Mobile wallet companies have given inputs to the Reserve Bank of India on video-based KYC (know your customer) as a possible way to eliminate the physical leg of the current KYC process, the Economic Times reports, citing an unnamed payments company executive. The central bank is understood to have worked on these, the source told ET, but there is no clarity yet on the when the guidelines will be released.
Wallet companies, like all other private firms, are not allowed to use Aadhaar for electronic KYC, according to last year’s Supreme Court decision. They have until August 31 to fully comply with KYC requirements. Several wallet firms have tied up with retailers and other companies to ensure in-person KYC of users, but that has turned out to be expensive. As a result, “some of the major companies” are looking to shift to the Unified Payments Interface, which has no KYC requirement, ET’s source said. Even if video KYC were introduced, it would not be a perfect solution as concerns about internet connectivity and customer awareness would remain, the report said; however, it would still reduce KYC costs somewhat.
Paytm wants RBI to retain minimum KYC norms after deadline
We had reported earlier this month that Paytm wants minimum KYC (Know Your Customer) norms for mobile wallet users to stay, even after the August 31 deadline. Doing away with minimum KYC is not at all customer friendly, Deepak Abbot, senior vice president, Paytm had said, adding that “as long as users are comfortable with limitations” with minimum KYC wallets, there is no harm in allowing them to operate after the deadline. Abbot said that the average cost of doing an in-person KYC was anywhere between ₹260 and ₹270 per customer, and for a firm like Paytm, which has 100 million MAUs, the resultant cost would be around ₹2,500 crore.
What Nilekani-led panel said about simplifying KYC
Also earlier this month, an RBI-appointed panel set up to review the status of digital payments called for the simplification of the KYC process in its report. The committee, headed by Nandan Nilekani, made three separate recommendations for simplifying the KYC process:
- Opening a second financial account with the same institution or a sister institution.
- Opening a wallet account by loading it from a KYC-compliant bank account.
- Opening a mutual fund account by funding it from a KYC compliant bank account.
- Purchasing an insurance policy by funding it from a KYC-compliant bank account belonging to the proposer.
Recommendation 61: Enable use of digital documents for KYC. The PMLA rules must be modified to recognise Officially Valid documents that are digitally signed by the issuer as original documents. Issuers of these documents (such as PAN, Passport) must be encouraged to provide these to users.
Recommendation 70: Simplify mobility through NCMC Wallet, with no KYC and a limited use case:
- Maximum value in the wallet: ₹2,000
- Maximum spending in a month: ₹10,000
- May be used only for proximity payments
- May be loaded with cash or from a bank account
- May be used at merchant locations, into a merchant bank account
Previous push for video-based KYC in February
In February, industry body Digital India Collective for Empowerment (DICE) and Digital Lenders Association of India (DLAI) had approached the RBI with alternatives to Aadhaar eKYC. DICE’s recommendations included a request for regulatory approval from the RBI and Finance Ministry for video verification as a form of digital KYC. DICE’s signatories included BankBazaar, SBI Cards and Payments Services, Eko India Financial Services. The 55-member DLAI had also emphasised the affordability of digital eKYC, and how it reduced cost for disbursing small and short-term loans. Later that month, the RBI extended the deadline for full KYC compliance from February 28 to August 31.