Mobikwik and other smaller PPI’s.
Will you lose your money without KYC?
The Reserve Bank of India has said that customers will not lose money from mobile wallets even if companies remain non-compliant to its full KYC (Know Your Customer) guidelines, after the deadline expires. But usability of the wallet will be severely limited.
Reloading on the wallet and remittances can only resume after completing the KYC requirement. Users will be able to undertake transactions for purchases with the available balance in the wallet. So you can still pay for your Uber rides and order food online with the balance amount left on your wallets even after the KYC deadline expires, but you can’t add any more money to it.
Those users who want to withdraw the balance amount (in the wallets) can close their PPI account and get the money transferred into their bank accounts.
What about UPI and Payments Banks?
Since, UPI is tied to a user’s existing bank account, no separate KYC verification is needed as long as the user’s bank account KYC is in order.
The Reserve Bank of India has issued guidelines for payments bank to get their KYC information verified by third parties. This appears to have been done as an attempt to prevent the sort of “piggybacking” that was seen with the Airtel Payments Banks accounts being opened with a barely noticed pre-ticked box.
How does this affect wallet companies?
Mobile wallet companies have raised alarm that this move could seriously cripple them. According to a report in the Economic Times, the total number of customers who have submitted their KYC details is in ‘low single-digit’ percentage.
The report quotes the chief executive of a payments company speaking anonymously, “If these norms are implemented in full force, the entire industry, which handled around Rs 12,000 crore worth of transactions in December, will be facing a major crisis.”